Beth Kobliner

WASHINGTON (WOMENSENEWS)–President Bush’s proposals to privatize the Social Security safety net for the nation’s elderly would adversely affect older Americans, especially women, according to a coalition of women’s organizations sponsoring the Women and Social Security Project.

Although stocks prices continue their downward slide, President Bush is still pressing for private investment in the stock market for the nation’s retirement fund, saying it is a safer and more stable way to protect this all-important social safety net.

According to research by the Older Women’s League, an advocacy organization for midlife and older women, women make up 60 percent of all Social Security recipients at age 65. At the age of 85, 71 percent of all recipients are women. And, for 27 percent of all older women, Social Security provides almost all of their income–90 percent. They have a vested interest in the stability and durability of the Social Security lifeline.

“Privatizing Social Security is bad, particularly for women,” asserted Dr. Catherine Hill, of the Institute for Women’s Policy Research, during a panel discussion on women and Social Security.

According to Hill, under privatization plans, women would receive no monetary benefit for their care-giving role and would have to pay more to compensate for their longer life spans, among other disadvantages.

In December 1999, the last year for which statistics are available, the government reported that 42 percent of all adult Social Security recipients were men and 58 percent were women. More than 80 percent of the men and more than 55 percent of the women received retired worker benefits. Slightly more than one-fifth of the women received survivors’ benefits.

Bush Promotes Individual Control of Retirement Savings

In his budget address to Congress, the President reiterated his belief that without a significant overhaul, the nation would soon be paying out more in pensions than it is taking in. The solution, he said, was to allow the younger generation to invest a portion of their retirement resources themselves into employment-linked Individual Retirement Accounts to guarantee that they would receive monthly Social Security checks when they retire. Unless the nation undertakes dramatic action now, there will be nothing left as the baby boomer generation begins to retire in eight years, he said.

The alarms sounded by the President during his campaign, and now in the early weeks of office, are inaccurate and misleading, according to several financial and public policy experts. Recent economic projections by the Congressional Budget Office suggest that the Social Security system will be fully funded until the year 2042.

“Social Security is a modest problem, requiring modifications and improvements, but not massive change,” said Marilyn Moon, an economist with the Washington-based Urban Institute. “This is not the time to panic,” she added.

During last month’s Summit on Women and Social Security, organized by the Women and Social Security Project, speakers told activists, business and professional women that Republican proposals to privatize Social Security were risky in general, and posed an even greater threat to women. Speaker after speaker dismissed the notion that Social Security was in imminent danger of bankruptcy, and that tying the funds to the stock market would save the system.

The Women and Social Security Project was established in 1998 by the National Council of Women’s Organizations, a nonprofit, nonpartisan coalition of 115 women’s groups.

The recent forum by the Women and Social Security Project recognized that the Social Security system needs changes so that benefits can be expanded and the system remains viable and protected well into the future. Women’s organizations have been among the strongest advocates for new approaches, which, along with changes in the health care system, are keys to reducing the level of poverty among older American women.

Without Social Security, according to Dr. Hill, half the elderly people in the United States would be poor–defined as a couple receiving an annual income under $10,000, or an individual with an annual income of less than $8,000.

Injecting Stock Market Risk Could Bankrupt System

However, reform proposals that inject more risk into the system will not only fail to alleviate poverty, experts said, but also could actually bankrupt the system sooner than privatization advocates claim would occur with the current set-up.

“There is no such thing as a free lunch. Bigger returns (on investment) mean bigger risks,” said Beth Kobliner, author of “Get a Financial Life,” a woman’s guide to investing.

In the keynote address, Kobliner said Social Security was never intended as a system of chance. “What is Social Security? It is not a place for big returns. The intent is safety, hence the word, ‘security.'”

Kobliner said everyone should contribute additional funds to their current Individual Retirement Accounts because a Social Security pension alone will not support a comfortable retirement, but she emphasized these accounts should not replace Social Security.

“Social Security is the emergency fund for retirement,” just as public agencies maintain rainy-day funds for emergencies, Kobliner said.

Inserting an element of risk into this emergency fund is extremely dangerous, say critics of the Bush proposal, including lawmakers such as Robert Matsui, D-Calif., ranking member of the House subcommittee on Social Security, and policy analysts and economists such as Dean Baker, co-director of the Center for Economic Policy Research.

While the market has experienced long periods of upward movement, lengthy downward trends are equally evident. Kobliner, also a financial commentator, compared two recent situations to make this point:

Vagaries of the Market Suggest Privatization Is Risky

The period from 1983 to 2000 was characterized by a 13 percent return on investment, she said. Simply put, this means that investing $1,000 in 1983 yielded $9,000 in 2000. However, during the period from 1966 to 1982, the same $1,000 initial investment would have resulted in a negative 6 percent return, or a yield of $940 in year 2000, she said.

Even if the market turns up and stays up, women stand to lose, should a portion of the nation’s Social Security–the nation’s retirement fund–be diverted to Individual Retirement Accounts. Supporters of privatization recommend that workers be allowed to divert up to 2 percent of their payroll taxes, which fund Social Security, into Individual Retirement Accounts.

These accounts currently are pegged to the amount earned and number of years in the workforce. Circumstances make it difficult for many women to contribute at adequate levels to an Individual Retirement Account.

Women’s care-taking responsibilities may prevent them from working at all, or seeking the kind of full-time employment that offers a pension benefit. The same responsibilities may result in women not being able to work long enough to become vested, even if they are working full time. This means they are unable to keep the pension income to which they are entitled, according to a recent report on the status of older women in America by the Older Women’s League.

And, women continue to receive only 73 to 77 cents for each dollar men are paid for the same work, which puts them further behind.

The current Social Security System protects women because payroll tax surpluses are rolled into the Social Security Trust Fund, which helps guarantee a minimum benefit for those who have been working at lower wages or who have had gaps in their employment record.

While Social Security guarantees spousal and survivor benefits, the current privatization proposals do not stipulate a plan to attach such guarantees to Individual Retirement Accounts. These Social Security benefits are crucial for many women who did not spend a lifetime in the paying workforce. Without spousal or survivor benefits attached to retirement accounts, women will be facing an even greater rate of poverty in their later years than they do today.

Economist: Social Security Administration Efficient Compared With IRAs

Moreover, Social Security benefits are progressive, said economist Baker, of the Center for Economic and Policy Research and author of “Social Security, the Phony Crisis.” The center promotes education and debate on economic and social issues. “So, you receive a higher percentage of your income back, the lower you are on the income scale,” he said.

Baker also said the high costs of administering millions of very small Individual Retirement Accounts could eat away at any gains. “Social Security is an extremely efficient system,” he said. Only seven-tenths of 1 percent of the system’s funds are spent on administration. By contrast, the British government spends a very large 15 percent of total funds on administering individually managed accounts.

While privatizing is not the answer, panelists at the Women and Social Security Project said change is necessary to improve the situation of today’s and tomorrow’s older women, who are twice as likely to spend their elderly years in poverty than men.

The speakers, including policy analyst Kilolo Kijakazi of the Center on Budget and Policy Priorities, and Dr. Hill of the Institute for Women’s Policy Research, suggested a four-pronged approach, to insure a safe, comfortable retirement for women:

  • Raise the level of minimum Social Security benefits and increase survivors’ benefits in order to increase the monthly check.
  • Increase the Supplemental Security Income requirement and asset limit so that more people qualify for supplemental support.
  • Exclude the balance in 401K and Individual Retirement Account plans from eligibility for supplemental benefits in order to remove a disincentive to save and encourage private savings.
  • Provide family service credit. Recognize the unpaid family work that prevents millions of women from working at higher-paying jobs, allowing them to receive more retirement income.

Instead of using the nation’s current budget surplus to fund a tax cut, surpluses could finance repairs to a system that is fundamentally stable but not without problems, speakers said. Dr. Hill suggested that a portion of the surplus might be invested in high-yield earnings instruments, balanced by safer investments to hedge some of the associated risk.

Ann Moline is a free-lance writer based in Washington, D.C.

For more information, visit:

Women and Social Security:

Beth Kobliner:

Center for Budget and Policy Priorities:

Institute for Women’s Policy Research:

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A special daily feature of Women’s Enews during Women’s History Month

(WOMENSENEWS)–1870. Women in the sparsely populated state of Wyoming became the first to gain suffrage. Historian Eleanor Flexner writes that the elections of that year and the next “confounded all predictions of disaster.” Flexner adds: “Women did not, as prophesied, descend upon the polling places in hordes and upset the established order. Uncertainty and fear held many back, and others simply did not care to exercise their newly acquired right. Those who did so came through the ordeal unscathed.”