The retirement income system affects women differently and often negatively. The three-legged stool is often used to describe the sources of income one can expect to receive in retirement. The three aspects of the stool model, government benefits, employer-based pensions, and personal savings, make up this retirement system. Women, unfortunately, have a disadvantage in these three elements of retirement income.

When it comes to government benefits, Social Security was established when women were scarce in the workplace. Therefore, a woman did not receive her own benefits in old age. Instead, her income was based on her husbands, receiving 50 percent of his PIA if she is married to him or divorced, as long as the marriage lasted 10 years. If the woman worked, she must decide between receiving her own benefit or the 50 percent of her husbands, not both. Technically speaking, the spouse receives their own benefits and then if this is less than the benefit they would be receiving from the spousal benefit, the difference is awarded. If the widow is at full retirement age they will receive full benefits of the insured worker. The issue here is that before the death of the loved one, 150 percent of benefits were coming in daily. Now the widow is reduced to 100 percent which may or may not allow them to keep to the old budget. Also, the woman has a much greater risk of lost benefits following a divorce in a one-earner family. In addition, the average woman who does work, more often than the average man, will take time off to raise children. As we know from the way Social Security benefits are calculated, this will hurt the woman’s eventual benefit because of fewer years on the job, lower earnings, and more frequent job changes.

Additionally, the dual-entitlement rules of the system often impose a sort of penalty on wives and widows of a two-earner couple. Two-earner couples receive less in total benefits than the one-earner couple because each can only claim their own PIA or a spouse benefit based on their partner’s. The two-earner couple may pay the same in taxes as the single worker and the one-earner couple, but will receive more benefits than the single worker and less than the one-earner couple. And when a death occurs the disparity is greater for the widow. As mentioned before the one-earner couple received 150 percent while both are living, and the survivor receives 100 percent which is 2/3 of the benefit. In a two-earner couple, the survivor receives the benefit based on the higher PIA paid to the two workers, thus receiving only ½ of the benefit. Clearly this needs to be changed because the survivor is often a woman who is living off of only half the benefit received prior to the spouse’s death, since nowadays most couples are two-earner. Many women go into poverty in old age and some have pointed to this policy issue as part of the cause.

When looking at the other legs of our retirement stool, women on average have lower savings and fewer pensions. Some of the same reasons listed above that result in women having lower Social Security benefits also influence their pension benefits. Women, on average, have pensions that are much lower than men’s and this is probably due to fewer or scattered years on the job, too many job changes, and making less money. As one can surmise, these influence savings rates as well. Another difference for women is related to annuities. Private insurance annuities generally charge women as a class more money because historically women live longer than men. Holding all other factors constant, women can expect to receive more lifetime benefit than men. Therefore, even though this is a supposed gender-neutral system, it is not really fair because the average woman gets a net transfer at the expense of the average man. Policies must be created to try and erase the disparities women face in the three-legged retirement stool.