[Joint House and Senate Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
S. Hrg. 113-363
WOMEN'S RETIREMENT SECURITY
=======================================================================
HEARING
before the
JOINT ECONOMIC COMMITTEE
CONGRESS OF THE UNITED STATES
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
__________
MAY 21, 2014
__________
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JOINT ECONOMIC COMMITTEE
[Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress]
HOUSE OF REPRESENTATIVES SENATE
Kevin Brady, Texas, Chairman Amy Klobuchar, Minnesota, Vice
John Campbell, California Chair
Sean P. Duffy, Wisconsin Robert P. Casey, Jr., Pennsylvania
Justin Amash, Michigan Bernard Sanders, Vermont
Erik Paulsen, Minnesota Christopher Murphy, Connecticut
Richard L. Hanna, New York Martin Heinrich, New Mexico
Carolyn B. Maloney, New York Mark L. Pryor, Arkansas
Loretta Sanchez, California Dan Coats, Indiana
Elijah E. Cummings, Maryland Mike Lee, Utah
John Delaney, Maryland Roger F. Wicker, Mississippi
Pat Toomey, Pennsylvania
Robert P. O'Quinn, Executive Director
Niles Godes, Democratic Staff Director
C O N T E N T S
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Opening Statements of Members
Hon. Amy Klobuchar, Vice Chair, a U.S. Senator from Minnesota.... 1
Hon. Richard L. Hanna, a U.S. Representative from New York....... 4
Witnesses
Dr. Debra Whitman, Executive Vice President, Policy, Strategy and
International Affairs, AARP, Washington, DC.................... 5
Dr. Brigitte Madrian, Aetna Professor of Public Policy and
Corporate Management, Harvard Kennedy School, Cambridge, MA.... 7
Ms. Cindy Hounsell, President, Women's Institute for a Secure
Retirement, Washington, DC..................................... 9
Ms. Rachel Greszler, Senior Policy Analyst, Economics and
Entitlements, Center for Data Analysis, The Heritage
Foundation, Washington, DC..................................... 11
Submissions for the Record
Prepared statement of Hon. Richard L. Hanna...................... 28
Prepared statement of Dr. Debra Whitman.......................... 29
Prepared statement of Dr. Brigitte Madrian....................... 41
Prepared statement of Ms. Cindy Hounsell......................... 46
Prepared statement of Ms. Rachel Greszler........................ 55
WOMEN'S RETIREMENT SECURITY
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WEDNESDAY, MAY 21, 2014
Congress of the United States,
Joint Economic Committee,
Washington, DC.
The committee met, pursuant to call, at 10:03 a.m. in Room
216 of the Hart Senate Office Building, the Honorable Amy
Klobuchar, Vice Chair, presiding.
Representatives present: Paulsen, Hanna, Carolyn B.
Maloney, Delaney, and Jenkins.
Senators Present: Klobuchar.
Staff present: Hank Butler, Gail Cohen, Connie Foster,
Niles Godes, Colleen Healy, Robert O'Quinn, and Steve Robinson.
OPENING STATEMENT OF HON. AMY KLOBUCHAR, VICE CHAIR, A U.S.
SENATOR FROM MINNESOTA
Vice Chair Klobuchar. All right, we are going to begin the
hearing. I want to thank everyone for coming. We have a full
house today, and I want to thank many of the visitors that we
have. I know the AARP volunteers are on the Hill today, and we
also have State staff who are joining us for the hearing. Thank
you, as well as many other visitors.
I want to specifically mention our Minnesota AARP people,
Will Phillips, who is the new AARP Minnesota State Director, as
well as Jim Scheibel, who is a former Mayor of St. Paul. So I
want to thank them for being here. I am going to meet with them
later on today, and I'm looking forward to it.
I also want to thank Congressman Hanna, who is our chair on
the House side today. I know Representative Brady had another
commitment, and I really appreciate that he allowed us to go
forward with this hearing, and Representative Hanna is here.
And I also want to thank Ms. Jenkins, who is a visitor, a
Congressional Visitor from the State of Kansas. So we are
excited to have her, as well.
The role of women has changed dramatically, as we all know,
over the past few decades. And much of the credit goes to women
who have come before us and created opportunities, broken down
barriers, and paved the way for generations to come.
Even with this progress, we know that there is still more
work to do and we need to ensure that women have access to
opportunities and are able to plan, save, and increase their
economic and financial security as they approach retirement.
I would first like to introduce our distinguished group of
witnesses here. We have Dr. Debra Whitman. She is Executive
Vice President, Policy, Strategy and International Affairs at
AARP. Her career has been dedicated to solving problems
affecting economic and health security issues related to the
aging population.
Dr. Brigitte Madrian is the Aetna Professor of Public
Policy and Corporate Management at the Harvard Kennedy School.
Her research concentrates on behavioral economics and household
finance, with a focus on household savings and investment
behavior.
We also have with us Ms. Cindy Hounsell--do you say ``Houn-
sell''?
Ms. Hounsell. Houn-sell.
Vice Chair Klobuchar. Ms. Hounsell is President of the
Women's Institute for a Secure Retirement, which works to
improve the opportunities for women to secure retirement
income. She has served as a delegate for the last two White
House Conferences on Aging, and the White House Social Security
Conference.
Ms. Rachel Greszler is a Senior Policy Analyst, Economics
and Entitlements, at The Heritage Foundation's Center for Data
Analysis. Before joining Heritage, she was Senior Economist at
the Joint Economic Committee from 2006 to 2013. We always like
when our alumns do well. Congratulations.
As I have mentioned in my opening, we have seen real
progress in the last 50 years in reducing the poverty rate
among older Americans. Poverty among older men and women has
fallen significantly since the mid-1960s when Medicare and
Medicaid were created.
In 1966, nearly a quarter of men 65 and over, and almost
one-third of women 65 and older, lived in poverty. By 2012, the
poverty rates for these same groups has fallen to 6.6 percent
of men, and 11 percent of women.
While there has been significant progress for both men and
women, women still face, as you can see, a significantly higher
poverty rate in their retirement. The poverty rate for women 75
and older is twice that of men 75 and older. I don't think most
people would guess that or realize it, but it is a fact.
A major source of the progress on poverty, as you all know,
has been Social Security. In 2012, Social Security alone lifted
more than 15 million elderly Americans out of poverty. Without
Social Security, the poverty rate for women 65 years or older
would climb to 48.6 percent.
In the coming years, we will be facing new demographic
challenges. The Census Bureau says that between 2005 and 2030,
the project that between those years the number of Americans
age 65 and older will have doubled that.
(A cellphone sounds.)
Vice Chair Klobuchar. That was his siren call for the
doubling of the population.
[Laughter.]
Representative Delaney. Sorry.
Vice Chair Klobuchar. Between 65 and older. I no longer
call it a ``silver tsunami.'' I know that has some bad
connotations, so we will call it a ``silver sensation''--how's
that?
[Laughter.]
We will put a positive spin on it. We are so glad that we
have so many seniors that are doing better and living longer,
but as we know with this rapidly growing population we need to
ensure that both men and women can retire in peace and that
most of our focus today is on how we close this gap for women
and strengthen their retirement security.
In April I released a report highlighting how women's lower
wages not only affect their current financial security but also
affect their retirement security. Women who work full-time earn
about 80 cents for every $1 that men earn. Much of this
disparity is due to differences in education and occupation,
but even after accounting for those and other factors women
still make less than men.
The pay gap is even greater for older workers. Lower
lifetime earnings translate to less money for retirement.
Annual median income for women 65 and over is about $11,000
less for men in the same age group--again, average, median
income, annual, is about $11,000 less for women than it is for
men.
Retirement experts often talk about the three-legged stool:
Social Security, employer retirement plans such as corporate or
government pensions, and savings, personal savings such as
IRAs.
Women rely more on Social Security for their retirement
income than men, but their benefits--because of the reasons I
just discussed with their salaries--are lower than men. The
average weekly Social Security benefit for female retirees is
78 percent of what it is for male retirees.
Women are also less likely to receive income from a
traditional pension plan, and when they do their pension check
is smaller. Women's median income from company or union
pensions is 53 percent of men's median income from those
sources.
Lower earnings also affect the ability of women to
contribute to retirement plans such as 401K, 403B, or Employee
Stock Ownership Plans, or IRAs. In addition, because women live
longer and are more likely to be single in retirement, they
cannot rely on a spouse's income to supplement their own.
In 2013, only 45 percent of women age 65 and over were
married, compared to 71 percent of men--okay, that's the most
interesting statistic of all. Preparing for a secure retirement
is even more challenging because many women of the Baby Boomer
Generation are also members of the so-called ``Sandwich
Generation,'' one I was in for quite awhile where you have
young kids and at the same time you have aging parents.
Because of these care-giving responsibilities, women have
12 fewer years in the paid workforce over their lifetimes,
leading to lost wages, lower Social Security, and private
pension losses as a result of their care-giving
responsibilities.
In addition to lost wages, family care-givers end up paying
about $5,500 per year in out-of-pocket costs. To help support
families who care for aging family members, I introduced the
Americans Giving Care To Elders Act, or the AGE Act, with
Senator Barbara Mikulski a few years back. And, while we are
waiting for Congress to move on the issue of long-term care, I
still think of it as the elephant in the room. As we grapple
with our continuing debates about health care and the need to
continue our work in that area, we cannot neglect this issue of
long-term care.
We should also strengthen Social Security, including
raising the cap on taxable income. In my mind, currently all
income above $117,000 is exempt from the Social Security
Payroll Tax. Gradually raising this threshold, along with other
reasonable reforms, could help ensure the solvency of Social
Security but not impact current beneficiaries.
We cannot concentrate solely on lifting women's income as
they retire or are near retirement. We also need to ensure that
women's earnings throughout their lives lay the groundwork for
a secure retirement.
I am going to turn this over to Congressman Hanna and just
end by saying that we have made extraordinary progress in
reducing poverty, but the reality and the focus of this hearing
today is that women remain less financially secure--much less--
than men in their retirement years.
Today's hearing can help us to uncover new ways to address
this challenge.
Congressman Hanna.
Representative Hanna. Thank you.
OPENING STATEMENT OF HON. RICHARD L. HANNA, A U.S.
REPRESENTATIVE FROM NEW YORK
Experience shows a strong economy is the foundation of a
secure economy. Workers with good jobs and adequate savings are
better prepared to enjoy their retirement years. Women tend to
live longer than men so a strong and vibrant economy is even
more critical to providing them with a secure retirement.
Unfortunately, our sluggish economy and aging population
threaten our Nation's future retirement security.
As Chairman Brady has observed, America has fallen into a
``growth gap.'' Our economy is growing at half the rate of
previous recoveries. That means we are falling further behind
in terms of jobs and income relative to where we need to be.
Fewer jobs and less income mean Americans will be less
prepared for retirement. Older workers who lose their jobs
often retire before they are ready. That means lower Social
Security benefits and less retirement savings. Spreading fewer
resources over more years results in a less secure retirement.
Our Nation's population is getting older. As the youngest
Baby Boomers enter the retirement years, we will undergo a
dramatic demographic shift. The ratio of workers to retirees
will shift from roughly three-to-one to only two-to-one.
This demographic shift will undermine the pay-as-you-go
financing of Social Security and Medicare programs. As a
result, neither program will be able to meet its promised
benefits and obligations. Our continuing growth gap and looming
entitlement crisis will adversely affect every American, but
especially and particularly women and older women.
Regrettably, women typically have lower lifetime earnings.
However, have longer life expectancies than men. Women are also
less likely to be covered by an employer pension program. As a
result, they are at grater risk of falling into poverty during
their retirement years.
To improve the retirement security of women, we must
understand the nature and extent of the problem.
As we focus on the topic of today's hearing, we must not
lose sight of the fact that a growing economy creates more
jobs, higher wages, and greater retirement security for both
men and women.
Economic growth alone cannot provide a secure retirement or
prevent the insolvency of our entitlement programs, but without
more growth our task will be much, much harder.
We have a distinguished panel with us today, including a
former member of the Joint Economic Committee, Rachel Greszler.
I look forward to hearing each of our witness's testimony, and
I hope we gain important insights into this very critical and
timely subject.
Thank you.
[The prepared statement of Representative Hanna appears in
the Submissions for the Record on page 28.]
Vice Chair Klobuchar. Thank you very much, Congressman
Hanna.
Dr. Whitman.
STATEMENT OF DR. DEBRA WHITMAN, EXECUTIVE VICE PRESIDENT,
POLICY, STRATEGY AND INTERNATIONAL AFFAIRS, AARP, WASHINGTON,
DC
Dr. Whitman. Thank you so much, and good morning.
On behalf of AARP's 37 million members and all Americans
age 50 and over, I would like to thank Vice Chair Klobuchar for
inviting me to testify, and for convening, along with
Representative Hanna and the other members of the Joint
Economic Committee, this important hearing on women's
retirement security.
I would also like to recognize and thank the AARP leaders
and volunteers from our state offices who are here today on
Capitol Hill to visit their Members of Congress.
The dream of a financially secure retirement is often much
harder to attain for women than it is for men. And if you think
about the reality of most women's lives, the reasons are fairly
straightforward. Women on average live almost three years
longer than men, so they have more years of retirement to pay
for, yet they typically reach their later years with less
income and savings than men.
Older women are more likely than men to end up alone. They
are more likely to need long-term services and supports, and
they often face greater health care costs. For all of these
reasons, older women are more likely than men to live under the
shadow of financial stress.
They have greater risk than men of outlasting their
savings, and they are far more likely than men to end up in
poverty. In fact, in 2012 almost 17 percent of women 65 and
older were poor compared to 12 percent of men, according to the
Census Bureau's Supplemental Poverty Measure, which takes into
account out-of-pocket health care spending.
Before going further, it is important to make it clear that
financial security among older women varies widely. Older
African American and Hispanic women have poverty rates that are
more than double that of older White women. Single older women
are up to five times more likely to be poor than married older
women. And as Vice Chair Klobuchar said, poverty rates also
vary significantly by age.
We know that disparities can take many forms. For example,
women who lack education or belong to economically
disadvantaged racial or ethnic groups have much shorter life
expectancies than educated White women. And despite women's
advances in the workplace, a great many still face obstacles to
their financial well-being in old age.
Because of care-giving responsibilities, both for their
children and older family members, women are more likely than
men to work part-time, to spend time outside the labor force,
to pass up promotions, and to shorten their careers.
We also know that women are more likely to work in jobs and
industries that tend to offer lower pay and benefits. Yet,
increases in longevity and rising health care costs are
actually worsening the outlook for many older women.
For these and other reasons, improving women's retirement
security requires a multi-pronged strategy. And I will use the
rest of my time to highlight key solutions.
First of all, we need to keep Social Security strong.
Currently, women's Social Security retirement benefits are 20
percent lower on average than men's, and women are more likely
to depend on them for the majority of their income. Its
protections, including guaranteed benefits and cost-of-living
adjustments, are critical for women.
We urge more employers to offer retirement savings plans.
Roughly one-in-two workers cannot set aside savings for
retirement from their paycheck, so improving coverage is
critical. That is why we support the Automatic IRA legislation
which would provide an easy and low-cost way for workers to
build nest eggs through payroll deduction.
AARP also supports state efforts to offer work-and-save
plans to private-sector employees who do not have access to
retirement plans in their workplace. We also urge employers to
adopt automatic enrollment in retirement savings plans, as well
as automatic escalation of contributions. And workers should
have the option of receiving their retirement benefits as
lifetime income, which would help protect women from out-living
their savings.
Enhancing tax incentives to encourage more people to save
for retirement is another key to the solution. This is
especially true for low- and moderate-income workers, and an
improved and strengthened savers credit is one way to achieve
this goal. Working longer, for those who still can, can also
improve their retirement security. We encourage employers to
adopt policies such as flexible schedules that help older
workers stay on the job.
We support adequate funding of training and retraining
programs to help older workers stay competitive. And,
importantly, AARP supports bipartisan legislation to restore
long-established protections against age discrimination in the
workplace.
As Representative Hanna said in his opening statement,
economic growth is an important factor for retirement security.
Women and men, for that matter, should have peace of mind about
their financial security as they age. That is why AARP believes
it is time for a national conversation on retirement security
to consider responsible ways to achieve this goal for all
Americans.
Thank you.
[The prepared statement of Dr. Debra Whitman appears in the
Submissions for the Record on page 29.]
Vice Chair Klobuchar. Thank you.
Dr. Madrian.
STATEMENT OF DR. BRIGITTE MADRIAN, AETNA PROFESSOR OF PUBLIC
POLICY AND CORPORATE MANAGEMENT, HARVARD KENNEDY SCHOOL,
CAMBRIDGE, MA
Dr. Madrian. Thank you for the opportunity to speak to you
today and share my thoughts on how we can strengthen America's
retirement savings system.
In examining the retirement security of women in the U.S.,
there is both good news and bad news. Saving for retirement and
then managing one's assets in retirement is one of the largest,
if not the largest, financial task that any household will
undertake.
Yet, evidence on the financial capabilities of the U.S.
population show that we as a nation are woefully unprepared for
this task, and that women fare worse than men.
Women have significantly lower scores than men on a simple
five-question test designed to test knowledge of basic
financial concepts such as inflation, compound interest, and
the value of diversification. This is true for both married and
single women. Interestingly, women are not much more likely to
give incorrect answers than men; instead, they are much more
likely to answer ``I don't know.''
Women are also substantially more likely than men to report
that it would be difficult for them to come up with $2,000 to
meet an unexpected expense within the next 30 days--44 percent
for women versus 34 percent for men. Women are also more likely
than men to report difficulty paying bills than men--57 percent
for women versus 47 percent for men.
But as women approach retirement, some of this gap narrows.
There is some evidence to suggest that married women become
more financially literate as they age in response to the
likelihood that they will outlive their husbands and need to
assume sole management of the household finances.
Planning for retirement is not an activity engaged in by
the majority of either women or men. On the retirement planning
front, there are no substantive differences by gender, with 43
percent of both men and women having planned for retirement--
although a slightly higher fraction of men than women actually
report having some retirement savings: 63 percent for men
versus 58 percent for women.
The fraction of the population working for an employer that
sponsors a retirement plan is actually relatively similar for
men and women, about half, according to a 2012 report by the
Employee Benefit Research Institute.
The fraction participating in an employer-sponsored savings
plan is also similar for men and women. This latter finding is
corroborated by a recent Vanguard report, ``How America Saves:
2013'' which shows that differences in savings plan
participation rates by gender are not sizeable when comparing
all men and all women eligible to participate.
In some years, women have a slightly higher participation
rate than men, and in others men have a slightly higher
participation rate than women.
This apparent parity, however, fails to account for the
fact that women earn less than men and that savings plan
participation tends to increase with income.
Conditional on income, women actually have substantially
higher savings plan participation rates than men at all levels
of income except for those earning more than $100,000 annually,
where the participation rates are roughly equal.
Similarly, women and men have roughly equal contribution
rates overall, but conditional on the income women's
contribution rates exceed those of men at all income levels.
Women, however, are less likely to make the maximum possible
contribution, or to make catch-up contributions to their plan
if they are eligible.
Women and men are equally likely to have taken a loan out
against their savings plan balances, with about 20 percent
having an outstanding loan. Although the average loan balance
is lower in dollar terms for women than for men, loan value as
a fraction of total assets is similar.
This largely reflects the fact that women have lower
balances against which to borrow. Because women have lower pay
than men on average--a point that has already been noted
several times--and also shorter job tenure, women tend to have
account balances that are roughly one-third lower than their
male counterparts.
In employer-sponsored savings plans, the asset allocation
of women and men is fairly similar. Women, however, report
having less tolerance for risk, and there are some notable
differences in the investing behavior of women and men outside
the domain of employer-sponsored savings plans.
In outside investment accounts, women are less likely than
men to put their money in high-risk investments. But they are
more patient and are less likely to trade in and out of stocks
to time the market or in response to an investment doing worse
than expected.
Taking on less risk can reduce expected portfolio returns,
but trading less implies lower trading costs and a lower
likelihood of mistiming the market.
My biggest concern for women is what happens in retirement.
Women have longer life expectancies than men, and married women
tend to be several years younger than their husbands, so the
average married woman reaching retirement can expect to spend
several years as a widow, and the average single woman reaching
retirement will spend all of her retirement years that way.
In the shift away from defined benefit and towards defined
contribution retirement plans, the financial security of women
in retirement will depend very much on how the wealth
accumulated for retirement is managed.
With a traditional defined benefit pension, the default
payout for a married couple is a joint and survivor annuity.
Anything else requires the affirmative consent of the spouse.
But defined contribution assets are largely not annuitized in
retirement, leaving women vulnerable if the assets are not
managed to last for their longer life expectancies.
The implications of the shift from a defined benefit to a
defined contribution retirement system on the wellbeing of
older workers has not received sufficient attention in either
academic or policy circles.
In conclusion, most of the problems with the retirement
savings system in the U.S. are not unique to women. The
problems of access to employer-sponsored savings plans are real
for both men and women.
On some measures, women do better than men: conditional on
having access to a plan, they are more likely to participate
and they contribute more.
But on other measures, women do worse. They have lower
account balances, largely driven by lower levels of tenure, and
lower pay than their male counterparts--which represent more
fundamental problems with the labor market. The biggest concern
is the longevity risk that women will face in retirement. They
have longer life expectancies than men, yet have saved less for
themselves.
[The prepared statement of Dr. Brigitte Madrian appears in
the Submissions for the Record on page 41.]
Vice Chair Klobuchar. Thank you so much.
Ms. Hounsell.
STATEMENT OF MS. CINDY HOUNSELL, PRESIDENT, WOMEN'S INSTITUTE
FOR A SECURE RETIREMENT, WASHINGTON, DC
Ms. Hounsell. Good morning, Vice Chair Klobuchar and
Representative Hanna, and Representative Delaney.
I appreciate the opportunity to appear before you to
discuss women's retirement security. I am President of the
Women's Institute for A Secure Retirement. WISER is a nonprofit
organization. Our primary mission is financial education/
capability--providing women with the crucial skills and
information they need to avoid poverty in retirement.
WISER operates the National Resource Center on Women and
Retirement Planning under a cooperative agreement with the
Administration on Aging. The Center's goal is to help low- and
moderate-income women make the best decisions they can with the
assets and income that they have.
Retirement decisions are complicated and getting it wrong
means a stronger likelihood of poverty in old age, and a
stronger reliance on government programs.
Women are at greater risk, as we have heard, but I would
like to add one more statistic to this. And that is, that women
need more retirement savings and assets, yet they have less.
Studies have projected that women on average need to replace
nearly 130 percent of their final pay at retirement due to
their life expectancy.
Many women also have uneven work histories due to time out
of the workforce for family care-giving. The financial issues
of family care-giving can jeopardize the long-term retirement
security of women, and that will be the focus of the rest of
what I am going to talk about.
Women remain the Nation's primary care-givers, whether
caring for children or older family members. As care-givers,
women are at an even greater risk of experiencing financial
setbacks.
When a two-income couple has a family, it still remain
largely the mother's responsibility to take care of the
children. In the majority of cases where a family elder
requires care, it is women who provide it. Nearly 66 million
people provide elder care in this country, and 61 percent of
them are women.
Nearly 5.5 million women who provide such care have
children under 16. The Pew Research Center did a profile of the
sandwich generation, finding that of the adults who provide
care and are also providing financial support to an aging
parent and supporting a child, nearly a third were just able to
meet their basic expenses; while 11 percent were not able to
meet their basic expenses.
Research indicates also that care-givers lose nearly
$304,000 in wages, lost pensions, and reduced Social Security
benefits. Care-givers pay an estimated $5,500 in out-of-pocket
costs each year for the person to whom they provide this care.
Many of these care-givers either stop saving for their own
retirement or dip into their retirement savings.
Another aspect of this is grandfamilies where grandparents
who are near retirement are raising grandchildren. Almost 20
percent of the 2.5 million grandparents who provide this type
of care live in poverty.
When women take time out of the workforce to care for their
children or their elder family member, their future Social
Security benefits take a hit. For each year a woman, or a man
for that purpose, does not work for pay the Social Security
Administration includes a zero into the benefit calculation.
According to SSA and about 20 other researchers that I spoke to
this past week, that number still holds up.
Vice Chair Klobuchar. I am glad you prepared for this.
Ms. Hounsell. New studies are coming out from everywhere,
it seems. Adding up all of these factors, women are worried
about their financial security in retirement and savings, and
they are really worried. Almost every survey shows that it is
at the top of their fears.
And the end results of the whole of women's unique
challenges is that when they hit their retirement years, they
have 25 percent less retirement income. And as you have heard
from everyone, it seems, twice the poverty rate of men. And
that poverty rate jumps for single women and for single African
American and Hispanic women.
So the question people are always asking me is: Men have
all these challenges; why women? The main reason we need to
stay focused on women are the shear volume of the numbers.
At age 65, there are over 6 million more women than men,
and the expected growth in the population of the oldest old is
expected to grow. Recently the National Institute on Aging
redefined this age group, ``85-plus'' and they changed it to
``Ages 90 and Older.''
Estimates indicate these numbers will greatly increase as
the Boomer population reaches very old age. By 2050, the number
of nonagenarians will make up more than 10 percent of the
population. The oldest-old population is mainly made up of
women who live alone--24 men for 100 women.
So in the interest of time, I will just talk very quickly
about four solutions that I think would actually help change
the landscape. And that is:
Shoring up Social Security, doing what we need to do to
make the program secure for everyone.
The private retirement system, especially because of the
economy, we need to extend all those opportunities for people
to save to part-time and temporary workers, of which there are
many more people working in that manner.
Then there is the role of lifetime income products like
immediate annuities and longevity insurance. And these are
little understood, but they actually could play an important
role in providing future retirement security for women.
And then care-giver credits. It is one of those things that
has been talked about for decades. Study after study has looked
at how the credit would work. And I think maybe its time has
come. We certainly have the population that would be interested
in such a policy option.
And finally, I would just like to say that while there are
endless discussions about a correct solution, millions of
Americans are just trying to achieve financial stability and
protect their future.
Thank you.
[The prepared statement of Ms. Cindy Hounsell appears in
the Submissions for the Record on page 46.]
Vice Chair Klobuchar. Thank you very much.
Ms. Greszler.
STATEMENT OF RACHEL GRESZLER, SENIOR POLICY ANALYST, ECONOMICS
AND ENTITLEMENTS, CENTER FOR DATA ANALYSIS, THE HERITAGE
FOUNDATION, WASHINGTON, DC
Ms. Greszler. Thank you for the opportunity to come here
today and testify.
I would like to start by just saying that the views I
express are my own and do not necessarily represent those of
the Heritage Foundation.
I would like to focus my remarks on three considerations:
First, the challenges that younger women will face are
likely to be different than those of current women retirees.
Women have made substantial gains in education, income, and
employment that will make them more secure in retirement; but
younger generations will have to grapple with unsustainable
entitlement problems, the massive federal debt, and a decline
in marriage, all of which will create new challenges. Policies
aimed at improving women's retirement security must take these
changes into account.
Second, policymakers should focus on reforming Social
Security and enabling greater personal savings to help improve
women's retirement security.
And third, most importantly, a strong economy is the
foundation for retirement security for men and women alike.
Without a job and rising income, individuals cannot adequately
save for retirement. In this area, the government can do more
by doing less.
Among the challenges that women face in retirement is
longer life expectancies, and historically they have earned
less and worked less than men, and have also not had as much
access to participation in employer-sponsored retirement plans.
Fortunately, women have made substantial gains in these
areas. Women now earn more college and graduate degrees than
men. Their incomes are rising compared to men, and they have
equal access to and participation in employment-sponsored
retirement plans.
While these gains will make women more secure in
retirement, the daunting fiscal outlook will bring unique
challenges. Defined benefit pensions are dwindling, and Social
Security is massively underfunded.
Social Security must be reformed, beginning with common-
sense proposals to preserve its solvency such as indexing the
retirement age to life expectancy, and implementing the more
accurate changed CPI.
Additionally, Social Security spousal benefit should be
replaced with an earnings credit for parents who take time out
of the labor force to raise children, and also a payroll tax
credit for parents who continue to work while raising children.
One of Social Security's shortfalls is that it fails to
keep some people out of poverty while providing the largest
benefits to the wealthiest retirees. A flat benefit above the
poverty level, and phased out for higher income earners, would
improve Social Security retirement and would also minimize the
resources extracted from the private sector.
And finally, Social Security should end its practice of
penalizing individuals who work longer. Both the earnings test
and payroll tax contributions for those who work beyond the
normal retirement age should be eliminated.
In addition to Social Security reform, there are a number
of ways the government can help enable greater personal
savings. About 75 million employees, many of whom are self-
employed and work for small businesses, do not have access to
an employer-sponsored retirement plan. And among those who do
have access, about 15 percent choose not to save.
The Automatic IRA proposal would increase access and
enrollment in retirement savings plans. Under the Automatic
IRA, employers would gain access to low or no-cost retirement
plans, and automatic enrollment of their employees would
increase participation.
This leaves the most important consideration for retirement
security: a strong and growing economy. Regardless of age or
gender, a strong and growing economy is fundamental to a secure
retirement. It may seem obvious, but a study by the Center for
Retirement Security found that the biggest determinant of
retirement savings was employment.
More than one-half of low-income older individuals surveyed
were not employed. Without a job, it is nearly impossible to
save for retirement.
Today's employment market is weak. Although the
unemployment rate has declined, much of that has been caused by
workers dropping out of the labor force. While labor force
participation is already near a 35-year low, policies such as
the Affordable Care Act are projected to reduce employment by
about 2.5 million in 2024.
Lower employment means less retirement security. Sound
fiscal and economic policies can spur job creation. Budgetary
discipline would reduce fears of future tax hikes, encourage
employers and entrepreneurs to expand operations, and repeal or
reform of harmful regulations would reduce employers' cost of
hiring workers.
In conclusion, it is important that policymakers consider
proposals that will help both current and future generations of
women retirees. This includes Social Security reform, as well
as increasing personal savings.
But the single greatest thing the government can do to
improve both men's and women's retirement security is to foster
a strong and growing economy.
Thank you.
[The prepared statement of Ms. Rachel Greszler appears in
the Submissions for the Record on page 55.]
Vice Chair Klobuchar. Thank you, very much.
Thanks to all of you. I am going to turn over my first
round here to Congressman Delaney, and then we will go to
Congressman Hanna. And then I will ask questions.
Representative Delaney. Thank you, Vice Chair Klobuchar,
and thank you for organizing this hearing. This is an
incredibly important topic, and I think it is really important
to shine a spotlight on this topic because I think what has
happened to women--we are thinking about this in the context of
retirement, but it is really just kind of a manifestation of
the injustices that women have dealt with their whole
professional careers, and the additional burdens that women
have had to bear in our society which in my opinion has been
inequitable as it relates to women.
And now they are bearing an additional burden in
retirement. So we have a series of, in my opinion, unfair and
inequitable burdens that women have borne, and now we just have
another example of it in retirement.
And I worry that it is still going on.
Ms. Greszler, you spoke about how more women are graduating
from college and have advanced degrees than men, and I think
last year it was 54 percent of college graduates were women and
58 percent of advanced degree graduates were women.
Yet, when you look at what is happening in corporate
America when men and women are up for promotions to the level
of vice president or manager, only 25 percent of those
promotions go to women. And when they are up for promotions to
the C Suite--in other words, the most senior executives of a
company--only 13 percent of those promotions are going to
women.
So it seems to me this inequitable behavior continues and
persists, despite many of the gains that we talk about. What is
your view as to why, despite the fact that--more than half of
the graduates are women, and probably more than half of the new
hires at companies are women, why do you think we are seeing
such talent drain among women in the senior ranks? Which to me
is a tragedy for our society because to not have half the
population represented in the most senior policymaking
positions in corporate America--forget about the fact that it
is bad for women, which it is; it is bad for society--
particularly in my own view, and this is just my own personal
view, if you look at the skills men and women generally
speaking have, the skills that women have in my opinion: better
judgment, a better spirit of cooperation, and quite frankly
better cognitive abilities--I have four daughters so I may be
biased on this--I think society is losing a lot there.
So why do you think it is continuing to happen?
Ms. Greszler. I think one of the first factors is that if
you look at what women are earning more college and graduate
degrees in, a lot of those degrees are not in the highest
paying fields of science, technology, engineering, and
mathematics. So that plays a certain role.
As far as the promotions within the workplace, I think we
need to encourage women to not take themselves out of the
running. Perhaps they think they are going to have a family
soon, and they don't know what that is going to look like, and
so they kind of step back and do not promote themselves as they
would. Also, women are less likely to ask for a pay increase
and a promotion. And so we need to encourage women, and we do
not want to make them believe these statistics of oh, you are
just going to earn less than men so just take yourself out of
the running, or do not push for that. That should not be a
given.
You know, we should be encouraging that. And one policy I
would like to caution against, particularly as a working mom
with four young kids, is the Paycheck Fairness Act. I just fear
that this would reduce opportunities for women, instead of
enabling them. We can celebrate the gains that women have made
over the past decades. They now have greater access to
flexibilities and accommodations in the workplace, and I just
think that policies like this could create one-size-fits-all
jobs that match one-size-fits-all pay scales.
Representative Delaney. I appreciate your comments. I think
we need those policies, quite frankly, based on some of the
statistics.
But switching to the other panelists for a second, so we
have talked about things to do. And they are, I would call
them, policies that I think will benefit both women and men in
retirement, right? Strengthening our important safety net
programs, social insurance programs like Social Security,
encouraging more personal retirement. And then we have the
whole portfolio of things around workplace fairness and
equality, which I touched on, which is worthy of its own
discussion, in my opinion, but staying with retirement for a
second, what are the specific things--laser-like focused things
we can do to help women specifically with this retirement
situation, which again the statistics are really tragic and in
my opinion very unfair. What can we do to help women's issues
in this narrow area of retirement security, specifically for
women, as opposed to things that help both men and women.
Dr. Whitman.
Dr. Whitman. Women, as we know, are the primary care-givers
of both children and older adults, and the number of older
adults needing care is going to grow exponentially as the
population ages.
So it is really important that employers have flexible work
schedules and; other accommodations that allow women to stay
attached to the labor force. Because if a woman quits her job
to care for a loved one, often she loses hundreds of thousands
of dollars in retirement security for her own future.
So we need to buck that up. We also need to help women and
men remain in the labor force longer, if they are physically
able to do so. And that includes ways to end age
discrimination, ways to help people maintain their skills and
training, and ways to help the long-term unemployed who are
most likely to be older workers. All of those can have a really
big impact on retirement security for women.
Representative Delaney. So it sounds like this care-giver
policy to bolster and support care-givers really will help
women materially. Thank you.
I don't know, am I out of time?
Vice Chair Klobuchar. If you want to ask another question--
--
Representative Delaney. Well I think Ms. Hounsell, did you
have a comment?
Ms. Hounsell. I was just going to say that I think the
population that I was talking about, what they are going to
need, and other countries are considering this, is maybe a
benefit when you reach that oldest old age, 85 or 90, that that
will keep the worst from happening.
Representative Delaney. So just kind of a top-off benefit
maybe for the people who hit that. Because they are exceeding
any probably modeled expectations for their savings, et cetera,
kind of like a way out of the money insurance plan.
Ms. Hounsell. Right.
Representative Delaney. Dr. Madrian.
Dr. Madrian. I think another policy that would be worth
looking into is thinking about ways to promote the
annuitization of defined contribution assets.
Representative Delaney. Right.
Dr. Madrian. A traditional pension gives you a monthly
paycheck every year until you die----
Representative Delaney. Right.
Dr. Madrian [continuing]. But traditional pensions are
increasingly only available to workers in the public sector.
And everyone else is left with a defined contribution 401K-like
pension plan; where annuitization is not typically a built-in
feature of such plans.
Representative Delaney. Right.
Dr. Madrian. And women would really benefit from this for
two reasons. Number one, longer life expectancy, and number two
is: As individuals get older, half of them are going to start
having diminished--diminished mental capabilities to manage
their own assets----
Representative Delaney. Right.
Dr. Madrian [continuing]. And those are the people who end
up being victims of financial fraud. And annuitization can help
solve both of those problems at the same time.
Representative Delaney. So supporting care-givers, some
kind of secondary program that maybe kicks in when someone has
reached a particularly kind of elderly phase, and then this
swap concept of defined contribution programs where they could
be swapped more freely and transparently to annuity programs.
Those are all three very good ideas. Thank you.
Vice Chair Klobuchar. Thank you, very much. Congressman
Hanna.
Representative Hanna. Thank you. My goodness, what an
important subject. I am struck by a number of comments, and I
really appreciate the opportunity to hear a little bit of back-
and-forth.
Ms. Greszler, to Ms. Whitman, you talked about Social
Security to flat means-tested benefits. I am curious how you
and your organization feel about that, Dr. Whitman?
Dr. Whitman. Thank you for the question, Representative
Hanna. Obviously AARP feels very strongly that we need to put
Social Security on solid footing for the future so that people
can depend on it--not only for the current generation, but also
for future generations.
So getting it financially healthy is really, really
important. And I think there are a variety of ways to do that.
Representative Hanna. But to the specific point of Ms.
Greszler, in terms of means testing?
Dr. Whitman. We have concerns in that everybody pays in at
different rates, and we want to maintain at least some link
between the contributions that people pay over time and the
benefits that they receive.
Representative Hanna. Even though the means testing would
ultimately make it more secure, I suppose, for everyone?
Ms. Greszler. The way in which I would support a means-
tested benefit is through elimination of the payroll tax, with
comprehensive tax reform, so it would no longer be a
contributory system.
I think this would bring us closer to Social Security's
original intent of protecting seniors against poverty in old
age. As it is, it is providing pretty substantial benefits to a
lot of people who do not need them at all and, you know,
extracting more taxes over everybody's lifetime in order to do
that.
We could better focus it through a flat poverty-level
benefit that was the same for everybody. And for seniors who
had significant non-Social Security income, that benefit would
be phased out and in return they would pay lower taxes over
their lifetime.
Representative Hanna. Do any of you feel as though we have
gone through this--we talk about the sandwich generation, but
there is a huge population who simply did not plan for
retirement, and the advent of things like 401Ks, and vestiges
programs that require you to work, in my view, much longer than
you should have to be a vested person. It seems if you earn
that money, you should get that money, and it should travel
with you and maybe become a part of your 401K.
The idea that people are just now understanding the value
of saving early, saving even as a child, a youth IRA type of
thing would be beneficial because of the time value of money
which Rockefeller so rightly pointed out.
So that the 130 percent of income that you need to retire
with that Dr. Madrian, you mentioned, I think you mentioned
that, that that seems like an impossibility with very low
interest rates that we see today, coupled with, even though the
stock market is doing well, you know, we have also seen long
periods where it hasn't. We see underfunded pension programs.
We see defined benefit programs with a lot of public employees,
but somewhat less historically--although about half--where they
are about the same rate as they have historically been but
somewhat less.
All of that adds up to a very unprepared population of
people, knowing that women live longer. This seems to me to be
a real crisis, not just something that's--I know it's going on
every day. I know I am blessed I can help with my own family,
but so many people can't.
What do you see with AARP? I am thinking about women in
poverty, and what is the percentage of people out there who
rely on Social Security for up to 90 percent of their income?
Do you know that?
Dr. Whitman. I can get it pretty quickly. But you're right,
the fact that most people do not have an adequate nest egg
means that the vast majority, and particularly older women as
Dr. Madrian mentioned, are much more reliant on Social
Security.
We need to get more people saving. Half the population
cannot do it in an easy way through payroll deductions, as
several on the panel have said. That is why we need to look at
ways to encourage employers to offer retirement plans, be it
through Auto IRA or, through the many states that are looking
at work and save programs.
But the specific number is, without Social Security
benefits almost half of older women would be in poverty.
Representative Hanna. Half?
Dr. Whitman. Half. 48.5 percent.
Representative Hanna. And with Social Security benefits?
Dr. Whitman. With Social Security benefits, it is down to
17 percent, I believe.
Representative Hanna. My time has expired. Thank you.
Vice Chair Klobuchar. Okay, very good. Representative
Maloney has joined us.
Representative Maloney. Thank you so much for focusing on
this important issue. I had two other hearings at the same time
with votes, and I look forward to reading your comments in the
transcript of this important hearing.
I really want to thank Vice Chair Klobuchar for bringing
our attention to this important issue. I find too often women's
issues are swept under the carpet, or ignored, or not paid any
attention to at all, and that is why we have still 77 cents to
the dollar in pay inequity, which has been stuck for well over
three decades.
In 2010 when I had the great honor of chairing this
Committee, I also honed in on some of these issues. And our
staff report back then underscored the severe gap in retirement
savings between men and women.
One thing that I find particularly disturbing, and I would
like to ask any member of the panel to comment on it, is that
all of these positions, whether it is 77 cents to the dollar,
or your IRA account, or your Social Security, all of these
financial things for which we are underpaid, or not paid as
much, ends up in making, at the time that report said the
largest segment of people living in poverty were older women.
And I want to know if that is still the case, and why? Why do
you think that is?
But furthermore, if you could comment on the 401K plan. In
2004 the median female worker approached retirement with
$34,000 less than half of what her male counterpart had. And I
am glad that the Committee and the Congress continue to examine
this critical issue and look for ways to help Americans to
prepare for retirement.
In my home City, a recent survey by our comptroller found
that two-thirds of working adults are not enrolled in employer-
sponsored retirement plans largely because many employers do
not offer these plans. And as a result, more than half of more
and more Americans are approaching retirement age without any
savings. And as we have seen here today, far, far too many of
them are widowed and single women.
The fact is that women live longer than men. Today a woman
who reaches 65 can expect to live another 20 years. Yet, for
many this prospect is a very fearful one, that they will
outlive their retirement savings. And as Dr. Whitman in your
prepared remarks testified, women incur greater health care
expenses, and need expensive long-term support and care into
older age. And I would just like to inject right now, with my
colleagues, one of the great things about the Affordable Care
Act is that women are no longer discriminated or denied
insurance because they are pregnant or because they are female.
So my basic questions are:
What are the best steps we can take in Congress--and I open
it up to everyone on the panel--to encourage employers to offer
retirement savings plans so that workers are better prepared
when they leave the workforce?
And also, how would President Obama's IRA proposal help
women prepare for retirement, particularly those with low wage
and part-time jobs?
And also, if you could comment on the contributing factors
that make women the poorest, single, older women, the poorest
members of our society? What a statement that is, a very
disturbing statement to me.
In any event, I want to thank you all for being here, for
your testimony, and for focusing some of your life's work on
helping other women. As Madeleine Albright used to say, there's
a very special place in hell for women who do not help other
women, and I am very pleased that our Vice Chairwoman is one of
the leading women in the United States in making sure that
these issues are front----
Vice Chair Klobuchar. And not in hell right now.
[Laughter.]
But thank you.
Representative Maloney. Thank you for focusing on this. I
think it is important, and I yield back and look forward to
your answers.
Dr. Madrian. So I can speak to one of your questions, which
was how the 401K system, or the private retirement savings
system, impacts women.
I think the answer there is that the system itself is
pretty neutral. Women and men are facing the same barriers to
access, and conditional having access, women actually are more
likely to save. The biggest problem is, their pay is lower than
men. So even if they are more likely to participate and
contribute more, it is not enough to compensate for the fact
that they are actually being paid less than men.
And then those lower assets have to stretch out over a
longer period of time in retirement. So it is not surprising
that if you are taking less money and it has to last longer,
that women are then more likely to end up in poverty.
Representative Maloney. And then this lower pay also
translates itself into lower Social Security payments, and also
the issue of should women who stay at home get some type of
compensation in their Social Security for the work that they
are doing for the overall family.
I think another dynamic that is very important is that so
many women are working, and that so many families--spouses,
males and their children--are dependent on the income of the
wife, or the spouse in this particular case. And that is
another dynamic that is taking place in our society and
impacting families overall.
So thank you so much. Yes, Dr. Whitman.
Dr. Whitman. I don't know if women helping women, or
working on women's issues gets us to Heaven, but I appreciate
your earlier comment.
[Laughter.]
I think the main problem with the retirement savings system
can be summarized this way: Half of the population does not
have the ability to save from every paycheck. Roughly half the
population has no financial incentives through the tax system
to save, and therefore roughly half the population when they
reach close to retirement age has almost nothing saved.
And I think we really need to look at ways to enable more
people to save through their workplace, provide more people
incentives to save either through employer matches or, through
adding to our tax code, refundable savers' credit. All of these
can really help people as they age, because as we know, the
defined contribution system is one of the predominant ways that
people have assets that they can live on in retirement.
Ms. Hounsell. I wanted to just say something about all the
women that work part-time, because twice as many women as men
work part-time, and they also do not have access to savings
even if they work someplace where there is a retirement
account.
Representative Maloney. Thank you.
Vice Chair Klobuchar. All right. Well thank you.
I want to start where Representative Maloney ended and
where you were just seizing on this about the issue of the
retirement accounts and what we can do.
And I know you, Dr. Madrian, have done a lot of work in
that area as well. So why don't we just start there. You have
done a lot of research on this. Let's start with a business
setting where they actually have 401K plans or something like
that. Does anyone know how many, what percentage of women have
access to that?
Dr. Madrian. So it is about half of the workforce overall,
women and men, are in jobs that have a pension plan.
Vice Chair Klobuchar. So what can we do to make it easier
for them to save, and get them to do it? Because sometimes I
have had some younger employees that kind of pride themselves
for not putting money away in it, and we keep trying to tell
them they should. But anyway, so tell me what we can do.
Dr. Madrian. We know the answer to that question. The
single most effective way to get people to save for retirement
is through automatic enrollment. Automatically enroll them in a
savings plan. And if they do not want to save, require them to
opt out.
Plans that have automatic enrollment have savings plan
participation rates ranging between 80 and 95 percent of
employees.
Vice Chair Klobuchar. Do you know how many plans have that
automatic enrollment?
Dr. Madrian. So automatic enrollment has been diffusing
rapidly over the last several years among large employers. It
is high, probably about 60 percent of workers in very large
companies are at firms that have automatic enrollment. Small
employers have been less likely to jump on the automatic
enrollment bandwagon.
Vice Chair Klobuchar. Do you think part of that--I mean, I
am sure part of it is trying to respect employee choice, but is
part of it then if people do not enroll they do not have to do
the matching funds? I am trying to figure out the motivation.
Dr. Madrian. That is certainly something you hear from some
employers, yes.
Vice Chair Klobuchar. And so I know there have been
attempts in Congress to make it mandatory-opt-out--is that how
you call it?
Dr. Madrian. Yes.
Vice Chair Klobuchar. Do you think that would be helpful?
Dr. Madrian. Oh, it would certainly help. I mean you might
get some political opposition from some quarters----
Vice Chair Klobuchar. Oh, really?
[Laughter.]
Dr. Madrian [continuing]. But it would help. We would be in
good company. The UK has recently enacted a pension reform,
doing this mandatory automatic enrollment. New Zealand has had
this for several years. So, you know, it is the way other
countries are going, and I think it is something worth thinking
about.
Vice Chair Klobuchar. Are there other countries besides
just those two that are doing it?
Dr. Madrian. Well some have mandatory enrollment, like
Singapore or Australia.
Vice Chair Klobuchar. But we would be looking more at opt-
out.
Dr. Madrian. I would guess that would be more politically
palatable.
Vice Chair Klobuchar. Right. What other things can we do,
short of that?
Dr. Madrian. Well, so I think the next thing is expanding
access. So half the workforce is in a firm that offers a
savings plan. So the real battle line is how do you get the
other half of the workforce able to save for retirement,
because payroll deduction is the single most effective way.
And most of those workers are either part-time, as Cindy
pointed out, or they are working for smaller firms that do not
offer a savings plan. And for smaller firms, a lot of those
companies have the same challenge as individual retirees.
Joe's Pizza--Joe who owns Joe's Pizza on the corner--you
know, probably does not have an MBA. He does not have a
dedicated human resources staff that is trying to figure out
optimal benefits packages for his employees. He has got all the
challenges of the average investor.
So we need a simple way for employees who are working part-
time, or working for small firms that do not have a savings
plan, to save for retirement, either by having simple plans for
those firms to offer, or by having an alternative that does not
rely on the employer-sponsored savings plan, like a MYIRA or an
automatic enrollment IRA product, or something like that.
Vice Chair Klobuchar. Um-hmm. Okay. Anyone want to add to
those ideas? This is the idea of opt-out requirement, and then
also which would have to be legislatively mandated, I think.
And then this idea for people who do not have access to find
some new vehicles to do that.
Dr. Whitman. I would also have employers use auto-
escalation mechanisms, so that maybe they enroll you
automatically at a low savings level, and then you have the
opportunity to save a little bit of your income more each year.
This is what I used to tell my colleagues who would ask me
for retirement advice. If you can save a piece of every raise
you get, or take a piece of every cost-of-living increase and
add that to your retirement savings, your contributions grow
over time, and it can make a huge difference in your lifetime
savings. And some employers are also looking at that, as well.
Vice Chair Klobuchar. Okay.
Ms. Greszler. I would just reiterate that automatic IRA
because it captures both the increased access and the increased
enrollment. It is something that would be easy for small
employers that don't have the time, the education, or the
resources necessary to go out into the private sector and pick
a plan, and pay for all of that.
It would help those to be able to go there and get these
plans. All they would have to do is to deduct it from their
employee's pay with little to no cost for them. And if they did
this through automatic enrollment, you significantly increase
participation rates. So I think the automatic IRA could go a
long way.
Vice Chair Klobuchar. What do you guys think about that?
Dr. Whitman. AARP supports the Automatic IRA, as well as
other state-based programs that are trying to help more people
to save for retirement.
Vice Chair Klobuchar. Okay. Anything more? Do you want to
add anything, Ms. Hounsell?
Ms. Hounsell. I think the MYIRA is a great proposal. It's
just that it's not expansive enough yet. And if that would be
available to small business owners, or individuals, that would
be a great opportunity for people.
Vice Chair Klobuchar. Okay, very good.
Then we are talking about another thing we can do here to
shore up Social Security. Does someone want to walk into that?
Dr. Whitman?
Dr. Whitman. Absolutely. We believe that we do need to
shore up Social Security, not just for the current generation
of retirees but for future generations.
If we look at the middle class in the future, they are
going to need Social Security even more than today's retirees,
largely because of the decline in defined benefit pensions and
rising health care costs. So we absolutely must find a balanced
solution to make sure that the program exists and is
sustainable over the long term.
Vice Chair Klobuchar. Very good.
Dr. Madrian. We know how to solve the problems with Social
Security from an economic standpoint. The biggest problem is
the political will to do it.
So the way to restore sustainability to the Social Security
system are a modest increase in taxes, a modest decrease in
benefits--and that would be done in such a way that the burden
falls most heavily on those who are receiving the highest level
of benefits--and increase the retirement age.
And if we do all of those in small measures, and we do it
today, then we can do them in small measures. And if we put it
off, kick the can down the road for 20 years, then we are going
to have to take much bigger steps and it is going to be much
more painful politically and economically.
Vice Chair Klobuchar. Okay.
Ms. Hounsell.
Ms. Hounsell. Ditto.
Vice Chair Klobuchar. Ditto? Okay. Good.
Ms. Greszler.
Ms. Greszler. Within Social Security, I would just say that
we need to focus any changes. We want to target those who are
actually living in poverty. That is what the program was meant
to protect against. And so if we are going to consider things
like higher benefit levels as people age because they tend to
have higher needs when they are older, it is not really the
fact that they are older which makes them more susceptible to
poverty; there are plenty of older people who are 90 years old
and may be very wealthy. We need to be targeting the income
level. That is what they need income for. And so I would
caution against anything that says we are going to have a
different measure of inflation, or something like that, for
people once they hit 80 or 85 or 90. We need to target income
so that Social Security can truly protect against poverty.
Vice Chair Klobuchar. Another thing we talked about was
care-givers. We have gone through now Social Security. I think
there is general agreement that we--probably disagreement on
how to do it, but that we need to make it as strong as
possible. But we have got to make it easier for people to get
access to retirement plans on their own.
But also if they are in the workplace, to maybe require
them, or try to get them to do it, make it easier for them, we
will put it that way.
And then the other thing we have talked about is this
particular strain on women for the most part, women who are
care-givers to their kids and to their aging parents, and this
whole long-term care issue.
Any ideas there? And do you think Congress should start
looking at this more seriously? Dr. Whitman?
Dr. Whitman. Yes, please. This is a critical issue,
especially for women. And I think you are right. It interacts
greatly with their ability to save and to have a secure
retirement.
If they have to take time out of the workforce and go into
part-time work or, tap their IRAs in order to pay to take care
of a loved one, that puts their own financial security at risk.
And right now we have very little support for people who
need long-term services and supports, other than through the
Medicaid program. While there are some states--and Minnesota is
a shining example in this country of a state that is using its
long-term services and support to deliver good quality care--we
absolutely need to do more to help people finance long-term
care costs that can be in the hundreds of thousands of dollars.
Vice Chair Klobuchar. Very good. Anyone else want to add
anything more to that?
Ms. Greszler. I think that we all support child care/care-
giver credit. I would just also like to say that we do not want
to do anything that is going to penalize the women who do take
time out of the labor force to care for children or for older
people from being able to come back into the labor force.
And so as I mentioned before, if you have one-size-fits-all
pay scales, and one-size-fits-all jobs, women are not going to
be able to have the flexibility that might let them stay in the
labor force while caring for somebody else. And then if they do
take the time out, they are not going to be as likely to be
rehired if the employers must pay one wage, just depending on
what the title of the job is. They are going to be less likely
to hire women who come in from time out of the labor force that
men would be in otherwise.
Vice Chair Klobuchar. Very good.
Ms. Hounsell. I think the care-giver credit is much more
important than the child-care credit.
Vice Chair Klobuchar. Okay. Right. Good. Well I have some
follow-ups that I think I will put in writing.
Vice Chair Klobuchar. Among other things, I have to
question my classmate from law school who happens to be the FBI
Director on the Judiciary Committee next. But I want to thank
you all for coming, and I really think this has been helpful.
I think usually you have these hearings and the statistics
kind of roll over you, but I think these statistics are pretty
mind boggling in terms of women as they are aging and living
longer and just how they are going to be able to support
themselves. And it really is a cry for strengthening Social
Security moving forward and looking at the long-haul, and then
also really trying to get into some of these retirement options
and how we can strengthen them as well.
I really appreciate the civility of this hearing, and the
tone, and how you guys clearly have looked at each other's
work, or talked ahead of time, which I also appreciate, and
know what each other's positions are. That has been very
helpful as well.
Do you want to add anything, Mr. Hanna?
Representative Hanna. Do you mind if I ask some questions?
Vice Chair Klobuchar. Oh, not at all. No, no.
Representative Hanna. I am curious, Dr. Madrian, did you
look at the current load of college debt? Has anybody
considered that in terms of our ability to save? You know, the
incomes we have not seen the growth, with college we have seen
enormous growth. That is going to affect the dynamic of all of
this.
The other thing I wanted to ask you, Dr. Madrian, is we
talk about increasing the retirement age. And I was in an
industry that, you know, at 55 years old in the type of work I
was in, heavy construction, at 60, increasing the retirement
age is just not a practical thing for so many hundreds of
thousands of people in this country. How do you manage that,
knowing that maybe that is something we need to talk
thoughtfully about, with all the different dynamics of all the
different types of employment out there?
Vice Chair Klobuchar. Before you answer it, I am going to
turn this over to Congressman Delaney to close this out, but
again I wanted to thank our witnesses. I have to go to
Judiciary, but it was a very good hearing and I hope some good
legislative ideas will come out of it. Thank you.
Representative Hanna. Thank you for indulging me.
Dr. Madrian. So to answer the first part of your question,
I am not aware of any research--and I certainly have not
conducted any--that tries to make a link between college debt
when individuals are entering the workforce and their
subsequent retirement savings. But I certainly think it stands
to reason that if you have got to pay a lot of money to pay off
your student loan, you are going to have less money to
contribute to a savings account and to accumulate retirement
savings.
And we know that starting early is the best way to save for
retirement because of the power of compound--because of the
power of compound interest. And I just blanked on your second
question.
Representative Hanna. Oh, different----
Dr. Madrian. The retirement age, yes. Absolutely.
Representative Hanna [continuing]. Things people do for a
living directly affects your ability to work less or more.
Dr. Madrian. Yes.
Representative Hanna. I was in heavy construction. I know
masons that, and laborers, and carpenters, who at 55 years old
simply cannot compete in their trade. And they certainly should
not have to move into some menial labor to survive. It just
does not seem----
Dr. Madrian. The fact of the matter is, to make the system
sustainable if you are going to allow people to retire at 55,
you are going to have to have----
Representative Hanna. Well, no. I mean how do you manage
that within all of that?
Dr. Madrian. Higher taxes. I think the way you manage it is
to think of some--to help workers with a transition strategy
from those jobs, those more physically demanding jobs that they
may not be able to handle once they get to a certain age.
Representative Hanna. So the bottom line is, growing our
economy, getting people better wages, learning to save earlier,
more, and having a target like you talked about, education, all
of that, is really something that as a society we need to
develop, focus on, and understand how critical it has become.
Dr. Madrian. Those issues are all related, and it would
behoove us to think of the interconnections. Absolutely.
Representative Delaney [presiding]. Well I have no further
questions. I want to join with my colleagues in thanking you
all for your terrific testimony here today. It was all very
interesting and very informative.
There is a fair amount of agreement, obviously, as
Congressman Hanna said: a renewed focus on retirement, a
renewed focus on making minor calibrations to some of our most
important kind of safety net social insurance programs like
Social Security; the sooner we do them the better and easier it
will be to do.
A fair amount of emphasis on care-givers. But it is still a
great reminder to me that a lot of work needs to be done as it
relates to parity and equality with respect to women in the
workforce. Because this issue that we are talking about here,
which is so terribly important, is in part based on some unique
aspects of the fact that women in fact live longer than men do,
and that makes this issue a more acute issue.
It makes it a more acute issue for everyone who lives long
these days, but it also reflects, in my opinion, the deep
injustice that continues to affect women in the work force,
particularly as they bear so many burdens in our society.
Because, you know, women are my heroes because they do so many
things in our society that in fact men do not do. They care for
children more. They care for elderly Americans more. And they
deserve equal and fair treatment in the work force when they
pursue their careers.
So this hearing, again, underscores the importance of that.
So I just want to thank everyone for being here and for
participating in this important discussion. And unless
Congressman Hanna has anything else, we will conclude the
hearing.
(Whereupon, at 11:29 a.m., Wednesday, May 21, 2014, the
hearing in the above-entitled matter was adjourned.)
SUBMISSIONS FOR THE RECORD
Prepared Statement of Representative Richard Hanna
Experience shows a strong economy is the foundation of a secure
retirement. Workers with good jobs and adequate savings are better
prepared to enjoy their retirement years. Women tend to live longer
than men so a strong and vibrant economy is even more critical to
providing them with a secure retirement.
Unfortunately, our sluggish economy and aging population threaten
our nation's future retirement security.
As Chairman Brady has observed, America has fallen into a ``growth
gap.'' Our economy is growing at half the rate of previous recoveries.
That means we are falling further behind in terms of jobs and income,
relative to where we should expect to be.
Fewer jobs and less income mean Americans will be less prepared for
retirement. Older workers who lose their job often retire before they
are ready. That means lower Social Security benefits and less
retirement savings. Spreading fewer resources over more years, results
in a less secure retirement.
Our nation's population is also getting older. As the youngest
Baby-Boomers enter their retirement years, we will undergo a dramatic
demographic shift. The ratio of workers to retirees will shift from
roughly three-to-one to only two-to-one.
This demographic shift will undermine the pay-as-you-go financing
of Social Security and Medicare. As a result, neither program will be
able to pay its promised benefits.
Our continuing growth gap and looming entitlement crisis will
adversely affect every American, but especially women.
Women typically have lower lifetime earnings and longer life
expectancies than men. Women are also less likely to be covered by an
employer pension plan. As a result, they are at greater risk of falling
into poverty during their retirement years.
To improve the retirement security of women, we must understand the
nature and extent of the problem.
As we focus on the topic of today's hearing, we must not lose sight
of the fact that a growing economy creates more jobs, higher wages, and
greater retirement security for both men and women.
Economic growth alone cannot provide a secure retirement or prevent
the insolvency of our entitlement programs. But without more growth,
our task will be that much harder.
We have a distinguished panel of witnesses today, including a
former member of the Joint Economic Committee staff, Mrs. Rachel
Greszler. I look forward to each of our witnesses' testimony and hope
we gain important insights than can help us address this important
issue.
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