[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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80-874 WASHINGTON : 2002
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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
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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.]