New Bill Tries to Level Playing Field for Women's Retirement

It's no secret that an increasing number of Americans are financially unprepared for their retirement.  A recent report released by the Employee Benefit Research Institute (EBRI) found that workers' confidence about their prospects of retiring comfortably fell from 27 percent in January 2007 to 18 percent in January 2008. And with 77 million baby boomers set to retire over the next few years, retirement security will become an increasingly important issue for policy makers to address. For women, the challenge to be able to have a financially secure retirement is even steeper.

The causes for the increasing financial security challenges Americans face are varied.   For one thing Americans are living longer than ever before and a lot longer than many projected when they were planning for retirement. Making things more challenging is the fact that less than half of Americans have any type of employer-sponsored retirement plan.  Lastly, Social Security and personal savings as sources of retirement income are not enough. On average, Social Security provides just 38 percent of pre-retirement earnings and America's personal savings rate stands at a negative.

As the president of WIPP, I have seen firsthand the unique challenges that women business owners face when it comes to saving for retirement.  Women spend an average of 12 years less than men in the workforce, which translates into fewer years saving or participating in an employer-sponsored retirement plan.  Women also earn only 77 cents for every dollar earned by men.  Consider that a typical 25-year-old woman with a college degree will make about $523,000 less in wages over her lifetime than her male counterpart.  This amount, or even a portion of it, with accumulated interest, could itself represent a comfortable retirement next egg.

And women will need to do more with less, as their life expectancy is 80 years from birth, compared to just 74 for men.  Women who are living alone face a much greater risk of declining living standards or poverty in old age. One way to address this retirement challenge is to encourage the "annuitization" of savings.  Lifetime annuities are the only retirement vehicle besides Social Security and pensions that can deliver retirees a steady stream of income for life - a "paycheck" for life.  Lifetime annuities greatly ease the challenges of retirement planning and take the guesswork out of estimating the necessary level of savings and rate of consumption.  Annuities are a particularly useful retirement tool for women entrepreneurs and small business owners, who typically do not have access to traditional retirement vehicles such as pensions or 401(k)s.

A large bipartisan group of Members of Congress have recognized the importance of savings annuitization through the introduction and support for the bipartisan Retirement Security for Life Act (S, 1010/HR 2205).  The legislation would provide a tax incentive that would exempt from income taxes 50 percent of the retirement income received from an annuity. For an average taxpayer, this would yield an average of $5,000 in savings. Most importantly, it provides an incentive to save outside of an employer-sponsored plan, thus providing greater flexibility and helping to level the playing field for women saving for retirement.  It's a small but important step toward ensuring retirement security for all Americans.

I urge you to contact your Congressional delegation asking them for their support of this legislation.  We've made it easy to do.  Go to our website and click on Take Action.  You will see an action alert where you can ask your Congressional delegation to support The Retirement Security for Life Act.  It will only take a minute but your voice will be heard.