While women, on average, have lower earnings than men, the program has several features that are advantageous to women. Because women typically earn less than men, women’s monthly benefits replace a larger proportion of their earnings. How Women Might Be Affected by Various Reform Proposals Within the Existing Program Structure

The changes contained in various Social Security reform proposals would likely have a disproportionate effect on women. Women, especially elderly women, are more likely to rely heavily, if not entirely, on Social Security. The comparable impact on men from an extension to 38 or 40 years is 3.1 percent and 5.2 percent, respectively. How Women Might Fare Under a System Restructured to Include Individual Accounts

Many reform proposals would fundamentally restructure Social Security by creating retirement accounts that would be owned and managed by individuals. Studies indicate that, compared with men, women might choose a relatively low-risk investment strategy that earns them lower rates of return for their retirement income accounts. individual accounts and still end up with very different monthly benefits if they were to purchase annuities and if the annuities were based on gender-specific life tables. Thus, while the total lifetime annuity benefits for men and women may be similar, the monthly benefit women receive, either as retirees or as survivors, will likely be lower and could result in a lower standard of living in retirement. Other groups of women will also need to be considered if individual accounts are introduced. Under current Social Security provisions, divorced spouses and survivors are entitled to receive benefits based on their former spouse’s complete earnings record if they were married at least 10 years. Conclusions

While the Social Security system has benefited women significantly through the spousal benefit and the progressivity of the benefit formula, women generally receive lower Social Security benefits than men because they work fewer years and earn lower wages. Because of women’s longer life expectancy, the creation of mandatory individual retirement accounts could also decrease women’s benefits relative to men’s if women continue to invest more conservatively than men. Additional copies are $2 each. A recorded menu will provide information on how to obtain these lists.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed: (1) how women currently fare under social security; (2) how they might be affected by some of the proposed changes in benefits to restore solvency; and (3) how women might fare under a system restructured to include individual accounts.

What GAO Found

GAO noted that: (1) women have benefited significantly from the social security program; (2) many women who work are advantaged by the progressive benefit formula that provides larger relative benefits to those with lower lifetime earnings; (3) women who did not work or had low lifetime earnings and who were married benefit from the program's spousal and survivor benefit provisions; (4) however, women typically receive lower monthly benefits than men because benefits are based on earnings and the number of years worked; (5) any across-the-board benefit cuts to restore solvency might fall disproportionately on women as a group because they rely more heavily on social security income than men; (6) other types of reform approaches can have positive or negative effects on women depending on how the reforms are designed; (7) restructuring social security to include individual accounts also will likely have different effects on men and women; (8) because women earn less than men, contributions of a fixed percentage of earnings would put less into women's individual retirement accounts; (9) available evidence indicates that women also tend to invest more conservatively than men, and thus would likely earn smaller returns on their accounts, although they would bear less risk; (10) in addition, how such accounts are structured will be extremely important to women; (11) for example, whether individuals will be required to purchase annuities with the proceeds of their accounts at retirement and how the annuities are priced could affect women quite differently from men; and (12) how benefits might be distributed to divorcees and how accounts are transferred to survivors could affect the retirement income of some elderly women.