Sources of Retirement Income

Although the composition of retirement income—the proportion of income  coming from different sources—varies greatly for individual households,  Social Security benefits, pension income, and earnings make up the bulk  of income for the U.S. population age 65 and over. Working Women’s Access to and Participation in Employer-Sponsored Pension Plans Have Improved Relative to Men

From 1998 to 2009, working women surpassed men in their likelihood of  having an employer that offered a pension plan, but were slightly less  likely to be eligible for and to participate in those plans. While Income Composition Changed Only Slightly for Women Age 65 and Over, They Continue to Have Less Retirement Income Than Men

The composition of women’s and men’s retirement income did not vary  greatly over the last decade despite changes in the economy and pension  system, largely because their main income sources—Social Security and  DB plans—were shielded from fluctuations in the financial market. However, women, especially widows and those 80 years and over,  depended on Social Security benefits for a larger percentage of their  income than men. Women age 65 and over also had less  retirement income on average and higher rates of poverty than men in  that age group. Specifically, for the population age 65 and over, women’s  median income was approximately 25 percent lower than men in the  same age group for all years. Moreover, women in this age group were  nearly twice as likely to be living in poverty than men. In  fact, in 2010, 16 percent of women age 65 and over depended solely on  Social Security for income compared to 12 percent of men. At the same  time, the share of income from earnings increased slightly for men and  women, but was consistently lower for women than for men. Divorce, Widowhood, and Unemployment Had a Detrimental Effect on Older Women’s Income Security

When women nearing or in retirement—women over age 50—became  divorced, widowed or unemployed, the effects on their households’ total  assets and income were detrimental, according to our analysis (see table  1). Further, divorce and widowhood had more pronounced effects for  women than for men. For example, while men’s income fell  22 percent after widowerhood, women’s income fell by an even greater  amount—37 percent. 16).income decline by about 7 to 9 percent. For  example, some options would expand the use of existing tax incentives,  encouraging women to save more. All of the options have cost implications that would need to be considered  prior to implementation. Since women have lower earnings than men, on  average, and are more likely to take time out of the workforce to care for  family members, women may especially benefit from these options. These options could address a variety of  challenges women face, including their lower levels of income in  retirement. There are also a number of policy options that could enhance Social  Security benefits for vulnerable groups at risk of not having sufficient  income or assets in retirement, including widows, divorced women, low- income women and women age 85 and over (see table 8).increasing the Social Security Survivor’s benefit to 75 percent of the  deceased worker’s benefit would provide widows with more monthly  income, helping to keep some women out of poverty. Agency Comments

We provided a draft of this report to the Department of Labor, the  Department of the Treasury, and the Social Security Administration for  review and comment. Appendix I: Objective, Scope, and Methods

To analyze factors that affect women’s retirement security, we examined  (1) how women’s access to and participation in employer-sponsored  retirement plans compare to men’s and how they have changed over  time; (2) how women’s retirement income compares to men’s and how  the composition of their income has changed with economic conditions  and trends in pension design; (3) how events occurring later in life affect  women’s retirement income; and (4) what policy options are available to  help increase women’s retirement income security. Section 1: Information Sources

To answer our questions, we obtained information from a variety of  sources including two nationally representative surveys—the Survey of  Income and Program Participation (SIPP) and the Health and Retirement  Study (HRS)—the academic literature on retirement security, and a range  of experts in the area of women’s retirement security. First, the SIPP collects separate information on  defined benefit (DB) and defined contribution (DC) plans. Section 2: Methods for Comparing Working Women’s and Men’s Access to and Participation in Employer-Sponsored Pension Plans

To determine the proportion of men and women that (1) work for an  employer that offers a plan, (2) are eligible for a plan, and (3) participate  in a plan, we used data from the SIPP topical module on retirement and  pension plan coverage. The rate of health decline was similar for  women and men.
Why GAO Did This Study

Elderly women, who comprise a growing portion of the U.S. population, have historically been at greater risk of living in poverty than elderly men. Several factors contribute to the higher rate of poverty among elderly women including their tendency to have lower lifetime earnings, take time out of the workforce to care for family members, and outlive their spouses. Other factors could affect older womens financial insecurity. These include the economic downturn and changing trends in pension plan offerings. In light of these circumstances, GAO was asked to examine (1) how womens access to and participation in employer-sponsored retirement plans compare to mens and how they have changed over time, (2) how womens retirement income compares to mens and how the composition of their incomethe proportion of income coming from different sourceschanged with economic conditions and trends in pension design, (3) how later-in-life events affect womens retirement income security, and (4) what policy options are available to help increase womens retirement income security. To answer these questions, GAO analyzed data from two nationally representative surveys, conducted a broad literature review, and interviewed a range of experts in the area of retirement security.
GAO is making no recommendations. GAO received technical comments on a draft of this report from the Department of Labor, the Department of the Treasury and the Social Security Administration, and incorporated them, as appropriate.

What GAO Found

Over the last decade, working womens access to and participation in employer-sponsored retirement plans have improved relative to men. Indeed, from 1998 to 2009, women surpassed men in their likelihood of working for an employer that offered a pension plan, largely because the proportion of men covered by a plan declined. Furthermore, as employers have continued to terminate their defined benefit (DB) plans and have switched to defined contribution (DC) plans, the proportion of women who worked for employers that offered a DC plan increased. Correspondingly, womens participation rates in DC plans increased slightly over this same period while mens participation fell, thereby narrowing the participation difference between men and women to 1 percentage point. At the same time, however, women contributed to their DC plans at lower levels than men.
Although the composition of income for women age 65 and over did not vary greatly over the perioddespite changes in the economy and pension system women continued to have less retirement income on average and live in higher rates of poverty than men in that age group. The composition of womens income varied only slightly, in part, because their main income sourcesSocial Security and DB benefitswere shielded from fluctuations in the market. Women, especially widows and those age 80 and over, depended on Social Security benefits for a larger percentage of their income than men. For example, in 2010, 16 percent of women age 65 and over depended solely on Social Security for income compared to 12 percent of men. At the same time, the share of household income women received from earnings increased over the period, but was consistently lower than for men. Moreover, womens median income was approximately 25 percent lower than mens over the last decade, and the poverty rate for women in this age group was nearly two times higher than mens in 2010.
For women approaching or in retirement, becoming divorced, widowed or unemployed had detrimental effects on their income security. Moreover, divorce and widowhood had more pronounced effects for women than for men. For example, womens household income, on average, fell by 41 percent with divorce, almost twice the size of the decline that men experienced. For widowhood, womens household income fell by 37 percentwhile mens declined by only 22 percent. Unemployment also had a detrimental effect on income security, though the effects were similar for women and men; household assets and income fell by 7 to 9 percent.
A range of existing policy options could address some of the income security challenges women face in retirement. For example, some would expand existing tax incentives to save for retirement while others would improve access to annuities. All of these options have advantages and disadvantages that would need to be evaluated prior to implementation. For example, increasing Social Security benefits for widows could provide additional income for women who have few options to increase their retirement savings. However, increasing benefits would also increase costs to the Social Security program and have implications for its long-term solvency.