Leanne Abdnor

(WOMENSENEWS)–In the wake of recent proposals to reform the Social Security system, women’s groups are sharpening their arguments about a public-retirement system that will be a key issue in the presidential campaign.

Women–who depend more heavily on Social Security in their retirement than men–need to be aware of how any fix might affect them, said Joan Entmacher, vice president and director ofFamily Economic Security at the National Women’s Law Center.

Proposals include privatizing the system by converting it to self-managed private retirement accounts and increasing taxes and cutting benefits to shore up the current system.

President Bush has said in speeches that he supports the establishment of personal savings accounts. Sen. John Kerry has said he will not cut Social Security benefits.

Of concern is that the current system, established 35 years ago, might become insolvent as the super-sized baby boom generation hits retirement age and gobbles up benefits faster than a smaller generation of income earners can feed it.

And that would have an outsized effect on women. According to the Washington, D.C.-based Institute for Women’s Policy Research, women are 60 percent of Social Security beneficiaries and half of women 65 years and older would be poor if not for Social Security.

Compounding the concern, just last week, Federal Reserve Board Chair Alan Greenspan urged Congress to cut future benefits in Social Security and Medicare to ensure tax cuts remain permanent at a time of rising budget deficits.

"There is a very direct link between the enormous tax cuts and the future of Social Security," said Entmacher. "Social Security is one of the policy issues that will be determined by this election. People have to understand that this is an important issue that the future administration will have to deal with."

For the most part women’s organizations have opposed any kind of cuts and have also opposed another Bush Administration push to privatize the benefit system.

The major drawback to such privatization, said the Institute for Women’s Policy Research’s president Heidi Hartmann, is the risk–the private accounts would likely be invested in the stock market–it would involve, especially in retirement when other sources of income may be drying up.

The National Women’s Law Foundation, following Greenspan’s remarks called for a stop to the "administration push for making the 2001 and 2003 tax cuts permanent."

The Washington, D.C.-based advocacy group said the plan would drain the Social Security Trust Fund and cause the deficit to explode just as baby boomers were retiring.

Paths to Personal Retirement Accounts

In a late-February report, "Social Security Choices for the 21st-Century Woman," published by the Washington, D.C.-based Cato Institute, Leanne Abdnor, a former member of the President’s Commission to Strengthen Social Security, concluded that Social Security has an outdated benefit structure that has failed to keep pace with the changing nature of U.S. families.

Abdnor wrote that, as a result, single women and dual-earner couples are subsidizing the benefits of wealthier single-earner couples, because under the current system’s "dual entitlement rule" for spousal benefits, the spouse with the lower lifetime earnings in a dual-earning couple receives either a benefit based on her own earnings or an amount equal to half of her spouse’s benefits.

Because of this rule, Abdnor claimed, millions of working women who pay Social Security taxes are subsidizing the benefits of stay-at-home married women who do not pay Social Security taxes.

Abdnor, a former vice president for external affairs at Cato, is now the president of For Our Grandchildren, an advocacy organization based in Fairfax, Va., that supports Social Security changes and the use of voluntary personal retirement accounts to do so.

She advocates letting women workers decide on their own and on a voluntary basis how they will invest their Social Security dollars. Under the system she proposes, younger workers, including younger women, would be allowed to privately invest at least a portion of their Social Security taxes through individual accounts.

One proposal described is an option set out by the President’s Commission to Strengthen Social Security: All workers would have the option of investing 4 percent of their payroll taxes up to $1,000 in personal retirement accounts annually.

She argues that giving women more control over their Social Security savings through personal retirement accounts would help correct some of the benefit inequities. Such personal accounts, Abdnor wrote, would help a woman who is part of a two-earner couple, for instance, because she would be proportionately rewarded for her time in the workplace. The funds she contributed would belong to her and not, be "subsidizing" women who do not work outside the home and earn benefits.

Private investment of Social Security dollars in stock and bond markets, which historically provide a higher rate of return, is really the only viable option, Abdnor argues. By allowing younger workers to invest their Social Security taxes through private individual accounts, the public pension system could be restored to long-term solvency without having to resort to massive tax increases.

Arguing Against Changes

While many leaders of women’s groups agree the system should be changed to give working women a better deal, they argue against privatization because it would create a system of individual accounts that could run dry–more often for females than for males–who "outlive" their account balances.

"In a certain way it is unfair to working women, but privatizing is not the way to fix that," said Martha Burk, the chair of the National Council of Women’s Organizations, whose membership includes some 200 women’s groups.

Women’s groups as well as Abdnor agree that the Social Security Program was created for a very different culture, in which most married women stayed home and performed unpaid domestic work.

"No one is opposed to modernizing Social Security to better reflect American family values, but there are lots of other ways to address this," said Catherine Hill, the author of a report on women and Social Security for the Institute for Women’s Policy Research.

The study concluded that privatizing Social Security created four problems: increased risk; high costs associated with the transition from a pay-as-you-go to a pre-funded system; expenses related to administration of individual accounts and the high costs of purchasing life and disability insurance in the private market.

Hill, now the director of income security policy at the National Academy of Social Insurance, a research organization in Washington, D.C., said that changes to the existing program, such as minimum benefits and child care credits, are preferable to the privatization of the benefits system.

Minimum benefits, she said, would give people credit for the time spent in the labor force and not just the amount of money they had contributed in terms of Social Security taxes.

Women, and especially low-wage women, would benefit from this change, she said. As it stands, benefits are progressive with lower earners receiving a higher percentage of benefits for the amount they contribute.

This is a feature that may be lost if private accounts were established, said Hill. The loss would adversely affect women who typically earn less than men.

Social Security benefits are progressive, so recipients gain a higher return if they are a low earner and women tend to be lower earners, said Hill. "This is something that the Cato report misses."

Child care credits are another option which would give credit for work, like raising children, done outside of the paid work force.

The National Council of Women’s Organizations backs the Institute for Women’s Policy Research in its call to find alternatives to implement changes in the system.

Abdnor, in her report, challenges women’s organization, in a sense, to support women’s right to choose their own retirement options as an alternative to this system she calls increasingly discriminatory.

"Women’s groups do not acknowledge that there are biases in the current system that treats some women very unfairly," she said.

At first glance the current structure of Social Security does indeed seem unfair to the working women, said Dee Lee, a certified financial planner based in Harvard, Mass., who works with state treasurers, among others, to help educate women about financial planning.

"We probably are paying for our sisters who are not working, but the reality is that most women are working today and are carrying the burden of working at home and at work and caring for children."

Marianne Sullivan is a New York-based freelance writer who writes frequently on economics and finance.

For more information:

Cato Institute–
"Social Security Choices for the 21st-Century Woman":

Institute for Women’s Policy Research–
Women and Social Security:

Social Security Online–
Social Security Information for Women: