{"id":2436,"date":"2012-12-05T07:35:46","date_gmt":"2012-12-05T11:35:46","guid":{"rendered":"https:\/\/kerryhannon.com\/?p=2436"},"modified":"2012-12-05T07:35:46","modified_gmt":"2012-12-05T11:35:46","slug":"pbs-next-avenue-5-ideas-to-help-women-retire-with-fewer-worries","status":"publish","type":"post","link":"https:\/\/kerryhannon.com\/?p=2436","title":{"rendered":"PBS Next Avenue: 5 Ideas to Help Women Retire with Fewer Worries"},"content":{"rendered":"

\"\"<\/a>When it comes to a comfortable retirement, the prospects aren\u2019t pretty for women. As I noted in a previous\u00a0Next Avenue post<\/a>, we generally have lower salaries and longer life spans than men, we spend more time away from the workforce to raise children or care for aging relatives and as a result our retirement and Social Security benefits get nicked.<\/p>\n

Little wonder that the poverty rate among people 65 and older is nearly twice as high for women as for men: 9 percent versus 5 percent.<\/p>\n

So I was grateful to see that a recent\u00a0report by the Government Accountability Office<\/a>\u00a0came up with 22 proposals to address the problem of women\u2019s financial woes in retirement. The GAO interviewed experts in government, academia, advocacy groups and the private sector to come up with its list of reforms for Social Security, 401(k) plans and private pensions. Although their proposals could help men, they favor women more.<\/p>\n

(MORE:<\/strong>\u00a0Why Women Need to Embrace Retirement Planning<\/a>)<\/p>\n

In honor of National Save for Retirement Week (you hadn\u2019t heard?), I decided this is an appropriate time to talk about my five favorite proposals. But first two caveats:<\/p>\n

First, the report said pension experts were concerned that women may not be as \u201cfinancially literate as men, hindering them from taking full advantage of options for saving for retirement.\u201d I found this comment patronizing, although there\u2019s undeniably a smattering of truth to it.<\/p>\n

Second, all the suggestions have cost implications. \u201cWhile the federal government could bear some of these costs, workers and (retirement) plan sponsors could be responsible for others,\u201d the report said.<\/p>\n

That said, I\u2019m delighted these proposals are on the table. My favorites:<\/p>\n

Require automatic individual retirement accounts.<\/strong>\u00a0Employers who don\u2019t offer pension plans would need to automatically enroll employees in IRAs unless the employees opted out. Some analysts favoring automatic IRAs have suggested excluding firms with fewer than 10 employees.<\/p>\n

Bills requiring automatic IRAs have been introduced in the four most recent Congressional sessions, but haven\u2019t gained traction. Most likely, that\u2019s because they\u2019d result in a loss of federal tax revenue and add some administrative burdens for employers.<\/p>\n

(MORE:<\/strong>\u00a05 Ways Women Can Be More Confident Investors<\/a>)<\/p>\n

Nonetheless, automatic IRAs make sense to me. They\u2019d get women to save more for retirement during their working years, which would pay off if they take time off for family reasons. I also know that when saving for retirement is discretionary, it\u2019s easy to put off.<\/p>\n

When I worked for an employer who automatically took money out of each paycheck for my 401(k), I didn’t notice or feel the deductions. And then, when the quarterly statement showing how much money I’d socked away landed would come, I couldn\u2019t believe how great it felt.<\/p>\n

Shorten vesting periods for retirement plans<\/strong>. It can take as long as six years for 401(k) contributions to be vested. Reducing this period would encourage contributions and increase retirement benefits for women with shorter job tenures. One of the report\u2019s proposals calls for lowering vesting requirements to two to three years.<\/p>\n

(Read more on PBS Next Avenue)<\/a>
\n\u00a0<\/a>
\nWork harder educating the public about the impact of delaying Social Security benefits.<\/strong>It\u2019s true that you can get an estimate of your future Social Security benefits and a record of your lifetime earnings history at\u00a0Socialsecurity.gov<\/a>. And that statement has a section showing how delaying the date you start collecting Social Security checks can increase the amount you\u2019ll receive. But the message doesn\u2019t seem to be sinking in.<\/p>\n

These days, many people elect to begin claiming Social Security as soon as they turn 62, the earliest age they can. Surveys show the public is largely unaware that delaying claiming Social Security from age 62 to 70 will increase benefits by about 8 percent a year.<\/p>\n

And as I noted in another Next Avenue piece,\u00a0financial advisers aren\u2019t doing a great job advising women<\/a>\u00a0about when to take Social Security.<\/p>\n

Better educational outreach from the government is necessary. It\u2019s especially important for women to understand the need to coordinate claiming of their Social Security benefits with their spouses so they can increase their spousal and survivor\u2019s payments.<\/p>\n

Create a Social Security longevity benefit to reflect Americans\u2019 longer lives.<\/strong>\u00a0Under this proposal, Social Security recipients over 80 or 85 would receive a benefits boost, like an extra 5 percent above their regular benefit. A woman reaching age 65 this year can expect to live until 85, on average, according to Social Security Administration data. But a quarter of today\u2019s 65-year-olds are expected to live past 90; 10 percent will make it to at least 95.<\/p>\n

Change the annual withdrawal rules for retirement plans.<\/strong>\u00a0Today, you need to start taking minimum annual distributions when you turn 70\u00bd. \u00a0But that mandatory age seems a little dated to me, since we\u2019re living longer, healthier lives and many of us are working past 70. The retirement withdrawal rules are really geared to people retiring at the \u201ctraditional\u201d age of 65. The longer your retirement stash can keep growing tax-deferred, the more you\u2019ll have when you need the money.<\/p>\n

GAO experts like this proposal for a different reason: It would become easier for retirees to buy so-called longevity annuities, contracts that pay guaranteed amounts regularly for the rest of your life but typically don’t begin until you\u2019re 85.<\/p>\n

One Proposal I Didn’t Like<\/strong><\/p>\n

And that takes me to the proposal that concerns me:\u00a0Encourage the use of annuities in retirement plans<\/strong>.<\/p>\n

The GAO report says that wider use of annuities could be especially attractive to women because of their longer life spans. Last year, the GAO released\u00a0another report\u00a0<\/a>that delivered a similar message.<\/p>\n

Here are the stumbling points for me. Annuities may be inappropriate or expensive for people with shorter-than-normal life expectancies. Likewise, the money you use to purchase immediate annuities is no longer available to cover large unplanned expenses, like medical bills.<\/p>\n

What You Should Do Now<\/strong><\/p>\n

You can\u2019t afford to wait for these proposals to take effect, if ever. That\u2019s why I recommend you take steps to make retirement more secure:<\/p>\n