Women Shortchanged In Retirement Earnings

The American workforce is graying. And while many people aren't saving enough for retirement, that's especially true for women. Guest host Celeste Headlee speaks with reporter Paul Solman and aging specialist Helen Dennis, about a gender gap in retirement earnings.

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CELESTE HEADLEE, HOST:

This is TELL ME MORE, from NPR News. I'm Celeste Headlee; Michel Martin is away. Just ahead, we'll get an update on Egypt from our correspondent on the ground there. But first, many American workers are reaching retirement age, and they're now facing questions about whether to retire or whether they can even afford it. When the time comes, more than half of American households may find they haven't saved enough for retirement, and that's especially true for women.

(SOUNDBITE OF TV SHOW, "PBS NEWSHOUR")

UNIDENTIFIED WOMAN: Oh, my gosh. I can't live on my Social Security. It's less than $1,000, and they take out $100 automatically for Medicare.

HEADLEE: That's an excerpt from the PBS NewsHour series "New Adventures for Older Workers." New research shows women save less for retirement, and they're more likely to take money out of their savings than men. To talk about this more is Paul Solman. He's a reporter and host for "New Adventures for Older Workers." Also with us is a Helen Dennis. She's a specialist on aging and author of "Project Renewment," a retirement model for career women. Welcome to both of you.

PAUL SOLMAN: Nice to be here.

HELEN DENNIS: Thank you.

HEADLEE: Paul, your series on PBS - and this is "New Adventures for Older Workers" - it really caught my eye because it really kind of breaks things down in a way that I've never seen before, severing it out according to your age, obviously, your gender. What kind of surprising things have you discovered over the course of your reporting on how prepared we are for retirement?

SOLMAN: I'm 68, about to be 69, so I sort of knew from my friends, from reading, from interviews I've done over the decades - I've been working for PBS since the '70s - how - in what bad shape people my age are. But I honestly didn't realize figures like - what is it? I think it's half of households in America have less than $10,000 saved. The average in the country is about $120,000 per household. But since most people take Social Security when they're age 64 or less, they take far less than the maximum.

And when you add it all up, you're talking about people who are going to live on something like - or expect to live on something like $20,000, $25,000 a year, and that's basically the poverty level in the United States. And when I say people expect, I think they expect that they'll be fine, but they just haven't done the numbers.

HEADLEE: Or maybe they haven't had a choice. Maybe they've had to take early retirement and they never had the chance to put money away. And, Paul, there's also the problem of people whose retirement accounts lost a great deal of value during the economic crash.

SOLMAN: Sure, although, if you didn't run scared, then most asset classes have come back from that. It is true that investors, generally, on average, underperform not just the market, but underperform inflation in this country - I mean, an incredibly sobering statistic which means that everybody is buying when the market's high and basically selling when it's low. You raise a bunch of points.

It's true that some people can't afford to wait until they can get their full Social Security at age 66 now, and the maximum you get is if you wait until age 70, which is what both I and my wife are doing. But I understand there are people who can't afford to do that. The question is, have you actually sat down and figured out or tried to figure out how you are going to live. Should I be taking a vacation today or not taking one until later because I am afraid I'm going to outlive my savings?

HEADLEE: Well, Helen, let me bring you into this. What exactly is a figure that's considered to be comfortable retirement at this point? What are we talking about?

DENNIS: Well, I think the financial experts look at having 70 to 80 percent of your working income.

We're living in a time when people are not satisfied with the status quo, meaning that retirement is a time of more - of more friends, of more freedom. And so I think that 70 to 80 percent can be a very minimum kind of number.

HEADLEE: Paul, let's talk about this gender gap 'cause this was relatively surprising to me. On average, the retirement account for a woman can be almost 40 percent less valuable than a man's. What exactly is the reason behind that? Is it because they're leaving to have children? What's the reason?

SOLMAN: Women leave the workforce to have children, and so they have fewer years of work and therefore, less accumulated pension and very significantly, less Social Security because Social Security is based on your highest 40 years of earning, and if you have fewer than that, well, you can figure out...

HEADLEE: Yeah.

SOLMAN: ...The numbers...

HEADLEE: ...And...

SOLMAN: ...Easily enough. I do want to say something to underscore what Helen was saying earlier, which is I think 80 percent of your pre-retirement income is a low number. The other thing that you got to continue to think about is how long you're going to live, how many years over which even that 80 percent has to extend, right?

HEADLEE: Right, 'cause people are living 30 years or more past retirement age. But, Helen, there's also the problem for women of the fact that we just make less on average than men, so our Social Security will be lower, and less money will be going into our retirement accounts. Isn't that correct?

DENNIS: That is correct, but I think there's some other considerations for women. When you think of - that the average age of widowhood is 56, that's a lot of years alone. And also, if you think about the number of women who will be facing, at some point, retirement alone, since women live longer than men - but on top of that, we see the maturing of the women's movement. And in the women's movement, they ask the question, (unintelligible) - is this all there really is?

And so you have a generation also of women that are looking at, what is the next opportunity, the next challenge. And all of that needs to be supported by money. And then coupled with that is a real resistance to think about two words - retirement and age. It's like if I don't pay attention to it, maybe it won't happen.

SOLMAN: That's an excellent set of points, but I would add to it that most people are also in denial about basic personal finance.

HEADLEE: If you're just joining us, we're talking to Paul Solman of PBS NewsHour and a specialist in aging, Helen Dennis. We're talking about the implications of the retirement-gender gap. And Paul, speaking to this gender gap specifically, what solves it? Is it bringing pay up to equal? If men and women are making the same amount, will then their retirement accounts have the same amount in them?

SOLMAN: Well, not if, in fact, women leave the work force for longer periods of time than men, right? Even if they were making a hundred percent of what men make, if they had fewer years they'd have fewer years to accumulate income, they'd have a smaller pension and they'd have lower Social Security. So that by itself wouldn't change things unless you literally have men be house husbands to the exact same extent that women have been housewives, you know, over the years.

But I'll tell you, the thing that Helen was emphasizing, which is to say - the denial we're all in - I see that all the time. And I see it particularly with a piece of software we've been trying to develop. It's called ESPlannerBasic. It's by somebody else, but the NewsHour has tried to develop its own version of it just so that people can put in simple numbers to plan for their retirement, you know, the simplest of numbers, really. And I can't get people to use it. They don't want to think about the future. You don't want to think about dying, for example. You don't want to think about being sick and outliving your savings and having - potentially, being in dire straits.

And so, you know, there's a huge kind of emotional issue. It is more pointedly true for women than for men because women become dependent on their retirement savings - or their husband's retirement savings, at an earlier age - given the fact that we guys die earlier than women do.

DENNIS: There are many women as well as men who are looking at something called an encore life, in fact, they're not even using the word retirement. And part of that encore life implies there's a lot of good things ahead of me and some of them are translating that into a new kind of career, frequently called an encore career, which is a combination of purpose, passion and a paycheck. So I think we also have a generation that is looking towards working in a different way. Yes, for income, but work that has some meaning for them and that has some relevance to their life.

HEADLEE: There's also a problem with parents and even grandparents having to house and sometimes partially support their adult children. Adult children are even having a harder time financing their educations, for example. So in many cases, parents and grandparents are picking up a larger cost of college education costs as well. At least for the next 5, 10, even 20 years, I would imagine this problem is going to get worse.

SOLMAN: Nobody is being - you know, looking at this through rose-colored glasses, I don't think. But the question is, what are you going to do about it? And the point I want to make about Social Security is if you do take Social Security early - you said, Celeste, before, well, maybe people can't afford not to - if you take it early, it isn't just penalizing you in terms of your eventual returns. If you die or get divorced, the survivor and spousal benefits will be commensurately lower if you don't wait. So that's another thing that everybody - every couple should be thinking about.

DENNIS: I agree with you, Paul. I think we need to reframe, if you will, some of these issues. I mean, I think the policy commentary, the economic commentary is right on. But I think people respond to the notion of opportunity and hope.

That they are empowered to do something, whether it's retraining, whether it's an encore career, the public responds much better to the notion that, yes, we have a major problem, but there are ways that you can get a grip on it as opposed to feeling the victim of a circumstance.

SOLMAN: Yeah, and I think that is exactly the spirit in which both Helen and I are saying - look, you're going to have to do something about it. Let's not discourage people even more since they're already so disinclined to, for example, do the numbers and think about when they're going to die and so forth. That's where this whole notion of encore careers and thinking strategically about Social Security come in.

HEADLEE: We've been speaking with Paul Solman, a reporter for the PBS NewsHour series "New Adventures for Older Workers." He joined us from Norwalk, Ohio. And Helen Dennis is a specialist in aging employment and the new retirement. She joined us from NPR Studios in Culver City, California. Thank you to both of you.

SOLMAN: Thank you, Celeste.

DENNIS: Thank you, been a pleasure.

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