Retirement Study Shows Gender Gaps
Raising the retirement age to 70 for full Social Security benefits would cost male workers 36% more than women, according to a study by the Social Security Administration.
By contrast, slicing 1 percentage point from the annual cost-of-living benefit increase would hit women 21% harder than men, the study found.
These consequences of major changes in benefits would occur because most women live longer than men. The impact by gender would add to the already complex difficulties of developing legislation that would lead to long-term solvency for the Social Security system.
The study was made available to The Times on Wednesday as the House Ways and Means Committee opened hearings on plans to assure the system’s long-range solvency.
Female House members, who had asked for a gender analysis of proposed reform bills, have indicated that they will oppose legislation that would have an adverse financial impact on women.
Any reductions in the size of future benefits or tax increases to maintain benefits are certain to stir considerable political opposition from members of both parties in Congress.
President Clinton has offered a Social Security plan that depends on future budget surpluses to close part of an expected financing gap. But he has not proposed any benefit cuts or tax increases, saying that he is ready to negotiate with Congress on steps to put the system on a sound basis for 75 years.
After two years of study, including development of a special computer model, the Social Security Administration has produced the first details of how typical beneficiaries might be affected by various reform proposals.
The study looked at the impact of increasing the retirement age, trimming the cost-of-living allowance and increasing the number of years used to calculate benefits.
Under current law, the age to receive full benefits is 65 and is scheduled to increase gradually to 67 over the next 28 years. The annual inflation increase is pegged to the consumer price index, a federal measure of the change in prices of the cost of goods and services purchased by a typical urban consumer. And benefits are calculated through a complex formula linked to 35 years of earnings.
Women tend to earn less than men and to drop out of the work force for several years to care for young children. They also live longer. Therefore, any changes that increase the number of working years required to receive a benefit would hurt women because they are more likely to have years with no earnings while temporarily out of the work force. And because of greater longevity, they would lose more money over a lifetime if the annual inflation allowance is trimmed. When the retirement age is boosted, men face the biggest loss because of shorter life spans.
Increasing the retirement age to 68 would cost women an average 5.4% of their annual benefits, or $379 a year, while men would lose an average 7% of benefits each year, or $528, according to the analysis. Setting age 70 as the retirement standard would cost women an average 15% of benefits, or $1,061 a year, while men would lose 20.4%, or $1,531 a year, according to the study.
If the cost-of-living adjustment is cut by a percentage point, for example, Social Security recipients would receive a 2.5% increase in benefits when inflation climbs 3.5%. Women would lose an average of 12.7% a year from their expected benefits, or a reduction of $899. Expected benefits for men would be cut by an average of 10.5%, or $791 a year.
If the number of years used to calculate benefits, now 35, is boosted to 40, women would lose an average of 6.2% of benefits, or $428 a year, while benefits for men would drop by 5.1%, or $397 annually.
The average benefit for men is $9,156 a year, while women receive an average of $7,107.
In addition to gender differences, any reductions in benefits would be particularly difficult for low-income people, who are more likely to depend on Social Security for virtually all of their retirement income. Only about half of American workers are enrolled in company pension programs leading to retirement benefits, and many workers have virtually no savings.
Without Social Security, 43% of persons over 65 in California would live in poverty. Social Security benefits reduce the poverty rate among the elderly to 13%.
There is little time left this year for Congress to develop a compromise on the volatile Social Security issue.
As Wednesday’s Ways and Means hearings opened, House Speaker J. Dennis Hastert (R-Ill.) offered words of encouragement in a letter to committee Chairman Bill Archer (R-Texas).
“I would hope that both Republicans and Democrats will put Social Security first and politics second, progress before partisanship,” Hastert said. “Consensus is possible,” he declared.
The legislative goal is a package that would assure the system can keep its promises to baby boomers, the 76 million Americans born in the years 1946 through 1964, members of the biggest generation in American history. The oldest of them, a group including Clinton, would become eligible for full retirement benefits in the year 2011.
The system’s financial crisis is expected to come in the year 2034, when payroll tax revenues are predicted to be sufficient to pay for only 75% of benefits promised under current law.
