A couple weeks ago, the New York Times ran an excellent article on women and retirement. The article discusses the unique challenges facing women in preparing for retirement. It also highlights that women who work in fields where defined benefit pensions are more common, like education and public administration, are less likely to be in poverty in retirement.
We’ve written about women and retirement before. We know that women are more likely to be in poverty in retirement than men. Many women take time out of the workforce to raise children or care for family members. This time out of the workforce means a loss of income, as well as a loss of money put aside for retirement. Additionally, many employer-sponsored retirement plans have eligibility requirements that women may not meet if they have “breaks-in-service” when they leave the workforce. Furthermore, the persistent wage gap for women means they have less to save than men do because they earn less than men do.
The research also shows, though, that women who have defined benefit pensions are less likely to be in poverty than women who don’t. This is consistent for other groups of workers too. Low-income workers who earn a defined benefit pension have more retirement income than low-income workers who have a 401(k) plan. This should not be a surprise. As we’ve said before, 401(k)s were invented to help wealthy corporate executives save money in tax-advantaged savings accounts and that is what they have been most successful at doing. For workers who aren’t wealthy corporate executives, defined benefit pensions remain the best way to prepare for a secure retirement.
Nurse Joanne Odom, who participates in a 401(k), said it best:
“I am mindful of my spending, and I am trying to contribute as much as I can… But when they talk about saving $1 million or more for retirement, that seems out of reach.”
Defined benefit pensions for teachers and other public employees keep women and other workers out of poverty in retirement. The move away from pensions in the private sector has led to a decrease in retirement security. Making a similar move in the public sector would only make the retirement security crisis worse. Additionally, many women rely exclusively on Social Security for their retirement. President Obama recently called for expanding Social Security in recognition of the looming retirement crisis. As political candidates campaign across the country this year, they must offer solutions to the retirement crisis, whether that is protecting public pensions, expanding Social Security, or both.