What Women Get
Compare Social Security for women today versus what it would be with private accounts.
By Thomas N. Bethell
August/September 2005
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| Social Security Now |
Private Accounts |
Defined benefits.
Social Security provides predetermined benefits to disabled and retired workers, their dependents and survivors. |
Benefits not defined.
Benefits will depend on investment success and how the market is doing when a person retires. |
| Survivor and disability insurance. This insurance is equal, on average, to a $400,000 life insurance policy and a $350,000 disability policy—important protection for spouses and children. |
Limited insurance.
Proposals reduce survivor benefits for all but low-wage workers. A worker whose career is cut short by death or disability may not have much in a private account. |
Better benefits for lower earners.
Social Security’s progressive formula pays comparatively higher benefits to women with low lifetime earnings, a help to child rearers and caregivers. |
Lower benefits for most workers.
Under price indexing, defined benefits would be reduced for all but lowest income earners. Private accounts would depend on how much a worker pays in. |
Inflation protection.
Automatic annual cost-of-living adjustment (COLA) fully protects the purchasing power of benefits—an important protection for longer-living women. |
Inflation risk.
Inflation at just 2.5% per year would cut the value of an annuity by 40% in 20 years. Few private annuities carry even partial inflation protection—it’s often capped at 3%. |
Protection for divorced women.
If a wage earner and a spouse divorce (after at least 10 years of marriage), the spouse is eligible for benefits. |
Protection for divorced women unclear.
Proposals don’t say whether a private account holder must share access, setting the stage for legal struggles. |
Sources: Social Security Administration, National Women's Law Center
Originally published in the July/August issue of the AARP Bulletin.
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