Anna Rappaport, Independent consultant

I wish to build on ideas from other members:

  • Social Security is not in crisis today
  • Solutions are available that build on the current system and do not require radical change
  • Social Security policy should be considered in the context of the total retirements picture (and three legged stool)

This is a critical time for the retirement security of Americans as Social Security is under attack at the same time that employer plans have declined and are suffering from an adverse regulatory climate. The decisions that policymakers make today will be important for decades to come.

Social Security is of course very important to all Americans, but there are special issues for women, particularly those who are alone in old age. Proposals for personal accounts are particularly troublesome for these groups. A change to personal accounts will create winners and losers. Widows, divorced women, and surviving minor children are likely to be big losers.

Benefits are earned as people work and paid over their lifetimes in retirement, after disability and to survivors at different points in time. Social Security benefits are based on the work history of those family members who work. Even though many women are in the labor force today, their lifetime work and earnings history is very different from men. Men retiring in 2000 had a median number of years worked of 44 compared to 32 for women. The median earnings of full-time male workers in 2002 were $38,884 compared to $29,680 for women. In 2002, 18% of non-married women over age 65 were poor compared to 4% of married persons. (Just the Facts on Retirement Issues 10, April 2004, Center for Retirement Research at Boston College).

Women's life history after age 65 is also very different. Women live longer, are less likely to remarry if widowed, and more often require paid long term care. Many widows and divorced women will be alone for 15 years or more and depend heavily on Social Security. Without Social Security many more of them would be destitute. Private accounts shift the emphasis from social insurance to property rights and would not meet the needs of widows and divorced women well. Just as happens with other funds, widows might find that little was left of the Social Security account after the death of their husbands. It is my hope that the group evaluating Social Security reform options will focus on the differences in circumstances between single and dual earner couples, male workers, female workers, widows, divorced persons and other groups and evaluate how each demographic segment will be affected by a proposed change.

Other benefits for families are also at risk. The existing Social Security system pays important benefits to children of deceased members, surviving spouses after retirement age, and surviving spouses with minor children. Social Security death benefit protection has a net present value equivalent to a life insurance policy with a face value of $403,000 for a young average earner with a spouse and two young children in 2001. The average monthly Social Security benefit for a widowed mother with two or more children was $1,909 or about $22,900 a year in January, 2004. (Uncharted Waters, page 158) Exchanging a significant part of these death benefits for a property right to the accounts that might be accumulated would be a very bad deal for the families that have depended on these benefits.

There is not a Social Security "crisis"; however there is long-term, and it is important to recognize that there are a variety of paths to solving it. The American Academy of Actuaries ( looks at 10 options in "Actuaries Look at Options for Reforming Social Security". I personally would start by indexing retirement ages. Life spans have increased a great deal since Social Security started, and normal retirement ages have increased just a little. Option 1 is to raise the retirement age for full benefits to 70 by 2030 and keep adjusting the age as people live longer. That option would solve 68% of the problem based on current actuarial estimates. 

In closing these comments, it is important to remember that a strong employer retirement system is important for Americans. Policy needs to support and encourage employer sponsored defined benefit and defined contribution plans. Without such plans, the pressures on Social Security as a source of income grow greater.

Posted on: February 3, 2005

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