[Senate Hearing 107-582]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 107-582
 
                          SETTLING FOR SILVER
                    IN THE GOLDEN YEARS: THE SPECIAL
        CHALLENGES OF WOMEN IN RETIREMENT PLANNING AND SECURITY
=======================================================================

                                HEARING

                               before the

                       SPECIAL COMMITTEE ON AGING
                          UNITED STATES SENATE

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                               __________

                             WASHINGTON, DC

                               __________

                              MAY 23, 2002

                               __________

                           Serial No. 107-26

         Printed for the use of the Special Committee on Aging










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                       SPECIAL COMMITTEE ON AGING

                  JOHN B. BREAUX, Louisiana, Chairman
HARRY REID, Nevada                   LARRY CRAIG, Idaho, Ranking Member
HERB KOHL, Wisconsin                 CONRAD BURNS, Montana
JAMES M. JEFFORDS, Vermont           RICHARD SHELBY, Alabama
RUSSELL D. FEINGOLD, Wisconsin       RICK SANTORUM, Pennsylvania
RON WYDEN, Oregon                    SUSAN COLLINS, Maine
BLANCHE L. LINCOLN, Arkansas         MIKE ENZI, Wyoming
EVAN BAYH, Indiana                   TIM HUTCHINSON, Arkansas
THOMAS R. CARPER, Delaware           JOHN ENSIGN, Nevada
DEBBIE STABENOW, Michigan            CHUCK HAGEL, Nebraska
JEAN CARNAHAN, Missouri              GORDON SMITH, Oregon
                    Michelle Easton, Staff Director
               Lupe Wissel, Ranking Member Staff Director

                                  (ii)












                            C O N T E N T S

                              ----------                              
                                                                   Page
Statement of Senator Larry E. Craig..............................     1
Prepared Statement of Senator John Breaux........................     2
Prepared Statement of Senator Gordon Smith.......................     3

                                Panel I

Cindy Hounsell, Executive Director, Women's Institute for a 
  Secure Retirement, Washington, DC..............................     3
Dorcas R. Hardy, President, Dorcas Hardy & Associates, 
  Spotsylvania, VA and Former Commissioner, Social Security 
  Administration.................................................    18
Muriel F. Siebert, President and Chairwoman, Muriel Siebert & 
  Company, and Women's Financial Network at Siebert, New York, NY    29
Laurie Young, Executive Director, Older Women's League, 
  Washington, DC.................................................    41

                                Panel II

Irene LaMarche, Retiree, Boise, ID...............................    67
Joan Mackey, Pension Counseling Client, Salem, NJ................    69
John Hotz, Deputy Director, Pension Rights Center, Washington, DC    71

                                 (iii)













  SETTLING FOR SILVER IN THE GOLDEN YEARS: THE SPECIAL CHALLENGES OF 
               WOMEN IN RETIREMENT PLANNING AND SECURITY

                              ----------                              


                         THURSDAY, MAY 23, 2002

                                       U.S. Senate,
                                Special Committee on Aging,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 9:35 a.m., in 
room SD-628, Dirksen Senate Office Building, Hon. Larry E. 
Craig presiding.
    Present: Senator Craig.

          OPENING STATEMENT OF SENATOR LARRY E. CRAIG

    Senator Craig. Let me call this hearing of the Senate 
Special Committee on Aging to order. Good morning, everyone.
    I want to thank you for joining us in this hearing this 
morning, which is entitled, ``Settling for Silver in the Golden 
Years: The Special Challenges of Women in Retirement Planning 
and Security.''
    Thanks also, of course, to the staff for working with all 
of you to put this hearing on. Also a very special thanks to 
Chairman John Breaux for helping facilitate this and for 
allowing me to chair the hearing this morning.
    As most of you know, the Special Committee on Aging is not 
a legislative body. It is an oversight body and a hearing body. 
But much of what we do--and part of the record that you will 
help us develop today--has been very important over the years 
in changing the direction and the character of legislation and 
public policy.
    So I hope you feel that your presence here today before the 
committee and the record that you will build will be valuable.
    Several other of our colleagues may be joining us through 
the course of the hearing this morning to listen and to make 
comments.
    As many of you know, security in retirement is often 
described as a three-legged stool, one leg of which is Social 
Security, another is employment-related pensions, and a third 
is individual investing and savings. For most of us, no single 
leg is sufficient, and problems with even one can lead to 
serious repercussions to one's retirement plans.
    Navigating the challenges of retirement planning has become 
an increasingly complex task in today's society--for both men 
and women. For women, however, the retirement stool is 
significantly more wobbly than it is for men. Indeed, in all 
three areas of retirement security, women today lag 
significantly behind men. In Social Security, for example, even 
though women account for 60 percent of the program's 
beneficiaries and tend to live 7 years longer in retirement 
than men, they receive only about 75 percent as much in Social 
Security benefits.
    Similarly, women tend to benefit far less from workplace-
based pensions or 401(k) plans. Only about 27 percent of 
retired women receive pension income, compared to about 47 
percent of men. And in personal savings and investment, as 
well, women fall behind, averaging only about one-half the 
personal savings rate of men.
    We are here today to examine why this is the case and to 
spotlight strategies and resources that women and their 
families can turn to for help. Among our witnesses this 
morning, for example, is the Executive Director of the Women's 
Institute for a Secure Retirement, which just this week issued 
a new publication aimed at better educating women and their 
families about the special challenges faced by women in 
retirement planning, ranging from women's patterns of 
employment, to divorce, to the retirement implications of child 
rearing and caregiving.
    I am also very pleased to have with us Irene LaMarche from 
my home State of Idaho. Irene is currently retired and living 
in Boise, and she will share with us some of the problems and 
challenges she has faced in her professional and financial 
experience.
    To all of our witnesses again, a very special thanks for 
being with us today. Now let me welcome our first panel up and 
introduce them for the record and to all of you who are here 
this morning.
    Cindy Hounsell is Executive Director of the Women's 
Institute for a Secure Retirement here in Washington.
    Dorcas Hardy, whom I have had the opportunity to know over 
the years, is President of Dorcas Hardy & Associates and former 
Commissioner of the Social Security Administration.
    Muriel Siebert--I am told you go by ``Mickey''; is that 
correct----
    Ms. Siebert. That is right.
    Senator Craig. Thank you. You are President and Chairwomen 
of Muriel Siebert & Company, and Women's Financial Network at 
Siebert in New York.
    Laurie Young is Executive Director of the Older Women's 
League here in Washington, better-known as OWL.
    We thank you all for being with us, and Cindy, we will 
start with you. Again, welcome to the committee.
    [The prepared statement of Senator Breaux follows along 
with a prepared statement of Senator Smith:]

               Prepared Statement of Senator John Breaux

    Good morning and thank you all for coming today. I would 
also like to thank Senator Craig for his interest in this 
important issue facing America's women. We all know far too 
well that women in America bear an overwhelming burden when it 
comes to caring for children, spouses and aging parents, while 
at the same time caring for their own health and well-being. 
Unfortunately, as you all will certainly point out, women are 
falling behind when it comes to taking care of their financial 
security and retirement preparation. Women spend so much time 
taking care of everyone else, they neglect themselves. This is 
simply unfair.
    Women are living longer, many times outliving their male 
spouses. Older women are also far more likely to be living in 
poverty than men. As this hearing will explore, there are many 
factors that contribute to these statistics--factors that 
cannot easily be changed. However, by building awareness of the 
important steps women can take to prepare for their own 
retirement, we can slowly begin to change these statistics as 
millions of women from the Baby Boom generation reach 
retirement age.
    Throughout history women have risen to the challenges put 
before them. They have fought successfully for their right to 
vote, they have demanded equal pay for equal work and shattered 
corporate glass ceilings. Now is the time to rise to another 
challenge--living securely and independently into older age.
    It is my hope that hearings such as these will serve as a 
powerful catalyst in getting these issues into the 
consciousness of women across America.
                                ------                                


               Prepared Statement of Senator Gordon Smith

    Mr. Chairman, I want to say how happy I am to serve as a 
new member of this committee and am also pleased that the first 
hearing I am able to attend is on the very important issue of 
the special challenges of women in retirement planning.
    In particular, the problems that current women social 
security beneficiaries have are of the utmost importance. Many 
current female beneficiaries have retired based on a husband's 
benefit . . . they are beneficiaries from a generation that 
perhaps stayed at home and worked harder than most, in my 
opinion, by raising families.
    Now demographics have changed but we still have many women 
beneficiaries that are dealing with inequities of the current 
Social Security system.
    In looking at the history of Social Security--it is evident 
that women were an integral component. The first woman to serve 
as a member of the Cabinet was Secretary of Labor Frances 
Perkins. Secretary Perkins also was a leader in designing 
Social Security.
    And as we all know the first beneficiary to receive a 
benefit from the system was Ida May Fuller.
    Today women comprise the majority of Social Security 
beneficiaries, representing almost 60 percent of all Social 
Security recipients at age 65 and 71 percent of all recipients 
by age 85.
    And many categories of these women--the elderly, the 
disabled and the divorced are more likely to live near the 
poverty line.
    Just a week and a half ago, following my appointment to 
this committee, Senator Feinstein and I introduced ``The Social 
Security Benefit Enhancement Act for Women Act of 2002.'' It is 
a small bill but an important one that makes improvements that 
will enhance benefits for disabled widows, divorced retirees 
and widows whose husbands died shortly after an early 
retirement.
    We introduced this package mirroring the House bill, which 
passed a few weeks ago by a vote of 418 to 0. Clearly making 
these kinds of benefit changes is a bipartisan effort--while 
they are small benefits--showing that we can work together on 
issues we all care about. Social Security is at the top of that 
list.
    So I'm pleased to be here and hear from these panels and 
experts. I hope that my colleagues will have a chance to 
cosponsor S. 2533--The Social Security Benefit Enhancements for 
Women Act of 2002.

   STATEMENT OF CINDY HOUNSELL, EXECUTIVE DIRECTOR, WOMEN'S 
       INSTITUTE FOR A SECURE RETIREMENT, WASHINGTON, DC

    Ms. Hounsell. Thank you very much. I am pleased to be here.
    WISER is an organization that was launched in response to a 
growing need to improve the long-term financial security of all 
women through education and advocacy. Our retirement education 
program, The Power Center, is funded through a grant in 
cooperative partnership with the Administration on Aging. The 
program uses a training technique that not only improves the 
knowledge of participants but helps them to take action and 
make better financial decisions.
    Predatory lending scams are an important part of our 
program, because a disproportionate number of older women are 
the purchasers of financial products that charge an exorbitant 
rate of interest and may jeopardize their ability to retain 
their homes. The program includes many partners--employers, 
women's organizations, and  community-based  groups. Government 
 agencies have included the Cooperative Extension Service at 
the Department of Agriculture, the Department of Labor's 
Pension Welfare Benefits Administration, the Women's Bureau, 
and the Social Security Administration. I think that what most 
of us know, all of the partners mentioned, is that very few 
people have the sophisticated knowledge needed for today's 
financial issues and that is the problem that we want to 
address today. The need for and the problem with financial 
education, is one of the reasons why we have released this new 
report, Your Future Paycheck What Women Need to Know About Pay, 
Social Security, Pensions, Savings and Investments.
    The report reveals the direct link between a woman's 
current paycheck and her future retirement prospects. The 
report also addresses the other factors that prevent women from 
securing adequate retirement income. Women face a host of 
obstacles, as you have already mentioned, but one of the 
important issues, I think, which people do not pay enough 
attention to is that working women, while they have increased 
their participation in the workforce, two-thirds of today's 
full-time working women earn less than $30,000.
    As women came into the workforce in large numbers, the 
traditional employer-paid health and pension benefits were 
becoming scarce. The norm is now for employee-paid and 
investment-directed savings plans such as 401(k)s and 403(b) 
plans. For women, not only is there the difficulty of working 
in a job where there is access to a retirement plan, but there 
is also the problem of having enough money to contribute to 
their plan and making that money last for a lifetime--a 
lifetime that is on average longer than for men of their same 
age.
    Those factors are coupled with marginal work, entering and 
exiting the workforce as they leave their jobs to care for 
their families. Women are twice as likely as men to work part-
time, and fewer years at work means smaller Social Security and 
pension benefits and less money to save.
    Women's economic security is also threatened by divorce, 
separation, or the death of a spouse. Older women living alone 
are much more likely to be poor.
    As WISER provides financial education, for women we hear 
from many women who are convinced that they will never be able 
to stop working. They worry that they will never be able to 
retire despite a lifetime of hard work in and out of the home. 
Their concerns are backed by a trend now among experts who have 
stopped talking about the three-legged stool to describe 
retirement income, because experts now recognize that pensions, 
Social Security, and individual savings will not provide enough 
income for retirement.
    Experts are now beginning to routinely refer to a four-or 
five-legged stool that includes earnings from employment along 
with SSI, a poverty program. However, working beyond age 65 out 
of choice is different from desperately applying for jobs at 
age 75 or 80 in order to pay for your medication or your rent.
    When I saw the title of the hearing, I thought that 
``Settling for Silver'' may mean the quarters left on the table 
for older women working as waitresses. Often, we see older 
women waitressing, and they are not doing it just because they 
are interested in getting out of the house--they need that 
income to pay for necessities.
    So how can a woman's retirement income become more like a 
man's? The answer unfortunately is neither easily nor quickly. 
If she works full-time, has higher than average earnings, has a 
retirement plan, then she is equally likely to participate in 
it. But the reality of the modern American workplace is that 
women are still the ones who have the children, and they are 
still willing to drop out of the workforce and care for those 
children. We see it all the time now. We see a lot of young 
professional women who have been working for 5 or 6 years, they 
have their second child, and they just cannot keep all the 
balls in the air, and the family priorities take over and they 
exit from the workforce and their profession.
    Women also have less money to save and invest, unless they 
are able to save sufficiently, their retirement suffers. 
Today's younger women are more likely to carry credit card debt 
than younger men, and more single young women than men live 
paycheck to paycheck.
    The data in the your future paycheck report is intended to 
alert policymakers to the need to examine future pension and 
Social Security reforms together, to have a cohesive retirement 
policy in order to ensure that these changes will meet the 
needs of today's women.
    As the mainstay of support for women, the Social Security 
program has helped to protect many women from outright poverty. 
Any future changes to the program should retain the income 
support features on which low- and moderate-income Americans 
rely most heavily.
    All Americans are being asked to assume new 
responsibilities in making more complex retirement savings 
decisions, but retirement issues are very difficult issues to 
understand, and the conflicting financial advice among the 
millions of pages available on the internet only seems to make 
the problem more confusing for both men and women.
    To end on a positive note, consider the education of Audrey 
Gray, a 35-year-old African American data entry operator for a 
national bank in Atlanta, GA. In 1997, Ms. Gray attended a 
financial literacy workshop. She says, ``I attended because I 
realized I did not have much savings, and I should have started 
my 401(k) in my twenties,'' which is what all the experts say 
she should have done. ``But nobody ever told me this was 
important to do. I never thought I would be able to get out 
from under debt. I had a pension plan in my job, but I did not 
feel comfortable because of the debt. I felt I could not 
contribute enough money into my 401(k) without making it too 
hard to make ends meet. Something had to be sacrificed, and I 
sacrificed the 401(k).''
    Five years later, Ms. Gray is debt-free, contributes to her 
retirement plan, and says she enjoys having a future financial 
plan.
    It is important for this committee to provide the 
leadership to other policymakers that people need financial 
education; they cannot be making all of these decisions on 
their own, and employers especially need to be able to help 
provide that education, because that is the one place where 
people listen to what they are told.
    Thank you for this opportunity to participate.
    Senator Craig. Cindy, thank you. I forgot to mention that 
the WISER organization is affiliated with the Heinz Family 
Philanthropies.
    Ms. Hounsell. Yes. We were launched by the Heinz Family 
Philanthropies.
    Senator Craig. And your primary goal is to educate women. 
Thank you for that testimony.
    [The prepared statement of Ms. Hounsell follows:]
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    Senator Craig. Now let me turn to Ms. Hardy. As I 
mentioned, Dorcas is former Commissioner of the Social Security 
Administration under Presidents Reagan and Bush, and we have 
had the opportunity over the years to work on a variety of 
issues related to Social Security and other retirement 
programs.
    Dorcas, we are pleased to have you before the committee.

  STATEMENT OF DORCAS R. HARDY, PRESIDENT, DORCAS R. HARDY & 
 ASSOCIATES, SPOTSYLVANIA, VA, AND FORMER COMMISSIONER, SOCIAL 
                    SECURITY ADMINISTRATION

    Ms. Hardy. Thank you, Mr. Chairman. It is my pleasure to be 
here.
    As you stated, when I served as Assistant Secretary of 
Human Services and also as Commissioner of Social Security 
during the 1980's and early 1990's, I was responsible for some 
of the most important Federal programs for retirees, from Meals 
on Wheels to Social Security benefits. These programs remain 
very important today and represent most of the nearly 50 
percent of the entire Federal budget which is dedicated to 
persons over the age of 65. My comments are based on my Federal 
and State service experiences with the elderly as well as my 
current consulting, regarding entitlement, health care, 
disability, and financial services.
    Issues related to Americans' pensions and retirement are 
discussed in several congressional venues. I would like to 
commend the efforts of the Special Committee to bring together 
a discussion of these important and very diverse issues within 
one committee.
    Women today, as Cindy has commented, comprise about 90 
percent of all the elderly who are a part of Social Security 
beneficiaries. Women represent about 58 percent of Social 
Security retiree beneficiaries and about 70 percent of those 
who are 85 and older. As we look at the receipt of benefits of 
many of these women, 74 percent of the unmarried elderly do 
depend on Social Security for at least half of their income.
    Even though the benefit formula does provide a higher 
proportion of pre-retirement earnings to lower-earning workers 
who are more often women, without Social Security, it is 
expected that half of the elderly women would meet the 
Government's definition of poor.
    Last week, the House passed reforms that, if they become 
law, will adjust Social Security to help widows and divorced 
women who fall through some of the cracks in the system. That 
legislation should benefit, it is estimated, about 120,000 
women, it improves fairness and updates eligibility 
requirements for some disabled widows and divorced spouses.
    Many say that inequities still remain in the way that 
Social Security treats women. A woman who works outside the 
home and qualifies for half of her husband's retirement will 
pay Social Security payroll taxes forever, decade after decade, 
but she will receive benefits no higher than those received by 
another woman who is not in the workforce at all and pays no 
payroll taxes.
    Some say that no one this side of the Taliban would propose 
a special tax levied only on working women as a penalty for 
working outside the house, but this is the effect of that 
Depression era provision of the Nation's retirement system. Six 
of every 10 women pay a huge amount of Social Security taxes, 
usually more than they pay in income taxes, and receive no 
added benefits. I believe that is part of a critically needed 
redesign of the Social Security system.
    We have also mentioned that the graying of America is upon 
us, and it has begun in earnest. I always say that that is good 
news and bad news. Obviously, we would all like to live longer. 
Annually, a new city the size of Boston is created and 
populated by persons over 65. In 2000, we reached the mark of 
100,000 persons over age 100, and soon, the entire Nation will 
look like the State of Florida.
    Women retirees are at the forefront, which is terrific--
some would say that is somewhat negative, but we are living 
longer. We reach age 65 and live on average almost 20 years 
compared to 16 years for a man. Life expectancy rates at age 65 
are anticipated to increase to over 20 years for women, whereas 
only about 17 years for men.
    The fastest growth will come among the numbers of the so-
called old-old, persons who are over 85. They are the most 
vulnerable.
    The cumulative growth in the 85 and over population between 
1995 and 2050, which I appreciate is a ways away, is 
anticipated to be more than 400 percent. I think that the 
future structure of these populations will affect our social, 
economic condition, and will particularly affect the 
economically dependent classes of the population.
    Our demography is changing dramatically. So I believe we 
should be asking how any of these factors influence one's 
retirement years and how can they be changed for the better. 
How do we get to the future by better educating our society and 
having them depend upon themselves?
    The women of tomorrow will be different. Many of them will 
have 401(k)s. They will understand most kinds of investments. 
The women of tomorrow are many of us. Those retirees are 
developing an understanding of financial options, and they are 
also beginning to learn that they need as much as 75 percent of 
their pre-retirement income for retirement years.
    Education is extremely important, and the integration of 
private and public retirement programs with regard to education 
is also very important. When I initiated what is now called the 
Social Security Statement, I wanted to say that all workers 
should have knowledge about their expected benefits, and in 
black and white, they should be able to see what Social 
Security is meant to be, and that it is not the sole source of 
retirement income.
    We need better education with regard to Social Security and 
we need to dismiss the myth that there is a shoebox in 
Baltimore that has your contributions or your taxes in it, with 
your name on it.
    We also see in the future a massive transfer of wealth from 
the young to the old, from the worker to tomorrow's retiree, 
specifically with regard to the financing of Social Security, 
but also with Medicare. When you look at the baby boom 
generation, which currently pays more than 60 percent of all of 
our taxes, who will be beginning to retire in just 9 years, you 
are looking at huge, increased payroll costs or some other kind 
of solution with regard to our public programs.
    So I would suggest the following. One is additional 
financial education, perhaps a personal finance course as a 
requirement for every high school graduate, because as has been 
pointed out, it is not just dollars; it is budgeting, 
insurance, and incredible debt at a young age.
    The financial industry has done a good job, but not 
everybody is listening. So there needs to be a combination of 
that kind of financial education plus an understanding of what 
one does once one has some savings.
    Second, additional retirement savings incentives. The 
Congress has increased the maximum contribution to IRAs, but I 
think it should increase even further--there is no particular 
reason to have a cap--so that baby boomers would have that 
opportunity to significantly increase their savings.
    The complexity of the whole retirement systems and how they 
all fit together, from 401(k)s to savings, is very difficult 
for people to understand. One might consider a very simple and 
useful savings incentive that would be just a passbook savings 
account with a deposit limit of $50,000, or $100,000 which 
would allow tax-free interest. People still do trust their 
banks, and that at least would give a start to some beginning 
savers and obviously, conservative investors.
    Third is Social Security 101, as I have called it, to 
really educate people about the system and what their 
expectations should be.
    And fourth and fifth are most important, that is, 
modernization and redesign of our Social Security and our 
Medicare systems. We have got to bite the bullet and we have 
got to tackle these issues in terms of legislation with new 
programs for both entitlements. Personal retirement accounts as 
part of Social Security would give a very welcome opportunity 
for women, for all of us, but especially for women. Much study 
has been done about that, from the President's Commission to 
Strengthen Social Security to all sorts of professors 
throughout academy, and they clearly say that for early widows 
and divorcees, the personal retirement accounts would be 
excellent and would keep most people out of a poverty 
situation.
    In conclusion, I think we clearly see that we are all 
living longer, but we have barely begun to deal with the 
implications of the graying of America and how it will affect 
all of us and all of our institutions. We must promote 
individual responsibility for retirement to the best of one's 
ability, and empower people through education and economic 
opportunity to provide for themselves, again, to the best of 
their ability.
    I think the answers to these questions are key to 
retirement security for seniors today, tomorrow, and in the 
future, but I have confidence that we will get there--if not 
tomorrow, but slowly and surely.
    Thank you, Mr. Chairman.
    Senator Craig. Dorcas, thank you very much.
    [The prepared statement of Ms. Hardy follows:]
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    Senator Craig. Our next panelist is Muriel Siebert, CEO of 
the New York investment firm of Muriel Siebert & Company and a 
pioneer in the world of finance.
    Mickey, thank you for being with us this morning.

   STATEMENT OF MURIEL F. SIEBERT, PRESIDENT AND CHAIRWOMAN, 
  MURIEL SIEBERT & COMPANY, AND WOMEN'S FINANCIAL NETWORK AT 
                     SIEBERT, NEW YORK, NY

    Ms. Siebert. Thank you for inviting me, Senator, to present 
my views before the Special Committee on Aging.
    In addition to my written testimony, I would like to make a 
few points. In 1999, women drew an average monthly Social 
Security check of $8,364 a year versus $10,848 for men. That is 
a 30 percent difference, and that represents a real quality of 
life difference.
    We cannot do much to change their former earnings, but we 
could pay for their prescriptions, possibly food stamps; we 
could help them consolidate their debt so if they have monthly 
payments, they could pay less; we could help them refinance 
their mortgages.
    I think we could reach these people and tell them about 
programs through their Social Security monthly check, or on a 
website, or through a local library.
    Most women in our country today work because they have to 
even though they are married. Their paycheck is necessary. 
Congress has created retirement vehicles to enable both working 
and nonworking spouses to have self-funding IRAs in addition to 
401(k)s. But many people do not have the basic financial skills 
to take advantage of these programs.
    Financial literacy is the key, and we must give people 
basic financial knowledge if they are to understand financial 
products which have become much more complicated today.
    For example, a 45-year-old woman with $35,000 in an IRA or 
a 401(k), and let us assume she is going to work until she is 
65 years old, which is 20 more years, sets aside $100 a month 
for 20 years. If she invested that in a bank at 3 percent, at 
65, she would have $136,044. If she invested it in U.S. 
Treasuries at 5 percent, she would have at the same age 
$193,447. If she wanted to put it in the stock market and 
stocks continued to earn an average, as they have over the last 
30 years, of 10 percent, she would have $332,417.
    Now, there is a big difference between stocks and the first 
two, but Treasuries are certainly as secure as a bank deposit. 
So you can see that if she had the knowledge to buy Treasuries 
at 5 percent, she has 50 percent more money at the end of that 
period of time.
    If a 25-year-old woman puts aside $100 a month for 40 
years, and if it earns 10 percent, compounds at 10 percent, she 
will have $632,000 at age 65. People do not have this 
knowledge. It must be taught in school, and it must be made 
available at banks, on the website, at employers' places of 
business.
    I learned about the lack of knowledge that women have. The 
first year I had a seat on the Stock Exchange, which was 1968, 
I think every woman who had been widowed and left money walked 
through my door. I could not say I was not in, because I had a 
two-room office, and if you opened the door, there I was. I 
could see they had absolutely no knowledge. They had portfolios 
which had the wrong stocks in them.
    Similarly, every young woman looking for work on Wall 
Street walked through my door, and I learned that they did not 
have basic knowledge to qualify themselves for jobs on Wall 
Street.
    I did a survey of every 4-year senior women's colleges. It 
was a 5- or 6-page survey, and we even counted home economies 
as a ``Yes''--and 90 percent of the 4-year senior women's 
colleges did not have one course in personal finance. That is 
not right.
    I learned about the lack of knowledge when I was 
Superintendent of Banks for the State of New York, where I 
served for 5 years. Besides regulating all the major foreign 
banks and big commercial banks and savings banks in New York, 
we regulated the check cashers and the licensed lenders. I can 
tell you in the case of the check cashers that people were 
using check cashers, paying an egregious amount of money, 
because they did not know how to use a checking account.
    Similarly, licensed lenders, our credit card companies--
nowhere do they state on their statements in simple, easy-to-
understand language that if you meet the minimum payment that 
the front of the bill shows that is due, you will be paying for 
last night's pizza dinner for 15 to 25 years. That is reality.
    I tried to tackle this when I was President of NYWA, the 
New York Women's Agenda, a coalition of 90 different Women's 
Organizations. I took my idea to the board, and we took it to 
the Department of Education in New York. It has taken 3 years, 
and my program, which teaches kids about credit cards and 
checking accounts, and the teachers added taxation to it, is 
now being enlarged. It has been tested, and in the fall, it 
will include basic financial tools like different kinds of 
mortgages, the kinds of tools that people in the workforce 
today need--regular people.
    We tested it in two schools and each of the five burroughs, 
and then we paid to have teachers from the 40 enterprise 
schools trained, and now it will be citywide. This must be done 
on a national scale.
    Anybody graduating from high school and entering the 
workforce should know about checking accounts, should know 
different kinds of bank accounts; they should be able to figure 
out if they should buy or lease a car. I am not talking about 
learning how to analyze stocks, but they should know about 
retirement. They should know the tax advantages of owning a 
house or contributing to an IRA.
    I am talking about real things they need in real life.
    You have a bankruptcy bill in front of you, and for the 
first time, if people who declare personal bankruptcy have 
money available, they are going to have to make a partial 
payment for the next I believe it is 5 years. They have to be 
told this in easy-to-understand language when they take out a 
credit card.
    The language on the monthly statement is like the terms of 
Enron. They need plain easy to understand language that clearly 
states that if you pay the minimum, you are going to be paying 
for the purchases on your card or the balance for ``x'' number 
of years. If you want to pay it off over a period of one year, 
send ``x'' dollars--just plain, simple language.
    We cannot stop people from overextending themselves, but it 
is our duty to get them information so they understand what 
they are doing. In that way, they can only blame it on 
themselves.
    I think that the basic financial terms must be inserted, in 
plain, easy-to-understand language, the same way that we are 
going to be doing it in indentures of bonds so that investors 
can understand it, and in quarterly earnings reports. It is 
just as important.
    If it is decided--and I am in favor of privatizing a 
portion of Social Security--I would like to suggest that 
individuals not be able to pick individual stocks. My reason is 
that people who know the least will lose the most. I would like 
to see them invest in a choice of index funds.
    I would also recommend--and I believe in it extremely 
strongly--that the Government under no circumstances should 
vote the proxies, because Government should not control private 
industry. I would like to see the Government's votes 
``neutralized.'' If the outside voters are voting 80-20, the 
proxies controlled by Government or Government agencies should 
vote 80-20.
    I thank you for inviting me to testify.
    Senator Craig. Thank you very much for that insight and the 
obvious experience that you bring to this committee.
    [The prepared statement of Ms. Siebert follows:]
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    Senator Craig. Now we welcome Ms. Laurie Young, Executive 
Director of the Older Women's League, a leading voice of 
concern for the needs of older American women.
    Welcome to the committee. Please proceed.

 STATEMENT OF LAURIE YOUNG, EXECUTIVE DIRECTOR, OLDER WOMEN'S 
                     LEAGUE, WASHINGTON, DC

    Ms. Young. Thank you, Senator Craig.
    I want to thank you for your invitation to testify today as 
Executive Director of the Older Women's League, or OWL, as we 
are known, the only national grassroots membership organization 
dedicated exclusively to the unique concerns of women as we 
age. I can assure you that our members have a very personal 
stake in this issue.
    My testimony today is a call to both policymakers and 
individual women. Members of Congress and private industry must 
improve our Nation's retirement system to truly reflect women's 
work, life, and retirement realities. On an individual level, 
women can do more to prepare for their own retirement.
    It is vital, however, that we remember that one part must 
flow from the other. Without a viable retirement system that we 
have equal access to, the efforts of most women to amply or 
even adequately fund their golden years will be in vain.
    Here are the challenges that we face. Reality one--women 
earn less. Women still earn only 73 percent of what men earn. 
Over a lifetime, this wage gap adds up to an average of 
$250,000 less in earnings for a woman to invest in her 
retirement. We must remember this glaring reality of the wage 
gap when we ask women to save more for their retirement. You 
cannot save what you do not earn.
    Reality two--women are America's caregivers, and we pay for 
it in retirement. Caregivers often take more flexible, lower-
wage jobs, with few benefits, or stop working altogether. Women 
spend on average 12 years out of the workforce for family 
caregiving over the course of their lives. This translates into 
an average loss of $550,000 in lifetime wage wealth.
    Most women do not have income from pensions or savings. The 
flexible jobs that allow women to be caregivers are usually 
low-wage work with little pension coverage. Women make up about 
two-thirds of the part-time labor force. Women live longer. We 
live an average of 6 years longer than men, and this means that 
older women are more likely to be single, living alone, and 
facing inflation's erosion of their money's value.
    The result is that women are poorer than men in retirement. 
Our poverty rate is almost twice that of men. Without Social 
Security benefits, over half of older women would be poor.
    Given these harsh realities, OWL offers simple policy 
recommendations. First, enact pay equity legislation. Women 
will not be able to save as much for retirement until they earn 
as much as men.
    Improve women's access to pensions. Our written testimony 
details changes to the pension system which should be 
encouraged.
    Women should not be penalized for caregiving, yet this 
happens again and again in America today. Our written testimony 
also offers several suggestions to prevent caregiving from 
jeopardizing women's retirement security.
    We need to improve Social Security for women. While this 
hearing is not focused on the third leg of retirement planning, 
that of Social Security, I would be remiss in not mentioning 
that it is a critical role in women's lives. Recommendations to 
strengthen the current Social Security system for women can be 
found in OWL's 2002 Mother's Day Report.
    While we first and foremost urge women to petition their 
elected officials and employers to change pension and savings 
systems, OWL also offers advice on how women can improve their 
own retirement prospects. Based on OWL's successful ``The Color 
of Money: Retirement for Women of Diverse Communities'' 
campaign, we offer the following advice.
    Women should become financially literate. It is critical 
for women to consider every opportunity for retirement saving. 
If married, a woman needs to make her marriage a true financial 
partnership by becoming a full participant in all decisions. 
Historical patterns and social customs often encourage women to 
put others first, and then, women are left alone to take care 
of themselves in old age.
    Start early. Saving and investing as early as possible is 
the best approach, and that is why OWL's public education 
campaign goes beyond our usual audience of midlife and older 
women to reach younger women.
    Learn about your employer's pension plans--and maximize all 
employer contributions. If you do not do this, it is like 
turning down a raise.
    Contribute to an individual retirement account. Whether in 
the paid labor workforce or not, you can and should if possible 
contribute up to $3,000 annually to an IRA in your own name.
    Investigate the exact amount of future Social Security 
benefits. Three months before your birthday, the SSA will send 
you an annual statement. Use it in your retirement planning 
calculations.
    Carefully consider how your job choices affect your 
retirement. When considering a change, look for a job with a 
good pension plan, and if you are 3 months away from full 
vesting, consider the financial impact of changing your job at 
that time. Preserve lump sum distributions for retirement. 
Retain and do not spend any lump sum distributions received 
upon leaving an employer. The penalties are severe, and most 
women will need this money in retirement.
    In conclusion, women have been balancing on a one-legged 
stool for some time now. Many younger women assume that these 
problems are problems of the past and believe that their lives 
will be different. They will not.
    However, almost two-thirds of women today have the same 
kinds of pink-collar jobs that women have traditionally held--
sales, clerical and retail--low-wage positions that frequently 
offer no retirement benefits.
    If this Nation's private pension system is reformed to 
better reflect women's work realities, if Social Security is 
strengthened for women in the ways that OWL suggests, and if 
women educate each other about what they need to do to plan for 
retirement, then, women's three-legged stool might actually 
become well-balanced, sturdy, and reliable.
    I want to thank you today for including OWL in this 
conversation and for taking the lead in creating the debate.
    Thank you.
    [The prepared statement of Ms. Young follows:]
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    Senator Craig. I thank all of you very much for your 
testimony.
    There have been some common themes running through all of 
your testimony which are extremely valuable. Let me ask this 
first question of all of you. In your own minds, based on your 
experience and your observations, which would you single out as 
the most serious mistake that women make in planning for 
retirement?
    Ms. Hounsell. I would say not planning. That is the biggest 
problem.
    Senator Craig. Is there any disagreement with that?
    Ms. Young. That is assuming, though, that the mistakes are 
mistakes that women make. It is about planning, but it is more 
about being educated about what the realities of the system 
are. There is only so much you can plan. If you still earn less 
than men, if you do not have access to pensions, if you do not 
have that information, no matter how much you plan, you are not 
going to get there.
    Senator Craig. Yes.
    Ms. Hardy. In that regard, the whole question of financial 
education availability--it is there, but it is extremely 
complex in many cases, and as Mickey has suggested, starting 
earlier and having personal finance understanding would be a 
great step forward for everybody, especially women.
    Senator Craig. In the context of those thoughts and 
statements, what would you recommend, or what would you say are 
the two or three most practical recommendations you would 
recommend to women who might be listening to this hearing 
today?
    Cindy?
    Ms. Hounsell. I would be happy to start. I think we need to 
provide information and education, but I think the most 
important thing that can be done, particularly with Members of 
Congress, is to do the work that is needed to strengthen Social 
Security. The information we have talked about today, the pay 
that women earn, the values and the caregiving, the issues that 
take women out of the workforce and compromise their ability to 
save and plan regardless of how much information they have, 
means that we cannot threaten Social Security, which often 
becomes the only leg that women can depend on in retirement.
    So I think the most important step has to be strengthening 
and maintaining and enhancing Social Security for women.
    Ms. Siebert. I think that if we spoke to people while they 
were in school and went through the benefits of a retirement 
fund, it is possible--that is why I used the $100 in my 
numbers, that somebody getting her first job might save $100 a 
month--or, if not $100, it may be $50--but we could get through 
to them that they must start, because it is the value of the 
compounding of interest over 20, 30, 40 years that will give 
them the money they need to retire when the time is there.
    Ms. Hardy. I would like to comment that I think the reform 
of entitlement programs is really the essence for all of us--
not just women, but men as well. If we are looking at huge tax 
increases for both Social Security payroll taxes and for 
Medicare in the future, how do we balance all these dollars? We 
are going to be paying all of our money into a payroll tax with 
the hope that something will be there, and I find that is not 
sustainable. I believe there are a lot of possibilities and 
options that we should be considering that include personal 
responsibility as well as a floor of protection as provided by 
entitlements.
    Ms. Hounsell. Not to be redundant, but I think part of the 
problem is that when people even take their first job or they 
leave a job, they are not thinking about the consequences. One 
of the problems that we see is that people just do not think 
they are going to get older, so nobody pays any attention to 
it.
    Senator Craig. Well, we can all testify that they think 
wrong, don't they? [Laughter.]
    Ms. Hounsell. They do, they do. But I think that women are 
also making choices that are just not good choices. They use 
their lump sum payments to pay for their kids' education. What 
is going to happen to them?
    Senator Craig. Mickey, you talk about education, and I have 
absolutely no disagreement with you. This weekend, I was home 
in Idaho, and we celebrated the birthday of a 4-to-become-5-
year-old, grown-up little girl. So our three children and their 
spouses were there, all in their mid-20's to early 30's. I was 
sitting back, listening to conversations, and one of the most 
enjoyable conversations was when they were all talking about 
their 401(k)s or getting into it, and all of them jumped on a 
daughter-in-law who had just become employed, and they asked 
what kind of benefits are available, and she mentioned the 
401(k), and there was this unison: ``How much are you going to 
put into it?'' Well, she did not really know. They all said, 
``But you have got to do this, you have got to do this.'' I was 
very pleased at that. I did not really have to say much, and 
they were not asking my advice at that moment; this was a 
conversation going on amongst the six of them.
    But the difference today, let us say, between the 30-year-
old woman in the workplace and that woman who is moving into 
retirement today--are we seeing a significant difference in the 
knowledge base that can allow them when they become 60 to be 
better off than the 60-year-old of today?
    Ms. Siebert. I think  the 30-year-old  woman  today,  as I 
see it--and part of them have become the ``sandwich 
generation,'' as they call it, because they are squeezed 
between obligations to parents and obligations to children--I 
believe these women know that at one time or another, they are 
going to have to be responsible for the financial matters in 
the family, or they must take control of their own financial 
matters; whereas the woman who is in her sixties or seventies 
today and collecting Social Security was raised to get married, 
and your husband will take care of you.
    I think today's young people are more realistic; they know 
that if they get a divorce, chances are that they might collect 
alimony for only a couple of years, but it is not a lifetime 
alimony that they will collect. So I think they are realistic.
    Are they taking the next step and investing up to the 
maximum or making a good contribution every month? Not 
particularly. I see it in our women's financial network 
website. They are coming to our website, they are spending a 
lot of time surfing on it, but they are not opening the 
accounts. Is it because there is a recession, and they do not 
have the money? Is it because we have done a poor job of 
explaining it? I do not think so. Is it because it is something 
they put off, and they say, ``I can start that next year, 
because I want to buy a new car.'' I do not know.
    Senator Craig. Does anyone else wish to comment on that 
question and your observations on the 30-year-old and the 60-
year-old?
    Ms. Hounsell. I think one thing that was surprising about 
the report when we were putting together a lot of the 
statistics--and we find that from our education program--is 
that there are not a lot of differences. There may be some 
women, especially those who live in big cities, in the same way 
that you were talking about your family, who have access to 
that kind of information. But most of the people that we are 
educating are not hearing from cocktail parties or other places 
about diversification or replacement rates. They do not even 
know what that means. Those are the people that we are really 
concerned about, and I think they are the majority.
    A lot of women get into their marriage--I keep saying that 
we should do a lot of work with Bride Magazine and try to 
prevent people from spending so much money on their weddings 
early on and use that money to prepare for retirement, but I do 
not think anybody is going to read that article in Bride 
Magazine.
    Senator Craig. In other words, ``Mom and Dad, put a deposit 
in my 401(k), not on my gown.''
    Ms. Hounsell. Exactly.
    Senator Craig. Does anyone else wish to comment on that 
question? [No response.]
    Then, let me ask this of all of you, and for the sake of 
time, it will probably have to be my last question.
    In addition to promoting better education for women about 
retirement realities and better individual planning, some of 
you also ventured recommendations of ways that Government can 
help.
    For example, Dorcas, you advocate allowing greater 
contributions to IRA accounts, and Ms. Young, you mentioned 
making changes in Federal law to open greater access to 
pensions for lower-income and part-time workers.
    Assuming for the moment that significant new Federal 
expenditures are unlikely in the current budget climate, what 
would you say are the top one or two most effective steps that 
Government could take to ease women's retirement preparations 
that would not involve extraordinary new expenditures?
    Cindy.
    Ms. Hounsell. I do not mean to beat the horse dead, but I 
think education, to make sure that people do take advantage--
Laurie mentioned  that,  and  we mentioned that in our written 
testimony--to make sure you take advantage of the retirement 
income that is available. Twenty-five percent of women are not 
contributing to their 401(k)s. You know, most people do not 
have 401(k)s. People are always surprised--they say ``I know 
someone without a 401(k).'' Well, believe me, more than half 
the workforce does not have a 401(k) or a pension plan.
    So I think that getting people to take advantage, of which 
is available and helping employers to convince employees to 
contribute to their plan that would make a big difference.
    Only 8 percent contribute to an IRA, so I think we can keep 
expanding those limits, but if people do not have the money, 
where are they going to find it to put into an IRA?
    Senator Craig. Dorcas.
    Ms. Hardy. In terms of a Government role, I would suggest 
reform of the entitlement programs. I think that if people 
understand that they do not have to be worried as people are 
beginning to be about the sustainability of both the Medicare 
and the Social Security programs, that will go a long way. In 
that regard, I would suggest a comprehensive reform of Medicare 
that has been discussed up here by your Chairman, Senator 
Breaux, and also Senator Frist. I would also suggest that the 
Social Security system be redesigned so that it does include 
personal retirement accounts. There is plenty of evidence that 
with that choice that people would have, there would be higher 
benefits than the current system promises let alone what it is 
going to be able to deliver. One would be able to build wealth 
and also have the ability to pass on that wealth and those 
savings to their family through inheritance. I think that would 
go a long way toward making sure that everybody has a 
comfortable retirement.
    Ms. Siebert. I have an idea that would be a nightmare to 
administer.
    Senator Craig. Well, give us a try.
    Ms. Siebert. Our Social Security that is withheld is not 
tax-deductible. If we made it tax-deductible for lower-income 
people with the requirement that they have to invest the tax 
savings in an IRA, it may create some forced saving in an IRA 
which would accumulate.
    Senator Craig. Well, I think all of us would like to create 
an incentive for savings or incentive for investment in any of 
our systems, and that is an interesting idea.
    Ms. Siebert. Because Social Security is the biggest tax 
these people pay.
    Senator Craig. Yes; no question. That is right.
    Yes, Laurie.
    Ms. Young. I feel compelled as the Executive Director of 
OWL and our Mother's Day Report on Social Security to suggest 
that at first thought, at least do not do any harm, and that 
would be to not take huge sums out of the Social Security 
system as it exists now to set up a privatization which would 
in fact impact existing recipients of Social Security and 
affect the one leg of the stool that women rely on.
    In terms of a proactive stance, I think the most important 
thing we can do for young women coming up in the system is 
enact pay equity legislation which would begin to level the 
playing field so that women can earn at the same rate that men 
do and then begin to save and have the same kinds of comfort in 
retirement that men enjoy.
    Senator Craig. I thank you all for those thoughts. They are 
extremely valuable. I do not think there is any question that 
what we do has to be long-term in its character as we build 
toward the next generation's retirement. I would agree with 
you, Laurie. I think that we will venture toward reforming 
Social Security, but the ``Do no harm'' becomes a critical part 
of it, or we will never be able to politically get to the other 
side of allowing the kind of individual accounts that will 
generate that kind of individualized wealth.
    I guess I have to ask one additional question. When people 
who have been non-investors begin to take it upon themselves to 
invest, their desire to gain more knowledge and education about 
what they have multiplies very rapidly. So that from the almost 
zero knowledge to the acquiring of additional information seems 
to be a quantum leap, and when it starts, it is a very rapid 
multiplier, and the uneducated can become really quite 
sophisticated in a reasonably short period of time because they 
desire to do so once they find out that this is a generator of 
personal wealth for themselves.
    Is that generally the experience that you have had in 
dealing with women who start into the process of 401(k)s and 
personal accounts and investment?
    Ms. Hounsell. No. I think there are those people who really 
do get into it, but I think that people are so time-conflicted, 
and it is so confusing, and they do not have the time to learn. 
I sort of alluded to that--it is very complicated. People will 
say to me, ``I took my money out of the teachers retirement 
plan 4 years ago; should I put it back in, or what should I 
do?'' I ask them, ``What type of plan do you have? Did you talk 
to the retirement people?'' ``No. They sent me stuff, and I 
could not understand it.'' So that is a big problem.
    Senator Craig. Fair enough.
    Ms. Hardy. I think time is obviously a constraint for 
everybody, but I do believe that if women do attend some of the 
seminars put on by the financial services industry, or they 
work with their employer counselors or they use Muriel's 
website, there is educational material there, and there are 
also financial planners who can help out with people. But you 
have different classes of folks and different income levels.
    Senator Craig. Oh, yes.
    Ms. Siebert. I think we still need a real emphasis on 
financial literacy for both men and women. The women are a 
little more conservative in their investments now than men--the 
younger women are not; those at 25 and 30 are willing to go 
into the same kinds of securities. But we need education for 
both. This is not limited to women, because I have seen it, and 
I have seen the bankruptcies.
    I will say that the fastest growing group of bankrupt 
people is single mothers, single-parent mothers, and those 
numbers are frightening.
    Senator Craig. They are that, yes.
    Any additional comment on that, Laurie?
    Ms. Young. Yes. Just in reference to my earlier comments, 
when you think about the fact that two-thirds of the part-time 
workforce is female, when you think about the fact that two-
thirds of women who are employed today still work in pink-
collar jobs which are lower wage with less benefits, when we 
talk about women, we are primarily talking about a class of 
people who do not have a lot of resources, particularly single 
mothers or people who are having to take care of people, to do 
that kind of investing. I am sure that when they have an 
opportunity to invest, they are certainly interested in getting 
more information about it. But we are really not talking about 
women in general when we talk about people who are able to 
invest and therefore have a greater interest in managing their 
assets.
    Senator Craig. That is always very valid, because if you 
are making those lower incomes, especially if you have 
children, it is even difficult without them.
    Thank you all very much for your testimony and your 
statements for the record. They are greatly appreciated in 
helping us build this record.
    Thank you very much.
    Now let me ask our second and final panel to come forward.
    We are going to hear from two women who have encountered 
particular challenges in preparing for their retirement as well 
as from a representative of a nonprofit organization dedicated 
to providing hands-on counseling to people, both men and women, 
who need assistance in understanding in protecting their 
pensions.
    I will ask Irene, Joan, and John to come forward, please.
    As I mentioned earlier, Irene is from Boise; Joan is from 
Salem, NJ, and we look forward to their stories. John Hotz is 
Deputy Director of the Washington, DC-based Pension Rights 
Center, which helps to coordinate a multi-State network of 
pension information and counseling programs and Administration 
on Aging-funded programs established several years ago in large 
measure at the instigation of this committee, under the 
guidance of then Chairman Chuck Grassley of Iowa.
    Again, thank you all very much, and Irene, we will ask you 
to start.

        STATEMENT OF IRENE LAMARCHE, RETIREE, BOISE, ID

    Ms. LaMarche. I accepted the invitation to come not because 
I wanted to say ``poor old me''--because I am rich in many 
ways. In order to conclude my statement in the 5 minutes 
allotted, I am going to read it rather than do it 
extemporaneously.
    Senator Craig. That is fine.
    Ms. LaMarche. I am a 76-year-old woman who, in spite of 
working most of my life, has very limited retirement resources. 
There are a number of circumstances that have contributed to my 
situation.
    First, I was born in 1925, and I am therefore a Social 
Security ``notch baby,'' which most people these days do not 
understand. Just by circumstances alone, I am entitled to less 
Social Security than others. I paid my way through college 
during and after the war by working in a men's clothing store 
for 50 cents an hour. After graduation in 1947, I taught high 
school math, first in Superior, WI, and then in Ironwood, MI, 
before taking a position in St. Maries, ID. I was married in 
1949 and left the workforce for a number of years while I gave 
birth to and raised four children.
    In 1957, I took a teaching position at Borah High School in 
Boise, ID, and taught mathematics there for 6 years. In 1963, I 
taught math at Saint Teresa's Academy in Boise in its last year 
of existence.
    Unfortunately, none of the teaching positions paid into 
Social Security, but rather, into a small teacher retirement 
fund. When I moved between positions, I had to take the money 
out of the retirement account, and because it was always so 
little and money was scarce, I had to spend the money.
    While working at Borah, I also taught skiing part-time at 
Bogus Basin Ski Resort outside Boise. After I left teaching, I 
taught skiing full-time at Bogus Basin. Then, I spent 8 years, 
from 1969 through 1977 as Director of the Bogus Basin Ski 
School. I did have a small retirement plan with Bogus Basin, 
and I cannot remember if they contributed to Social Security or 
not before I was the director.
    After 30 years of marriage, I was divorced in 1978. At that 
time, I did not work. As part of the divorce agreement, I was 
paid $750 a month for 2 years for what was termed 
``rehabilitation pay.'' I also received the family home, along 
with the mortgage, in the settlement.
    At the age of 55, I had to go back to work. I worked in a 
number of positions where Social Security deductions were taken 
from my paycheck--taxpayer information for the Internal Revenue 
Service, as a personal assistant to Verna Harrah in Sun Valley, 
for an office design firm, and as organizer and Executive 
Director of the First Security Winter Games of Idaho at the 
request of the Idaho Centennial Sports Commission.
    At age 62, I began to draw Social Security benefits to 
augment my income. I had since sold the family home and was 
able to invest approximately $60,000.
    At age 66, I stopped working completely, primarily due to 
health issues. Because of the teaching jobs I had that did not 
pay into Social Security, being a ``notch baby,'' and my 
divorce, I am currently receiving $518 a month in Social 
Security benefits plus Medicare.
    Additionally, I receive approximately $500 a month from 
investments I was able to make from the money I received from 
the sale of my house, money I saved from my job in Sun Valley 
and with Winter Games. At this time, I was putting my youngest 
son through college.
    I have been living in an apartment where the rent has 
increased to $695 a month. I no longer can afford to live there 
and have been forced to find another apartment. I have been on 
a waiting list for 2 years with Idaho Housing to receive 
vouchers for rent subsidy--and incidentally, that is the first 
help I have ever asked for. I have finally reached the top of 
the waiting list and will be able to receive help from this 
agency. While I have not received final confirmation from Idaho 
Housing as to how much they will subsidize, I moved into an 
apartment complex on May 14 that accepts the subsidies. Regular 
rent for a one-bedroom apartment is $545 a month, but I am 
hoping that I will only pay $300--since this report was 
written, I have found out that it is $315 a month.
    I have never lived extravagantly and have scrimped all my 
life. If not for the money I received from the sale of my home, 
I would be in a terrible financial position. I never had extra 
money to put aside to save for retirement and thought I could 
rely on Social Security. Had I not been divorced, I may have 
been able to receive a larger benefit because of my former 
husband's contributions. Incidentally, I cannot remember if his 
contribution to my Social Security is $13 a month or $31 a 
month, but that is all I get from his. As it is, if he drops 
dead, I will be entitled to a larger benefit based on his 
contributions and the number of years we were married.
    Thank you for the opportunity to testify before this 
committee.
    Senator Craig. Irene, thank you very much for that thorough 
explanation of your life and your work history, and of course, 
the benefits of it, or the lack of benefits of it. I think that 
is very valuable. I think it is quite typical of many women 
your age, and it is valuable for us to hear that.
    Senator Craig. Joan, welcome to the committee. Joan has a 
story that is very important for the committee to hear about.
    Let us hear from you now, please.

 STATEMENT OF JOAN MACKEY, PENSION COUNSELING CLIENT, SALEM, NJ

    Ms. Mackey. Good morning. My name is Joan Mackey, and I am 
honored that you have invited me to speak today about the 
importance of educating women on the pitfalls they may 
encounter in preparing for retirement.
    I must tell you that I would not be in the situation that I 
am currently in if I had only known when I was going through my 
divorce what I know now.
    My husband, Lavond Mackey, Sr., and I were married for 21 
years. We lived in Philadelphia, PA. Throughout our marriage, 
my husband worked at the Home of the Merciful Savior for 
Crippled Children, a rehabilitation center and group home for 
children with cerebral palsy and other physical disabilities. 
He worked as the chef for the home, preparing meals for the 
children.
    Although I also worked at two jobs, we were primarily 
dependent on my husband's income. That is because I was also 
caring for our three children.
    By 1990, my marriage had fallen apart. My husband had 
become so abusive that to protect my children and myself, I had 
to move out of our home. I was able to find a lawyer to help me 
with the separation agreement later that year. In it, my 
husband agreed to stay away from us and provide support for the 
children. At that time, our oldest child was only 12 years old.
    I filed for divorce in 1994. At that time in our lives, we 
owned very little. I had a car; my husband did not. We rented 
our home. I had no savings, insurance, or investments. My 
husband had spoken from time to time about investments and 
savings accounts, but at the time of our divorce, he had hidden 
them or spent them, because my attorney could not find 
anything. I knew he had a pension and life insurance through 
his job, but to be honest, I never thought about it in 
connection with the divorce, and my lawyer never mentioned it. 
I was just concerned with getting the child support we needed 
to pay our rent, food, and other bills.
    The divorce court order was just 2 pages long and repeated 
almost exactly what was in the legal separation order--that my 
husband would stay away from us and pay child support. There 
was no mention of the insurance or pension.
    My ex-husband continued to work for the home, now called 
HMS School for Cerebral Palsy, until 1996 when, after more than 
18 years, he had to quit working due to cancer. He died in 
1997. The last months before he passed, he told me several 
times that I would get money from his insurance and pension at 
the home so that the children and I would be taken care of.
    After he passed, I asked the home about the insurance 
policy and pension benefits my ex-husband had mentioned. The 
lady at the benefits office told me that they could not pay me 
anything because I was not married to my ex-husband when he 
died. This just did not make sense, because my ex-husband had 
told me so many times that the benefits would be mine.
    I went to Community Legal Services in Philadelphia and 
found a wonderful lawyer willing to help me. We learned that 
the benefits manager at the home actually wanted to pay me the 
widow's pension benefit my ex-husband had talked about, but the 
lawyer for the home had said no, that they could pay me if I 
had gotten a divorce court order directing them to pay the 
benefits and that if they did it without a court order, the 
plan would get into trouble with the Government.
    This still did not make sense. It did not seem right. So 
the pension plan provided benefits for widows at no cost to 
husbands, and my husband had not given those benefits to anyone 
else. If I had only known to ask for the benefits during my 
divorce proceedings, there would have been no problem paying 
them to me.
    I am now 48 years old, and I am very worried about what I 
will live on when I cannot work anymore. I know firsthand the 
importance of retirement security. Both my father and my mother 
are receiving pensions. I could not imagine what their lives 
would be like without them.
    I have worked all my life, but until recently never had a 
retirement plan through my employer. I currently work as a real 
estate broker and do direct marketing for a cleaning company of 
which I am part owner. The cleaning company has a 401(k), and I 
have worked hard to contribute the $4,000 that is in there now. 
But I am worried that I will not be able to save enough money. 
The survivors' benefits from my ex-husband's pension would make 
a big difference.
    I know that I am not alone in being frightened about my 
future financial security. I hope that this committee will get 
the word out to women throughout the country about the 
importance of educating themselves about retirement before it 
is too late, and most important, that they need to ask about 
their rights to survivors' benefits when they are going through 
a divorce. If my experience is any guide, women cannot count on 
their lawyers to ask about the pension.
    Thank you for inviting me to share my experience. I hope 
that my story can help other women. I would be happy to answer 
any questions.
    Thank you.
    Senator Craig. Joan, thank you. That was very valuable 
testimony, and your advice is extremely important.
    John, let me turn to you. John Hotz is Deputy Director of 
the DC-based Pension Rights Center.
    Please proceed, John.

STATEMENT OF JOHN HOTZ, DEPUTY DIRECTOR, PENSION RIGHTS CENTER, 
                         WASHINGTON, DC

    Mr. Hotz. Good morning, Senator Craig.
    My name is John Hotz, and I am Deputy Director of the 
Pension Rights Center. The Center is the Nation's only consumer 
organization dedicated solely to protecting and promoting the 
pension rights of American workers, retirees, and their 
families.
    For 26 years, the Center has been at the forefront of 
efforts to help individuals understand and enforce their 
retirement rights. I also coordinate the Center's Technical 
Assistance Project, providing training and legal assistance to 
the Administration on Aging's Pension Information and 
Counseling Program, a network of pension assistance projects 
around the country offering free pension help to those who need 
it, particularly disadvantaged seniors, women, and minorities. 
We thank you for inviting us to testify on the resources 
available to women to enable them to avoid pension pitfalls and 
effectively prepare for their retirement years.
    You have just heard Joan Mackey testify about her 
experience with one such pitfall, not knowing to ask for a 
widow's pension benefit at the time of divorce. Sadly, Joan is 
not alone. We hear from numerous women each year who tell us 
their own version of Joan's heart-wrenching story. Her 
situation is different from theirs in only one critical 
respect. Joan found out of the few legal services attorneys in 
the country willing to help in the complicated area of pension 
law.
    For other women around the country with pension questions 
and problems, the good news is that tremendous strides are 
being made in building a nationwide pension counseling and 
assistance system. In 1992, recognizing the complexity of 
pensions and their importance to the retirement security of 
older Americans, Congress established the Pension Information 
and Counseling Demonstration Program as part of the Older 
Americans Act Amendments. Last Congress, thanks to the 
leadership of this committee and particularly its former 
Chairman, Senator Charles Grassley, the counseling projects 
became a permanent program of the Administration on Aging, 
providing free, personalized pension counseling and advocacy.
    The AOA program is currently providing invaluable hands-on 
assistance to individuals in 16 States on all kinds of 
retirement-related problems. Since its inception, the Pension 
Information and Counseling Program has served over 10,000 
individuals and has helped those clients receive more than $40 
million in pension and other retirement benefits.
    Due to these impressive and cost-effective results, the AOA 
is interested in expanding the program nationwide. But the best 
way to communicate the value that the AOA projects bring to 
women in need of pension assistance is through an example.
    Sallie Mae B. is a typical project client. An impoverished 
elderly widow from rural Alabama, Sallie Mae contacted the 
Alabama project for help. Her husband had lied to the lumber 
yard where he worked, claiming that he was divorced and naming 
his daughter from another relationship as his pension 
beneficiary. Only after her husband's funeral did Sallie Mae 
learn from the lumber yard supervisor that she should have 
something coming from his pension. The project argued that 
Sallie Mae was still married at the time of her husband's 
death, but the plan had already begun to pay the daughter and 
refused to reverse itself. It took months of hard work, but the 
project finally convinced the plan to pay Sallie Mae the 
$25,000 she was due--a very significant sum of money for her.
    In addition to this kind of personalized assistance and 
advocacy, the projects also publish fact sheets and other 
educational materials for women and make referrals to 
Government agencies and pension professionals.
    Pension-related Government offices willing to help include 
the Labor Department's Pension and Welfare Benefits 
Administration, the Employee Plans Division of the Internal 
Revenue Service, and the Pension  Benefit  Guarantee  
Corporation.  Private  services include the National Pension 
Lawyers Network, a pension and domestic relations lawyer 
referral service operated by the New England Pension Assistance 
Project, and the American Academy of Actuaries' Pension 
Assistance List, a network of actuaries willing to help 
participants check the accuracy of their pension calculations.
    Although great strides have been made toward the 
development of a nationwide pension assistance service delivery 
system, gaps still exist. To help close these gaps, we are 
turning to the internet.
    Under contact with the Labor Department, we developed a 
prototype for a pension assistance website that we will 
formally launch later this year with funding from the 
Administration on Aging and the Public Welfare Foundation.
    PensionHelp America is specifically designed for 
pensioners, pension plan participants and their families. It 
will provide a free pension information search engine, as well 
as referrals to counseling projects, Government agencies, 
attorneys and other professionals. It will also allow users to 
search for benefits from pension plans sponsored by companies 
that have moved, been bought out or have otherwise gone out of 
business since the individual last worked there.
    As the Pension Rights Center has worked to build a 
nationwide public-private partnership of agencies and 
professionals to assist individuals with their pension 
questions and problems, we have ensured that issues faced by 
women remain a top priority.
    We would be pleased to work with the committee to continue 
the growth of pension assistance in America and to increase 
retirement security for older women and all American workers.
    We thank you for allowing us the opportunity to share this 
information, and I would be pleased to answer any questions 
that you might have.
    [The prepared statement of Mr. Hotz follows:]
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    Senator Craig. John, thank you very much. That is good 
news, and we will look forward to some of those products.
    Irene, what retirement advice would you most appreciate 
having received at some time in your life that might have 
changed the decisions you made or the actions you took? Have 
you thought of it in that context?
    Ms. LaMarche. Well, to begin with, I never thought I would 
have to worry about retirement and so I did not do anything 
about it. But as soon as I was divorced, I got rid of my credit 
cards, and thought if I cannot pay cash, I cannot buy it, and 
then, with the sale of the house--it was at a time when the 
housing prices were down in Boise--I did not receive, of 
course, what the house was worth. So I put it all in utilities 
that would pay me a income every month from interest and such. 
When, they were all called, I put the money into income bonds.
    I just had not planned for any problem. I quit my job at 
the ski school thinking that it would help save my marriage, 
which it did not do, and therefore gave up one of the best jobs 
I ever had, and that is when I started thinking about what I 
needed to do.
    Senator Craig. Well, as I said, for the record, I think it 
is very valuable that we hear that story, and you told it well.
    Ms. LaMarche. Also for the record, the investment lady from 
New York I thought had a very good idea, having been an 
educator myself, about having a way of teaching young people, 
not just women but men, how to prepare for the future by having 
something in the educational system that tells kids how to 
write a check and what their Social Security can do for them 
and how to invest.
    Senator Craig. Well, I have no disagreement there. Having 
raised three children, I know that in both my wife's and my 
efforts with them, the enticement of credit cards is very, very 
strong. It is when they are adults and they are out seeking 
credit and all of a sudden find out that they might not have 
been as responsible as they should have been or maybe as mom or 
dad told them, so it is probably better sometimes if that 
information comes from another source. I readily agree that 
that kind of financial education ought to go on in our high 
schools today for all of our children and for this country; it 
would be very valuable.
    Irene, thank you.
    Joan, your story is not only important for the record, but 
obviously, knowing what you know now and had you known it at 
the time of your divorce--how much in pension income would you 
have had the opportunity to have had you had the knowledge that 
you now have?
    Ms. Mackey. Do you mean monthly?
    Senator Craig. Yes.
    Ms. Mackey. I think we talked about--what was it----
    Mr. Hotz. Somewhere between $150 and $200 a month.
    Senator Craig. That would have been very helpful; 
absolutely.
    Ms. Mackey. Yes, it would have.
    Senator Craig. Are you still pursuing the case?
    Ms. Mackey. Yes, I am.
    Senator Craig. Well, my best hope to you in being able to 
gain that. To think that if you had only had that knowledge at 
the time of the divorce, and that would have made you eligible, 
is an amazing factor. You want to go around--and I hope you 
do--and shout that very loudly to all of your friends.
    John, is there any hope for Joan to be able to gain this 
pension, in your thoughts or experience?
    Mr. Hotz. Yes, there are two tracks. One is legal, and the 
other is legislative. We are arguing--there is a very technical 
regulation that actually, literally read, would support Joan's 
position that her beneficiary election that her husband had 
made actually survives the divorce. However, it is common 
practice in the pension industry on the plan side to say that 
there is no survivor benefit without one of these court orders.
    So we are trying to work with the Technical Division of the 
Internal Revenue Service to get an interpretation of that 
regulation that would support Joan's position. That is sort of 
the legal side.
    On the legislative side, we will just be looking for a 
change in the law that would allow for women to be protected if 
they do not know to ask for this at divorce, legislating that 
if there is not a court order that one be basically implied in 
situations where it was not asked for.
    Senator Craig. OK. That would be extremely valuable.
    Listening to your testimony, John, I am struck by the 
almost extreme complexity of this country's pension system, a 
complexity that is compounded when questions of divorce or 
survivorship enter into the picture. Working on the front lines 
as you and your colleagues do, what recommendations might you 
have of ways to simplify the system to make it easier for women 
like Ms. Mackey and Ms. LaMarche in dealing with their 
situations?
    Mr. Hotz. It is sort of the nature of the beast to be 
complex because it is a creature of the Tax Code.
    I think that what would take the greatest stride toward 
making the system simpler would be to give greater access to 
that system to our low and moderate wage-earners. Something 
needs to be done to allow very popular programs like the 401(k) 
program to be accessible by low and moderate wage-earning 
families or single parents or whomever might want to contribute 
to a program like that.
    First, more employers need to have programs that allow 
people to save. Then, low and moderate wage-earnings do not 
have enough money to actually put into that program, so they 
cannot begin to take advantage of, first of all, the savings 
benefit and the compounding, but they cannot get that employer 
match. So we need to work on access and coverage.
    Senator Craig. You have certainly reinforced the point of 
the first panel, and Laurie mentioned that.
    In your experience coordinating numerous pension counseling 
programs around the country, what are the top two or three most 
critical warnings or pieces of advice that you might give women 
in dealing with their own or their spouses' pensions?
    Mr. Hotz. Probably that would be not to give up the pension 
at the time of divorce in a tradeoff for some physical or other 
monetary resource like the house or the car. It seems 
oftentimes--and it is mostly women that we see in this 
situation--if there are children involved, oftentimes, having 
that home can be very important, but they do not realize the 
long-term financial impact of giving up a portion of the other 
wage-earner's retirement benefits.
    Far and away, that is probably the most significant issue 
that the projects that I work with across the country are 
dealing with. The No. 1 issue is spousal problems related to 
divorce.
    Senator Craig. Yet, at the time those kinds of decisions 
are made, that is probably the most stressful time in that 
person's life, and they are looking for the immediate sense of 
security. It is very difficult to look out long-term.
    Mr. Hotz. Even when you do have the knowledge, it is a 
difficult thing to wrap your mind around.
    Senator Craig. Yes. As you mentioned, the Administration on 
Aging's Pension Information and Counseling Program is what it 
is today in part because of this committee's work. But short of 
asking for more money, which we would probably all like to do, 
is there anything that we in Congress can do to help improve 
the program even more, based on your perspective of it?
    Mr. Hotz. Well, every year, the appropriations bill comes 
around, and supporting the program through appropriations is 
always a big assistance, and in the past, the committee has 
been a tremendous support. So although it is now labeled as a 
permanent program under the Older Americans Act, we still need 
that support on an annual basis.
    Senator Craig. Irene, Joan, and John, again, thank you for 
your testimony this morning and helping us build the record. 
Both Chairman Breaux and I are increasingly concerned about the 
reality of what we are looking at here. Statistics are one 
thing, but personal testimony builds on an understanding of 
what those statistics mean across the country as we find older 
women really in very difficult situations for all the reasons 
that we have heard this morning.
    We thank you for being a part of this hearing and helping 
us build the record.
    The committee will stand adjourned.
    [Whereupon, at 11:05 a.m., the committee was adjourned.]

                           


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