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PART ONE OF A SERIES: What Every Woman Needs to Know About MONEY AND RETIREMENT
This article originally appeared in Good Housekeeping magazine, and was prepared as a project of the Teresa and H. John Heinz III Foundation. It is serialized by permission.
Message from Teresa Heinz,
Chair of the Teresa and H. John Heinz III Foundation:
After a lifetime of hard work, inside or outside the home - or both - women should be able to look forward to a financially secure retirement. Unfortunately, in far too many cases, that is not how it works. Women are far more likely than men to live out the end of their lives in poverty.
Six years ago, the Teresa and H. John Heinz III Foundation started examining why poverty in old age has a distinctly feminine face. What we discovered is a retirement system that is not well-suited to the work patterns of women, who continue to bear the overwhelming share of responsibility for caregiving in our society.
The Foundation has worked to bring these inequities to the attention of policy makers and the public. It is equally important to educate women about the importance of saving and planning for retirement and about how to take control of their financial futures.
This article provides essential information that every woman, young or old, should know as she makes decisions that will affect her financial security. If you have questions or would like additional information, please contact the Women's Institute for a Secure Retirement (WISER) at 1201 Pennsylvania Ave., N.W., Suite 619, Washington, DC 20004.
OVERVIEW: Just the facts
Although women need more money for retirement than men do, they usually end up with far less.
PART I:
WHERE RETIREMENT MONEY COMES FROM
Retirement is supported by three main sources of income: Social Security, employer-sponsored pension plans, and individual savings.
SOCIAL SECURITY: Social Security provides a foundation of support or safety net. Unfortunately, many retirees, particularly women, rely on Social Security as their primary source of retirement income. Given that the average benefit for women workers is only $644 per month, or $7,728 a year, it is clear that Social Security alone is not effective in protecting women from poverty.
PENSIONS: Think of a pension as a series of delayed paychecks that you receive upon retirement. Employer-sponsored pensions are a crucial source of retirement income. Yet women are less likely than men to earn pensions, because they are more likely to work in lower-paying or part-time jobs where pensions are not available. Those who do earn pensions receive less than half the benefits men receive.
SAVINGS AND ASSETS: Your assets are an increasingly important part of your retirement plan, so it is essential to start saving early and to invest wisely. This means choosing investments that are appropriate for your age, tolerance for risk, and current need for cash.
Stocks, for example, often produce greater returns over long periods of time, and you should, therefore, consider including them in your retirement investment portfolio, especially if you are a number of years away from retirement. If you are closer to retirement, you may want to invest more conservatively. According to the Social Security Administration, non-married women retirees over age 65 receive a median payment of only $95 per month or $1,140 annually in interest income from their assets. But you can realize much greater dividends from your own investments.
A GUIDE TO SOCIAL SECURITY:
A working woman earns Social Security because she pays into the system at her place of employment. She may also collect benefits as a spouse or as an ex-wife - provided she was married for 10 years or more. A woman may collect Social Security either on the basis of her own work record or, if the benefit to which she would be entitled is greater, as a spouse. She cannot collect both full benefits.
Taxes: Your Social Security benefits may be taxable, depending on your total income. For instance, if you file a federal tax return and the combined income of you and your spouse is between $32,000 and $44,000, you may have to pay taxes on half of your Social Security benefits. If your combined income is above $44,000, up to 85 percent of your benefits are subject to income tax.
When can I receive Social Security and Medicare benefits?
Age 65 is the current age at which you will qualify to receive full Social Security benefits. Beginning in the year 2003, the age at which you will be able to receive full benefits will gradually rise to 67.
Age 65 is when you are eligible to enroll in Medicare, the federal health-insurance program. Contact the Social Security Administration at 800-772-1213 several months before your sixty-fifth birthday for more information.
You may also receive reduced Social Security benefits at:
These benefits are not automatic.
You must apply to the Social Security Administration to receive them.
For how long can I collect Social Security benefits?
These benefits will continue for as long as you live, and are currently adjusted every year for inflation.
Do I get benefits if I left the paid workforce to care for my family?
Social Security benefits are based on an individual's average earnings over 35 years, but a person who works for at least ten years will generally qualify for some benefits.
What is SSI?
SSI stands for Supplemental Security Income. It pays a monthly benefit to people over 65 who have very little income, or younger persons who are disabled and poor.
Message from Teresa Heinz,
Chair of the Teresa and H. John Heinz III Foundation:
After a lifetime of hard work, inside or outside the home - or both - women should be able to look forward to a financially secure retirement. Unfortunately, in far too many cases, that is not how it works. Women are far more likely than men to live out the end of their lives in poverty.
Six years ago, the Teresa and H. John Heinz III Foundation started examining why poverty in old age has a distinctly feminine face. What we discovered is a retirement system that is not well-suited to the work patterns of women, who continue to bear the overwhelming share of responsibility for caregiving in our society.
The Foundation has worked to bring these inequities to the attention of policy makers and the public. It is equally important to educate women about the importance of saving and planning for retirement and about how to take control of their financial futures.
This article provides essential information that every woman, young or old, should know as she makes decisions that will affect her financial security. If you have questions or would like additional information, please contact the Women's Institute for a Secure Retirement (WISER) at 1201 Pennsylvania Ave., N.W., Suite 619, Washington, DC 20004.
OVERVIEW: Just the facts
Although women need more money for retirement than men do, they usually end up with far less.
- Fact One: Longevity. Women, on average, outlive men by five years.
- Fact Two: Lower Earnings. Women typically earn less money than men, so the amount of their retirement benefits is lower - in both pension and Social Security payments.
- Fact Three: Care Giving. Women often leave the workforce to care for children or aging parents for a certain part of their work lives - another reason they accumulate fewer retirement benefits.
- Fact Four: Moving On. Women often leave their jobs too soon to qualify for a pension.
PART I:
WHERE RETIREMENT MONEY COMES FROM
Retirement is supported by three main sources of income: Social Security, employer-sponsored pension plans, and individual savings.
SOCIAL SECURITY: Social Security provides a foundation of support or safety net. Unfortunately, many retirees, particularly women, rely on Social Security as their primary source of retirement income. Given that the average benefit for women workers is only $644 per month, or $7,728 a year, it is clear that Social Security alone is not effective in protecting women from poverty.
PENSIONS: Think of a pension as a series of delayed paychecks that you receive upon retirement. Employer-sponsored pensions are a crucial source of retirement income. Yet women are less likely than men to earn pensions, because they are more likely to work in lower-paying or part-time jobs where pensions are not available. Those who do earn pensions receive less than half the benefits men receive.
SAVINGS AND ASSETS: Your assets are an increasingly important part of your retirement plan, so it is essential to start saving early and to invest wisely. This means choosing investments that are appropriate for your age, tolerance for risk, and current need for cash.
Stocks, for example, often produce greater returns over long periods of time, and you should, therefore, consider including them in your retirement investment portfolio, especially if you are a number of years away from retirement. If you are closer to retirement, you may want to invest more conservatively. According to the Social Security Administration, non-married women retirees over age 65 receive a median payment of only $95 per month or $1,140 annually in interest income from their assets. But you can realize much greater dividends from your own investments.
A GUIDE TO SOCIAL SECURITY:
A working woman earns Social Security because she pays into the system at her place of employment. She may also collect benefits as a spouse or as an ex-wife - provided she was married for 10 years or more. A woman may collect Social Security either on the basis of her own work record or, if the benefit to which she would be entitled is greater, as a spouse. She cannot collect both full benefits.
Taxes: Your Social Security benefits may be taxable, depending on your total income. For instance, if you file a federal tax return and the combined income of you and your spouse is between $32,000 and $44,000, you may have to pay taxes on half of your Social Security benefits. If your combined income is above $44,000, up to 85 percent of your benefits are subject to income tax.
When can I receive Social Security and Medicare benefits?
Age 65 is the current age at which you will qualify to receive full Social Security benefits. Beginning in the year 2003, the age at which you will be able to receive full benefits will gradually rise to 67.
Age 65 is when you are eligible to enroll in Medicare, the federal health-insurance program. Contact the Social Security Administration at 800-772-1213 several months before your sixty-fifth birthday for more information.
You may also receive reduced Social Security benefits at:
- Age 62 if you want to retire early.
- Age 62 if you are divorced, you were married 10 years or more - and aren't currently married - and your ex-spouse is eligible for retirement benefits.
- Age 60 if your husband or ex has died.
- Age 50 if you are a disabled widow.
- Also: If you are a widow and must stay at home to care for young children, you may be eligible for a survivor's benefit, regardless of your age. This is paid until your youngest child reaches age 16.
These benefits are not automatic.
You must apply to the Social Security Administration to receive them.
For how long can I collect Social Security benefits?
These benefits will continue for as long as you live, and are currently adjusted every year for inflation.
Do I get benefits if I left the paid workforce to care for my family?
Social Security benefits are based on an individual's average earnings over 35 years, but a person who works for at least ten years will generally qualify for some benefits.
What is SSI?
SSI stands for Supplemental Security Income. It pays a monthly benefit to people over 65 who have very little income, or younger persons who are disabled and poor.