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80–874 PDF 2002

S. HRG. 107–582

SETTLING FOR SILVER

IN THE GOLDEN YEARS: THE SPECIAL

CHALLENGES OF WOMEN IN RETIREMENT

PLANNING AND SECURITY

HEARING

BEFORE THE

SPECIAL COMMITTEE ON AGING

UNITED STATES SENATE

ONE HUNDRED SEVENTH CONGRESS

SECOND SESSION

WASHINGTON, DC

MAY 23, 2002

Serial No. 107–26

Printed for the use of the Special Committee on Aging

(

SPECIAL COMMITTEE ON AGING

JOHN B. BREAUX, Louisiana, Chairman

HARRY REID, Nevada

HERB KOHL, Wisconsin

JAMES M. JEFFORDS, Vermont

RUSSELL D. FEINGOLD, Wisconsin

RON WYDEN, Oregon

BLANCHE L. LINCOLN, Arkansas

EVAN BAYH, Indiana

THOMAS R. CARPER, Delaware

DEBBIE STABENOW, Michigan

JEAN CARNAHAN, Missouri

LARRY CRAIG, Idaho, Ranking Member

CONRAD BURNS, Montana

RICHARD SHELBY, Alabama

RICK SANTORUM, Pennsylvania

SUSAN COLLINS, Maine

MIKE ENZI, Wyoming

TIM HUTCHINSON, Arkansas

JOHN ENSIGN, Nevada

CHUCK HAGEL, Nebraska

GORDON SMITH, Oregon

MICHELLE EASTON, Staff Director

LUPE WISSEL, Ranking Member Staff Director

(II)

C O N T E N T S

Page

Statement of Senator Larry E. Craig ..................................................................... 1

Prepared Statement of Senator John Breaux ....................................................... 2

Prepared Statement of Senator Gordon Smith ..................................................... 3

PANEL I

Cindy Hounsell, Executive Director, Women’s Institute for a Secure Retirement, Washington, DC ......................................................................................... 3

Dorcas R. Hardy, President, Dorcas Hardy & Associates, Spotsylvania, VA

and Former Commissioner, Social Security Administration ............................ 18

Muriel F. Siebert, President and Chairwoman, Muriel Siebert & Company,

and Women’s Financial Network at Siebert, New York, NY ............................ 29

Laurie Young, Executive Director, Older Women’s League, Washington, DC ... 41

PANEL II

Irene LaMarche, Retiree, Boise, ID ........................................................................ 67

Joan Mackey, Pension Counseling Client, Salem, NJ .......................................... 69

John Hotz, Deputy Director, Pension Rights Center, Washington, DC .............. 71

(III)

(1)

SETTLING FOR SILVER IN THE GOLDEN

YEARS: THE SPECIAL CHALLENGES OF

WOMEN IN RETIREMENT PLANNING AND

SECURITY

THURSDAY, MAY 23, 2002

U.S. SENATE,

SPECIAL COMMITTEE ON AGING,

Washington, DC.

The committee met, pursuant to notice, at 9:35 a.m., in room

SD–628, Dirksen Senate Office Building, Hon. Larry E. Craig presiding.

Present: Senator Craig.

OPENING STATEMENT OF SENATOR LARRY E. CRAIG

Senator CRAIG. Let me call this hearing of the Senate Special

Committee on Aging to order. Good morning, everyone.

I want to thank you for joining us in this hearing this morning,

which is entitled, ‘‘Settling for Silver in the Golden Years: The Special Challenges of Women in Retirement Planning and Security.’’

Thanks also, of course, to the staff for working with all of you

to put this hearing on. Also a very special thanks to Chairman

John Breaux for helping facilitate this and for allowing me to chair

the hearing this morning.

As most of you know, the Special Committee on Aging is not a

legislative body. It is an oversight body and a hearing body. But

much of what we do—and part of the record that you will help us

develop today—has been very important over the years in changing

the direction and the character of legislation and public policy.

So I hope you feel that your presence here today before the committee and the record that you will build will be valuable.

Several other of our colleagues may be joining us through the

course of the hearing this morning to listen and to make comments.

As many of you know, security in retirement is often described

as a three-legged stool, one leg of which is Social Security, another

is employment-related pensions, and a third is individual investing

and savings. For most of us, no single leg is sufficient, and problems with even one can lead to serious repercussions to one’s retirement plans.

Navigating the challenges of retirement planning has become an

increasingly complex task in today’s society—for both men and

women. For women, however, the retirement stool is significantly

more wobbly than it is for men. Indeed, in all three areas of retirement security, women today lag significantly behind men. In Social

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Security, for example, even though women account for 60 percent

of the program’s beneficiaries and tend to live 7 years longer in retirement than men, they receive only about 75 percent as much in

Social Security benefits.

Similarly, women tend to benefit far less from workplace-based

pensions or 401(k) plans. Only about 27 percent of retired women

receive pension income, compared to about 47 percent of men. And

in personal savings and investment, as well, women fall behind,

averaging only about one-half the personal savings rate of men.

We are here today to examine why this is the case and to spotlight strategies and resources that women and their families can

turn to for help. Among our witnesses this morning, for example,

is the Executive Director of the Women’s Institute for a Secure Retirement, which just this week issued a new publication aimed at

better educating women and their families about the special challenges faced by women in retirement planning, ranging from women’s patterns of employment, to divorce, to the retirement implications of child rearing and caregiving.

I am also very pleased to have with us Irene LaMarche from my

home State of Idaho. Irene is currently retired and living in Boise,

and she will share with us some of the problems and challenges

she has faced in her professional and financial experience.

To all of our witnesses again, a very special thanks for being

with us today. Now let me welcome our first panel up and introduce them for the record and to all of you who are here this morning.

Cindy Hounsell is Executive Director of the Women’s Institute

for a Secure Retirement here in Washington.

Dorcas Hardy, whom I have had the opportunity to know over

the years, is President of Dorcas Hardy & Associates and former

Commissioner of the Social Security Administration.

Muriel Siebert—I am told you go by ‘‘Mickey’’; is that correct—— Ms. SIEBERT. That is right.

Senator CRAIG. Thank you. You are President and Chairwomen

of Muriel Siebert & Company, and Women’s Financial Network at

Siebert in New York.

Laurie Young is Executive Director of the Older Women’s League

here in Washington, better-known as OWL.

We thank you all for being with us, and Cindy, we will start with

you. Again, welcome to the committee.

[The prepared statement of Senator Breaux follows along with a

prepared statement of Senator Smith:]

PREPARED STATEMENT OF SENATOR JOHN BREAUX

Good morning and thank you all for coming today. I would also like to thank Senator Craig for his interest in this important issue facing America’s women. We all

know far too well that women in America bear an overwhelming burden when it

comes to caring for children, spouses and aging parents, while at the same time caring for their own health and well-being. Unfortunately, as you all will certainly

point out, women are falling behind when it comes to taking care of their financial

security and retirement preparation. Women spend so much time taking care of everyone else, they neglect themselves. This is simply unfair.

Women are living longer, many times outliving their male spouses. Older women

are also far more likely to be living in poverty than men. As this hearing will explore, there are many factors that contribute to these statistics—factors that cannot

easily be changed. However, by building awareness of the important steps women

can take to prepare for their own retirement, we can slowly begin to change these

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statistics as millions of women from the Baby Boom generation reach retirement

age.

Throughout history women have risen to the challenges put before them. They

have fought successfully for their right to vote, they have demanded equal pay for

equal work and shattered corporate glass ceilings. Now is the time to rise to another

challenge—living securely and independently into older age.

It is my hope that hearings such as these will serve as a powerful catalyst in getting these issues into the consciousness of women across America.

PREPARED STATEMENT OF SENATOR GORDON SMITH

Mr. Chairman, I want to say how happy I am to serve as a new member of this

committee and am also pleased that the first hearing I am able to attend is on the

very important issue of the special challenges of women in retirement planning.

In particular, the problems that current women social security beneficiaries have

are of the utmost importance. Many current female beneficiaries have retired based

on a husband’s benefit . . . they are beneficiaries from a generation that perhaps

stayed at home and worked harder than most, in my opinion, by raising families.

Now demographics have changed but we still have many women beneficiaries that

are dealing with inequities of the current Social Security system.

In looking at the history of Social Security—it is evident that women were an integral component. The first woman to serve as a member of the Cabinet was Secretary of Labor Frances Perkins. Secretary Perkins also was a leader in designing

Social Security.

And as we all know the first beneficiary to receive a benefit from the system was

Ida May Fuller.

Today women comprise the majority of Social Security beneficiaries, representing

almost 60 percent of all Social Security recipients at age 65 and 71 percent of all

recipients by age 85.

And many categories of these women—the elderly, the disabled and the divorced

are more likely to live near the poverty line.

Just a week and a half ago, following my appointment to this committee, Senator

Feinstein and I introduced ‘‘The Social Security Benefit Enhancement Act for

Women Act of 2002.’’ It is a small bill but an important one that makes improvements that will enhance benefits for disabled widows, divorced retirees and widows

whose husbands died shortly after an early retirement.

We introduced this package mirroring the House bill, which passed a few weeks

ago by a vote of 418 to 0. Clearly making these kinds of benefit changes is a bipartisan effort—while they are small benefits—showing that we can work together on

issues we all care about. Social Security is at the top of that list.

So I’m pleased to be here and hear from these panels and experts. I hope that

my colleagues will have a chance to cosponsor S. 2533—The Social Security Benefit

Enhancements for Women Act of 2002.

STATEMENT OF CINDY HOUNSELL, EXECUTIVE DIRECTOR,

WOMEN’S INSTITUTE FOR A SECURE RETIREMENT, WASHINGTON, DC

Ms. HOUNSELL. Thank you very much. I am pleased to be here.

WISER is an organization that was launched in response to a

growing need to improve the long-term financial security of all

women through education and advocacy. Our retirement education

program, The Power Center, is funded through a grant in cooperative partnership with the Administration on Aging. The program

uses a training technique that not only improves the knowledge of

participants but helps them to take action and make better financial decisions.

Predatory lending scams are an important part of our program,

because a disproportionate number of older women are the

purchasers of financial products that charge an exorbitant rate of

interest and may jeopardize their ability to retain their homes. The

program includes many partners—employers, women’s organizations, and community-based groups. Government agencies have

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included the Cooperative Extension Service at the Department of

Agriculture, the Department of Labor’s Pension Welfare Benefits

Administration, the Women’s Bureau, and the Social Security Administration. I think that what most of us know, all of the partners

mentioned, is that very few people have the sophisticated knowledge needed for today’s financial issues and that is the problem

that we want to address today. The need for and the problem with

financial education, is one of the reasons why we have released this

new report, Your Future Paycheck What Women Need to Know

About Pay, Social Security, Pensions, Savings and Investments.

The report reveals the direct link between a woman’s current

paycheck and her future retirement prospects. The report also addresses the other factors that prevent women from securing adequate retirement income. Women face a host of obstacles, as you

have already mentioned, but one of the important issues, I think,

which people do not pay enough attention to is that working

women, while they have increased their participation in the workforce, two-thirds of today’s full-time working women earn less than $30,000.

As women came into the workforce in large numbers, the traditional employer-paid health and pension benefits were becoming

scarce. The norm is now for employee-paid and investment-directed

savings plans such as 401(k)s and 403(b) plans. For women, not

only is there the difficulty of working in a job where there is access

to a retirement plan, but there is also the problem of having

enough money to contribute to their plan and making that money

last for a lifetime—a lifetime that is on average longer than for

men of their same age.

Those factors are coupled with marginal work, entering and

exiting the workforce as they leave their jobs to care for their families. Women are twice as likely as men to work part-time, and

fewer years at work means smaller Social Security and pension

benefits and less money to save.

Women’s economic security is also threatened by divorce, separation, or the death of a spouse. Older women living alone are much

more likely to be poor.

As WISER provides financial education, for women we hear from

many women who are convinced that they will never be able to

stop working. They worry that they will never be able to retire despite a lifetime of hard work in and out of the home. Their concerns

are backed by a trend now among experts who have stopped talking about the three-legged stool to describe retirement income, because experts now recognize that pensions, Social Security, and individual savings will not provide enough income for retirement.

Experts are now beginning to routinely refer to a four-or fivelegged stool that includes earnings from employment along with

SSI, a poverty program. However, working beyond age 65 out of

choice is different from desperately applying for jobs at age 75 or

80 in order to pay for your medication or your rent.

When I saw the title of the hearing, I thought that ‘‘Settling for

Silver’’ may mean the quarters left on the table for older women

working as waitresses. Often, we see older women waitressing, and

they are not doing it just because they are interested in getting out

of the house—they need that income to pay for necessities.

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So how can a woman’s retirement income become more like a

man’s? The answer unfortunately is neither easily nor quickly. If

she works full-time, has higher than average earnings, has a retirement plan, then she is equally likely to participate in it. But the

reality of the modern American workplace is that women are still

the ones who have the children, and they are still willing to drop

out of the workforce and care for those children. We see it all the

time now. We see a lot of young professional women who have been

working for 5 or 6 years, they have their second child, and they

just cannot keep all the balls in the air, and the family priorities

take over and they exit from the workforce and their profession.

Women also have less money to save and invest, unless they are

able to save sufficiently, their retirement suffers. Today’s younger

women are more likely to carry credit card debt than younger men,

and more single young women than men live paycheck to paycheck.

The data in the your future paycheck report is intended to alert

policymakers to the need to examine future pension and Social Security reforms together, to have a cohesive retirement policy in

order to ensure that these changes will meet the needs of today’s

women.

As the mainstay of support for women, the Social Security program has helped to protect many women from outright poverty.

Any future changes to the program should retain the income support features on which low- and moderate-income Americans rely

most heavily.

All Americans are being asked to assume new responsibilities in

making more complex retirement savings decisions, but retirement

issues are very difficult issues to understand, and the conflicting financial advice among the millions of pages available on the internet only seems to make the problem more confusing for both men

and women.

To end on a positive note, consider the education of Audrey Gray,

a 35-year-old African American data entry operator for a national

bank in Atlanta, GA. In 1997, Ms. Gray attended a financial literacy workshop. She says, ‘‘I attended because I realized I did not

have much savings, and I should have started my 401(k) in my

twenties,’’ which is what all the experts say she should have done.

‘‘But nobody ever told me this was important to do. I never thought

I would be able to get out from under debt. I had a pension plan

in my job, but I did not feel comfortable because of the debt. I felt

I could not contribute enough money into my 401(k) without making it too hard to make ends meet. Something had to be sacrificed,

and I sacrificed the 401(k).’’

Five years later, Ms. Gray is debt-free, contributes to her retirement plan, and says she enjoys having a future financial plan.

It is important for this committee to provide the leadership to

other policymakers that people need financial education; they cannot be making all of these decisions on their own, and employers

especially need to be able to help provide that education, because

that is the one place where people listen to what they are told.

Thank you for this opportunity to participate.

Senator CRAIG. Cindy, thank you. I forgot to mention that the

WISER organization is affiliated with the Heinz Family Philanthropies.

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Ms. HOUNSELL. Yes. We were launched by the Heinz Family Philanthropies.

Senator CRAIG. And your primary goal is to educate women.

Thank you for that testimony.

[The prepared statement of Ms. Hounsell follows:]

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Senator CRAIG. Now let me turn to Ms. Hardy. As I mentioned,

Dorcas is former Commissioner of the Social Security Administration under Presidents Reagan and Bush, and we have had the opportunity over the years to work on a variety of issues related to

Social Security and other retirement programs.

Dorcas, we are pleased to have you before the committee.

STATEMENT OF DORCAS R. HARDY, PRESIDENT, DORCAS R.

HARDY & ASSOCIATES, SPOTSYLVANIA, VA, AND FORMER

COMMISSIONER, SOCIAL SECURITY ADMINISTRATION

Ms. HARDY. Thank you, Mr. Chairman. It is my pleasure to be

here.

As you stated, when I served as Assistant Secretary of Human

Services and also as Commissioner of Social Security during the

1980’s and early 1990’s, I was responsible for some of the most important Federal programs for retirees, from Meals on Wheels to Social Security benefits. These programs remain very important today

and represent most of the nearly 50 percent of the entire Federal

budget which is dedicated to persons over the age of 65. My comments are based on my Federal and State service experiences with

the elderly as well as my current consulting, regarding entitlement,

health care, disability, and financial services.

Issues related to Americans’ pensions and retirement are discussed in several congressional venues. I would like to commend

the efforts of the Special Committee to bring together a discussion

of these important and very diverse issues within one committee.

Women today, as Cindy has commented, comprise about 90 percent of all the elderly who are a part of Social Security beneficiaries. Women represent about 58 percent of Social Security retiree beneficiaries and about 70 percent of those who are 85 and

older. As we look at the receipt of benefits of many of these women,

74 percent of the unmarried elderly do depend on Social Security

for at least half of their income.

Even though the benefit formula does provide a higher proportion of pre-retirement earnings to lower-earning workers who are

more often women, without Social Security, it is expected that half

of the elderly women would meet the Government’s definition of

poor.

Last week, the House passed reforms that, if they become law,

will adjust Social Security to help widows and divorced women who

fall through some of the cracks in the system. That legislation

should benefit, it is estimated, about 120,000 women, it improves

fairness and updates eligibility requirements for some disabled

widows and divorced spouses.

Many say that inequities still remain in the way that Social Security treats women. A woman who works outside the home and

qualifies for half of her husband’s retirement will pay Social Security payroll taxes forever, decade after decade, but she will receive

benefits no higher than those received by another woman who is

not in the workforce at all and pays no payroll taxes.

Some say that no one this side of the Taliban would propose a

special tax levied only on working women as a penalty for working

outside the house, but this is the effect of that Depression era provision of the Nation’s retirement system. Six of every 10 women

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pay a huge amount of Social Security taxes, usually more than they

pay in income taxes, and receive no added benefits. I believe that

is part of a critically needed redesign of the Social Security system.

We have also mentioned that the graying of America is upon us,

and it has begun in earnest. I always say that that is good news

and bad news. Obviously, we would all like to live longer. Annually, a new city the size of Boston is created and populated by persons over 65. In 2000, we reached the mark of 100,000 persons over

age 100, and soon, the entire Nation will look like the State of Florida.

Women retirees are at the forefront, which is terrific—some

would say that is somewhat negative, but we are living longer. We

reach age 65 and live on average almost 20 years compared to 16

years for a man. Life expectancy rates at age 65 are anticipated to

increase to over 20 years for women, whereas only about 17 years

for men.

The fastest growth will come among the numbers of the so-called

old-old, persons who are over 85. They are the most vulnerable.

The cumulative growth in the 85 and over population between

1995 and 2050, which I appreciate is a ways away, is anticipated

to be more than 400 percent. I think that the future structure of

these populations will affect our social, economic condition, and will

particularly affect the economically dependent classes of the population.

Our demography is changing dramatically. So I believe we

should be asking how any of these factors influence one’s retirement years and how can they be changed for the better. How do

we get to the future by better educating our society and having

them depend upon themselves?

The women of tomorrow will be different. Many of them will

have 401(k)s. They will understand most kinds of investments. The

women of tomorrow are many of us. Those retirees are developing

an understanding of financial options, and they are also beginning

to learn that they need as much as 75 percent of their pre-retirement income for retirement years.

Education is extremely important, and the integration of private

and public retirement programs with regard to education is also

very important. When I initiated what is now called the Social Security Statement, I wanted to say that all workers should have

knowledge about their expected benefits, and in black and white,

they should be able to see what Social Security is meant to be, and

that it is not the sole source of retirement income.

We need better education with regard to Social Security and we

need to dismiss the myth that there is a shoebox in Baltimore that

has your contributions or your taxes in it, with your name on it.

We also see in the future a massive transfer of wealth from the

young to the old, from the worker to tomorrow’s retiree, specifically

with regard to the financing of Social Security, but also with Medicare. When you look at the baby boom generation, which currently

pays more than 60 percent of all of our taxes, who will be beginning to retire in just 9 years, you are looking at huge, increased

payroll costs or some other kind of solution with regard to our public programs.

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So I would suggest the following. One is additional financial education, perhaps a personal finance course as a requirement for

every high school graduate, because as has been pointed out, it is

not just dollars; it is budgeting, insurance, and incredible debt at

a young age.

The financial industry has done a good job, but not everybody is

listening. So there needs to be a combination of that kind of financial education plus an understanding of what one does once one has

some savings.

Second, additional retirement savings incentives. The Congress

has increased the maximum contribution to IRAs, but I think it

should increase even further—there is no particular reason to have

a cap—so that baby boomers would have that opportunity to significantly increase their savings.

The complexity of the whole retirement systems and how they all

fit together, from 401(k)s to savings, is very difficult for people to

understand. One might consider a very simple and useful savings

incentive that would be just a passbook savings account with a deposit limit of $50,000, or $100,000 which would allow tax-free interest. People still do trust their banks, and that at least would give

a start to some beginning savers and obviously, conservative investors.

Third is Social Security 101, as I have called it, to really educate

people about the system and what their expectations should be.

And fourth and fifth are most important, that is, modernization

and redesign of our Social Security and our Medicare systems. We

have got to bite the bullet and we have got to tackle these issues

in terms of legislation with new programs for both entitlements.

Personal retirement accounts as part of Social Security would give

a very welcome opportunity for women, for all of us, but especially

for women. Much study has been done about that, from the President’s Commission to Strengthen Social Security to all sorts of professors throughout academy, and they clearly say that for early

widows and divorcees, the personal retirement accounts would be

excellent and would keep most people out of a poverty situation.

In conclusion, I think we clearly see that we are all living longer,

but we have barely begun to deal with the implications of the

graying of America and how it will affect all of us and all of our

institutions. We must promote individual responsibility for retirement to the best of one’s ability, and empower people through education and economic opportunity to provide for themselves, again,

to the best of their ability.

I think the answers to these questions are key to retirement security for seniors today, tomorrow, and in the future, but I have

confidence that we will get there—if not tomorrow, but slowly and

surely.

Thank you, Mr. Chairman.

Senator CRAIG. Dorcas, thank you very much.

[The prepared statement of Ms. Hardy follows:]

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Senator CRAIG. Our next panelist is Muriel Siebert, CEO of the

New York investment firm of Muriel Siebert & Company and a pioneer in the world of finance.

Mickey, thank you for being with us this morning.

STATEMENT OF MURIEL F. SIEBERT, PRESIDENT AND CHAIRWOMAN, MURIEL SIEBERT & COMPANY, AND WOMEN’S

FINANCIAL NETWORK AT SIEBERT, NEW YORK, NY

Ms. SIEBERT. Thank you for inviting me, Senator, to present my

views before the Special Committee on Aging.

In addition to my written testimony, I would like to make a few

points. In 1999, women drew an average monthly Social Security

check of $8,364 a year versus $10,848 for men. That is a 30 percent

difference, and that represents a real quality of life difference.

We cannot do much to change their former earnings, but we

could pay for their prescriptions, possibly food stamps; we could

help them consolidate their debt so if they have monthly payments,

they could pay less; we could help them refinance their mortgages.

I think we could reach these people and tell them about programs through their Social Security monthly check, or on a

website, or through a local library.

Most women in our country today work because they have to

even though they are married. Their paycheck is necessary. Congress has created retirement vehicles to enable both working and

nonworking spouses to have self-funding IRAs in addition to

401(k)s. But many people do not have the basic financial skills to

take advantage of these programs.

Financial literacy is the key, and we must give people basic financial knowledge if they are to understand financial products

which have become much more complicated today. For example, a 45-year-old woman with $35,000 in an IRA or a

401(k), and let us assume she is going to work until she is 65 years

old, which is 20 more years, sets aside $100 a month for 20 years.

If she invested that in a bank at 3 percent, at 65, she would have

$136,044. If she invested it in U.S. Treasuries at 5 percent, she

would have at the same age $193,447. If she wanted to put it in

the stock market and stocks continued to earn an average, as they

have over the last 30 years, of 10 percent, she would have

$332,417.

Now, there is a big difference between stocks and the first two,

but Treasuries are certainly as secure as a bank deposit. So you

can see that if she had the knowledge to buy Treasuries at 5 percent, she has 50 percent more money at the end of that period of

time.

If a 25-year-old woman puts aside $100 a month for 40 years,

and if it earns 10 percent, compounds at 10 percent, she will have

$632,000 at age 65. People do not have this knowledge. It must be

taught in school, and it must be made available at banks, on the

website, at employers’ places of business.

I learned about the lack of knowledge that women have. The first

year I had a seat on the Stock Exchange, which was 1968, I think

every woman who had been widowed and left money walked

through my door. I could not say I was not in, because I had a tworoom office, and if you opened the door, there I was. I could see

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they had absolutely no knowledge. They had portfolios which had

the wrong stocks in them.

Similarly, every young woman looking for work on Wall Street

walked through my door, and I learned that they did not have

basic knowledge to qualify themselves for jobs on Wall Street.

I did a survey of every 4-year senior women’s colleges. It was a

5- or 6-page survey, and we even counted home economies as a

‘‘Yes’’—and 90 percent of the 4-year senior women’s colleges did not

have one course in personal finance. That is not right.

I learned about the lack of knowledge when I was Superintendent of Banks for the State of New York, where I served for 5 years.

Besides regulating all the major foreign banks and big commercial

banks and savings banks in New York, we regulated the check

cashers and the licensed lenders. I can tell you in the case of the

check cashers that people were using check cashers, paying an

egregious amount of money, because they did not know how to use

a checking account.

Similarly, licensed lenders, our credit card companies—nowhere

do they state on their statements in simple, easy-to-understand

language that if you meet the minimum payment that the front of

the bill shows that is due, you will be paying for last night’s pizza

dinner for 15 to 25 years. That is reality.

I tried to tackle this when I was President of NYWA, the New

York Women’s Agenda, a coalition of 90 different Women’s Organizations. I took my idea to the board, and we took it to the Department of Education in New York. It has taken 3 years, and my program, which teaches kids about credit cards and checking accounts,

and the teachers added taxation to it, is now being enlarged. It has

been tested, and in the fall, it will include basic financial tools like

different kinds of mortgages, the kinds of tools that people in the

workforce today need—regular people.

We tested it in two schools and each of the five burroughs, and

then we paid to have teachers from the 40 enterprise schools

trained, and now it will be citywide. This must be done on a national scale.

Anybody graduating from high school and entering the workforce

should know about checking accounts, should know different kinds

of bank accounts; they should be able to figure out if they should

buy or lease a car. I am not talking about learning how to analyze

stocks, but they should know about retirement. They should know

the tax advantages of owning a house or contributing to an IRA.

I am talking about real things they need in real life.

You have a bankruptcy bill in front of you, and for the first time,

if people who declare personal bankruptcy have money available,

they are going to have to make a partial payment for the next I

believe it is 5 years. They have to be told this in easy-to-understand language when they take out a credit card.

The language on the monthly statement is like the terms of

Enron. They need plain easy to understand language that clearly

states that if you pay the minimum, you are going to be paying for

the purchases on your card or the balance for ‘‘x’’ number of years.

If you want to pay it off over a period of one year, send ‘‘x’’ dollars—just plain, simple language.

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We cannot stop people from overextending themselves, but it is

our duty to get them information so they understand what they are

doing. In that way, they can only blame it on themselves.

I think that the basic financial terms must be inserted, in plain,

easy-to-understand language, the same way that we are going to be

doing it in indentures of bonds so that investors can understand it,

and in quarterly earnings reports. It is just as important.

If it is decided—and I am in favor of privatizing a portion of Social Security—I would like to suggest that individuals not be able

to pick individual stocks. My reason is that people who know the

least will lose the most. I would like to see them invest in a choice

of index funds.

I would also recommend—and I believe in it extremely strongly— that the Government under no circumstances should vote the proxies, because Government should not control private industry. I

would like to see the Government’s votes ‘‘neutralized.’’ If the outside voters are voting 80–20, the proxies controlled by Government

or Government agencies should vote 80–20.

I thank you for inviting me to testify.

Senator CRAIG. Thank you very much for that insight and the obvious experience that you bring to this committee.

[The prepared statement of Ms. Siebert follows:]

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Senator CRAIG. Now we welcome Ms. Laurie Young, Executive

Director of the Older Women’s League, a leading voice of concern

for the needs of older American women.

Welcome to the committee. Please proceed.

STATEMENT OF LAURIE YOUNG, EXECUTIVE DIRECTOR,

OLDER WOMEN’S LEAGUE, WASHINGTON, DC

Ms. YOUNG. Thank you, Senator Craig.

I want to thank you for your invitation to testify today as Executive Director of the Older Women’s League, or OWL, as we are

known, the only national grassroots membership organization dedicated exclusively to the unique concerns of women as we age. I can

assure you that our members have a very personal stake in this

issue.

My testimony today is a call to both policymakers and individual

women. Members of Congress and private industry must improve

our Nation’s retirement system to truly reflect women’s work, life,

and retirement realities. On an individual level, women can do

more to prepare for their own retirement.

It is vital, however, that we remember that one part must flow

from the other. Without a viable retirement system that we have

equal access to, the efforts of most women to amply or even adequately fund their golden years will be in vain.

Here are the challenges that we face. Reality one—women earn

less. Women still earn only 73 percent of what men earn. Over a

lifetime, this wage gap adds up to an average of $250,000 less in

earnings for a woman to invest in her retirement. We must remember this glaring reality of the wage gap when we ask women to

save more for their retirement. You cannot save what you do not

earn.

Reality two—women are America’s caregivers, and we pay for it

in retirement. Caregivers often take more flexible, lower-wage jobs,

with few benefits, or stop working altogether. Women spend on average 12 years out of the workforce for family caregiving over the

course of their lives. This translates into an average loss of

$550,000 in lifetime wage wealth.

Most women do not have income from pensions or savings. The

flexible jobs that allow women to be caregivers are usually lowwage work with little pension coverage. Women make up about

two-thirds of the part-time labor force. Women live longer. We live

an average of 6 years longer than men, and this means that older

women are more likely to be single, living alone, and facing inflation’s erosion of their money’s value.

The result is that women are poorer than men in retirement. Our

poverty rate is almost twice that of men. Without Social Security

benefits, over half of older women would be poor.

Given these harsh realities, OWL offers simple policy recommendations. First, enact pay equity legislation. Women will not

be able to save as much for retirement until they earn as much as

men.

Improve women’s access to pensions. Our written testimony details changes to the pension system which should be encouraged.

Women should not be penalized for caregiving, yet this happens

again and again in America today. Our written testimony also ofVerDate 11-MAY-2000 10:28 Oct 03, 2002 Jkt 000000 PO 00000 Frm 00045 Fmt 6633 Sfmt 6633 C:\DOCS\80874.TXT SAGING1 PsN: SAGING1
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fers several suggestions to prevent caregiving from jeopardizing

women’s retirement security.

We need to improve Social Security for women. While this hearing is not focused on the third leg of retirement planning, that of

Social Security, I would be remiss in not mentioning that it is a

critical role in women’s lives. Recommendations to strengthen the

current Social Security system for women can be found in OWL’s

2002 Mother’s Day Report.

While we first and foremost urge women to petition their elected

officials and employers to change pension and savings systems,

OWL also offers advice on how women can improve their own retirement prospects. Based on OWL’s successful ‘‘The Color of

Money: Retirement for Women of Diverse Communities’’ campaign,

we offer the following advice.

Women should become financially literate. It is critical for

women to consider every opportunity for retirement saving. If married, a woman needs to make her marriage a true financial partnership by becoming a full participant in all decisions. Historical

patterns and social customs often encourage women to put others

first, and then, women are left alone to take care of themselves in

old age.

Start early. Saving and investing as early as possible is the best

approach, and that is why OWL’s public education campaign goes

beyond our usual audience of midlife and older women to reach

younger women.

Learn about your employer’s pension plans—and maximize all

employer contributions. If you do not do this, it is like turning

down a raise.

Contribute to an individual retirement account. Whether in the

paid labor workforce or not, you can and should if possible contribute up to $3,000 annually to an IRA in your own name.

Investigate the exact amount of future Social Security benefits.

Three months before your birthday, the SSA will send you an annual statement. Use it in your retirement planning calculations.

Carefully consider how your job choices affect your retirement.

When considering a change, look for a job with a good pension

plan, and if you are 3 months away from full vesting, consider the

financial impact of changing your job at that time. Preserve lump

sum distributions for retirement. Retain and do not spend any

lump sum distributions received upon leaving an employer. The

penalties are severe, and most women will need this money in retirement.

In conclusion, women have been balancing on a one-legged stool

for some time now. Many younger women assume that these problems are problems of the past and believe that their lives will be

different. They will not.

However, almost two-thirds of women today have the same kinds

of pink-collar jobs that women have traditionally held—sales, clerical and retail—low-wage positions that frequently offer no retirement benefits.

If this Nation’s private pension system is reformed to better reflect women’s work realities, if Social Security is strengthened for

women in the ways that OWL suggests, and if women educate each

other about what they need to do to plan for retirement, then,

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women’s three-legged stool might actually become well-balanced,

sturdy, and reliable.

I want to thank you today for including OWL in this conversation and for taking the lead in creating the debate.

Thank you.

[The prepared statement of Ms. Young follows:]

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Senator CRAIG. I thank all of you very much for your testimony.

There have been some common themes running through all of

your testimony which are extremely valuable. Let me ask this first

question of all of you. In your own minds, based on your experience

and your observations, which would you single out as the most serious mistake that women make in planning for retirement?

Ms. HOUNSELL. I would say not planning. That is the biggest

problem.

Senator CRAIG. Is there any disagreement with that?

Ms. YOUNG. That is assuming, though, that the mistakes are

mistakes that women make. It is about planning, but it is more

about being educated about what the realities of the system are.

There is only so much you can plan. If you still earn less than men,

if you do not have access to pensions, if you do not have that information, no matter how much you plan, you are not going to get

there.

Senator CRAIG. Yes.

Ms. HARDY. In that regard, the whole question of financial education availability—it is there, but it is extremely complex in many

cases, and as Mickey has suggested, starting earlier and having

personal finance understanding would be a great step forward for

everybody, especially women.

Senator CRAIG. In the context of those thoughts and statements,

what would you recommend, or what would you say are the two or

three most practical recommendations you would recommend to

women who might be listening to this hearing today?

Cindy?

Ms. HOUNSELL. I would be happy to start. I think we need to provide information and education, but I think the most important

thing that can be done, particularly with Members of Congress, is

to do the work that is needed to strengthen Social Security. The

information we have talked about today, the pay that women earn,

the values and the caregiving, the issues that take women out of

the workforce and compromise their ability to save and plan regardless of how much information they have, means that we cannot

threaten Social Security, which often becomes the only leg that

women can depend on in retirement.

So I think the most important step has to be strengthening and

maintaining and enhancing Social Security for women.

Ms. SIEBERT. I think that if we spoke to people while they were

in school and went through the benefits of a retirement fund, it is

possible—that is why I used the $100 in my numbers, that somebody getting her first job might save $100 a month—or, if not $100,

it may be $50—but we could get through to them that they must

start, because it is the value of the compounding of interest over

20, 30, 40 years that will give them the money they need to retire

when the time is there.

Ms. HARDY. I would like to comment that I think the reform of

entitlement programs is really the essence for all of us—not just

women, but men as well. If we are looking at huge tax increases

for both Social Security payroll taxes and for Medicare in the future, how do we balance all these dollars? We are going to be paying all of our money into a payroll tax with the hope that something will be there, and I find that is not sustainable. I believe

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there are a lot of possibilities and options that we should be considering that include personal responsibility as well as a floor of protection as provided by entitlements.

Ms. HOUNSELL. Not to be redundant, but I think part of the

problem is that when people even take their first job or they leave

a job, they are not thinking about the consequences. One of the

problems that we see is that people just do not think they are going

to get older, so nobody pays any attention to it.

Senator CRAIG. Well, we can all testify that they think wrong,

don’t they? [Laughter.]

Ms. HOUNSELL. They do, they do. But I think that women are

also making choices that are just not good choices. They use their

lump sum payments to pay for their kids’ education. What is going

to happen to them?

Senator CRAIG. Mickey, you talk about education, and I have absolutely no disagreement with you. This weekend, I was home in

Idaho, and we celebrated the birthday of a 4-to-become–5-year-old,

grown-up little girl. So our three children and their spouses were

there, all in their mid–20’s to early 30’s. I was sitting back, listening to conversations, and one of the most enjoyable conversations

was when they were all talking about their 401(k)s or getting into

it, and all of them jumped on a daughter-in-law who had just become employed, and they asked what kind of benefits are available,

and she mentioned the 401(k), and there was this unison: ‘‘How

much are you going to put into it?’’ Well, she did not really know.

They all said, ‘‘But you have got to do this, you have got to do this.’’

I was very pleased at that. I did not really have to say much, and

they were not asking my advice at that moment; this was a conversation going on amongst the six of them.

But the difference today, let us say, between the 30-year-old

woman in the workplace and that woman who is moving into retirement today—are we seeing a significant difference in the

knowledge base that can allow them when they become 60 to be

better off than the 60-year-old of today?

Ms. SIEBERT. I think the 30-year-old woman today, as I see it— and part of them have become the ‘‘sandwich generation,’’ as they

call it, because they are squeezed between obligations to parents

and obligations to children—I believe these women know that at

one time or another, they are going to have to be responsible for

the financial matters in the family, or they must take control of

their own financial matters; whereas the woman who is in her sixties or seventies today and collecting Social Security was raised to

get married, and your husband will take care of you.

I think today’s young people are more realistic; they know that

if they get a divorce, chances are that they might collect alimony

for only a couple of years, but it is not a lifetime alimony that they

will collect. So I think they are realistic.

Are they taking the next step and investing up to the maximum

or making a good contribution every month? Not particularly. I see

it in our women’s financial network website. They are coming to

our website, they are spending a lot of time surfing on it, but they

are not opening the accounts. Is it because there is a recession, and

they do not have the money? Is it because we have done a poor job

of explaining it? I do not think so. Is it because it is something they

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put off, and they say, ‘‘I can start that next year, because I want

to buy a new car.’’ I do not know.

Senator CRAIG. Does anyone else wish to comment on that question and your observations on the 30-year-old and the 60-year-old?

Ms. HOUNSELL. I think one thing that was surprising about the

report when we were putting together a lot of the statistics—and

we find that from our education program—is that there are not a

lot of differences. There may be some women, especially those who

live in big cities, in the same way that you were talking about your

family, who have access to that kind of information. But most of

the people that we are educating are not hearing from cocktail parties or other places about diversification or replacement rates. They

do not even know what that means. Those are the people that we

are really concerned about, and I think they are the majority.

A lot of women get into their marriage—I keep saying that we

should do a lot of work with Bride Magazine and try to prevent

people from spending so much money on their weddings early on

and use that money to prepare for retirement, but I do not think

anybody is going to read that article in Bride Magazine.

Senator CRAIG. In other words, ‘‘Mom and Dad, put a deposit in

my 401(k), not on my gown.’’

Ms. HOUNSELL. Exactly.

Senator CRAIG. Does anyone else wish to comment on that question? [No response.]

Then, let me ask this of all of you, and for the sake of time, it

will probably have to be my last question.

In addition to promoting better education for women about retirement realities and better individual planning, some of you also

ventured recommendations of ways that Government can help.

For example, Dorcas, you advocate allowing greater contributions

to IRA accounts, and Ms. Young, you mentioned making changes

in Federal law to open greater access to pensions for lower-income

and part-time workers.

Assuming for the moment that significant new Federal expenditures are unlikely in the current budget climate, what would you

say are the top one or two most effective steps that Government

could take to ease women’s retirement preparations that would not

involve extraordinary new expenditures?

Cindy.

Ms. HOUNSELL. I do not mean to beat the horse dead, but I think

education, to make sure that people do take advantage—Laurie

mentioned that, and we mentioned that in our written testimony—to make sure you take advantage of the retirement income

that is available. Twenty-five percent of women are not contributing to their 401(k)s. You know, most people do not have 401(k)s.

People are always surprised—they say ‘‘I know someone without a

401(k).’’ Well, believe me, more than half the workforce does not

have a 401(k) or a pension plan.

So I think that getting people to take advantage, of which is

available and helping employers to convince employees to contribute to their plan that would make a big difference.

Only 8 percent contribute to an IRA, so I think we can keep expanding those limits, but if people do not have the money, where

are they going to find it to put into an IRA?

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Senator CRAIG. Dorcas.

Ms. HARDY. In terms of a Government role, I would suggest reform of the entitlement programs. I think that if people understand

that they do not have to be worried as people are beginning to be

about the sustainability of both the Medicare and the Social Security programs, that will go a long way. In that regard, I would suggest a comprehensive reform of Medicare that has been discussed

up here by your Chairman, Senator Breaux, and also Senator Frist.

I would also suggest that the Social Security system be redesigned

so that it does include personal retirement accounts. There is plenty of evidence that with that choice that people would have, there

would be higher benefits than the current system promises let

alone what it is going to be able to deliver. One would be able to

build wealth and also have the ability to pass on that wealth and

those savings to their family through inheritance. I think that

would go a long way toward making sure that everybody has a

comfortable retirement.

Ms. SIEBERT. I have an idea that would be a nightmare to administer.

Senator CRAIG. Well, give us a try.

Ms. SIEBERT. Our Social Security that is withheld is not tax-deductible. If we made it tax-deductible for lower-income people with

the requirement that they have to invest the tax savings in an IRA,

it may create some forced saving in an IRA which would accumulate.

Senator CRAIG. Well, I think all of us would like to create an incentive for savings or incentive for investment in any of our systems, and that is an interesting idea.

Ms. SIEBERT. Because Social Security is the biggest tax these

people pay.

Senator CRAIG. Yes; no question. That is right.

Yes, Laurie.

Ms. YOUNG. I feel compelled as the Executive Director of OWL

and our Mother’s Day Report on Social Security to suggest that at

first thought, at least do not do any harm, and that would be to

not take huge sums out of the Social Security system as it exists

now to set up a privatization which would in fact impact existing

recipients of Social Security and affect the one leg of the stool that

women rely on.

In terms of a proactive stance, I think the most important thing

we can do for young women coming up in the system is enact pay

equity legislation which would begin to level the playing field so

that women can earn at the same rate that men do and then begin

to save and have the same kinds of comfort in retirement that men

enjoy.

Senator CRAIG. I thank you all for those thoughts. They are extremely valuable. I do not think there is any question that what

we do has to be long-term in its character as we build toward the

next generation’s retirement. I would agree with you, Laurie. I

think that we will venture toward reforming Social Security, but

the ‘‘Do no harm’’ becomes a critical part of it, or we will never be

able to politically get to the other side of allowing the kind of individual accounts that will generate that kind of individualized

wealth.

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I guess I have to ask one additional question. When people who

have been non-investors begin to take it upon themselves to invest,

their desire to gain more knowledge and education about what they

have multiplies very rapidly. So that from the almost zero knowledge to the acquiring of additional information seems to be a quantum leap, and when it starts, it is a very rapid multiplier, and the

uneducated can become really quite sophisticated in a reasonably

short period of time because they desire to do so once they find out

that this is a generator of personal wealth for themselves.

Is that generally the experience that you have had in dealing

with women who start into the process of 401(k)s and personal accounts and investment?

Ms. HOUNSELL. No. I think there are those people who really do

get into it, but I think that people are so time-conflicted, and it is

so confusing, and they do not have the time to learn. I sort of alluded to that—it is very complicated. People will say to me, ‘‘I took

my money out of the teachers retirement plan 4 years ago; should

I put it back in, or what should I do?’’ I ask them, ‘‘What type of

plan do you have? Did you talk to the retirement people?’’ ‘‘No.

They sent me stuff, and I could not understand it.’’ So that is a big

problem.

Senator CRAIG. Fair enough.

Ms. HARDY. I think time is obviously a constraint for everybody,

but I do believe that if women do attend some of the seminars put

on by the financial services industry, or they work with their employer counselors or they use Muriel’s website, there is educational

material there, and there are also financial planners who can help

out with people. But you have different classes of folks and different income levels.

Senator CRAIG. Oh, yes.

Ms. SIEBERT. I think we still need a real emphasis on financial

literacy for both men and women. The women are a little more conservative in their investments now than men—the younger women

are not; those at 25 and 30 are willing to go into the same kinds

of securities. But we need education for both. This is not limited

to women, because I have seen it, and I have seen the bankruptcies.

I will say that the fastest growing group of bankrupt people is

single mothers, single-parent mothers, and those numbers are

frightening.

Senator CRAIG. They are that, yes.

Any additional comment on that, Laurie?

Ms. YOUNG. Yes. Just in reference to my earlier comments, when

you think about the fact that two-thirds of the part-time workforce

is female, when you think about the fact that two-thirds of women

who are employed today still work in pink-collar jobs which are

lower wage with less benefits, when we talk about women, we are

primarily talking about a class of people who do not have a lot of

resources, particularly single mothers or people who are having to

take care of people, to do that kind of investing. I am sure that

when they have an opportunity to invest, they are certainly interested in getting more information about it. But we are really not

talking about women in general when we talk about people who

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are able to invest and therefore have a greater interest in managing their assets.

Senator CRAIG. That is always very valid, because if you are

making those lower incomes, especially if you have children, it is

even difficult without them.

Thank you all very much for your testimony and your statements

for the record. They are greatly appreciated in helping us build this

record.

Thank you very much.

Now let me ask our second and final panel to come forward.

We are going to hear from two women who have encountered

particular challenges in preparing for their retirement as well as

from a representative of a nonprofit organization dedicated to providing hands-on counseling to people, both men and women, who

need assistance in understanding in protecting their pensions.

I will ask Irene, Joan, and John to come forward, please.

As I mentioned earlier, Irene is from Boise; Joan is from Salem,

NJ, and we look forward to their stories. John Hotz is Deputy Director of the Washington, DC-based Pension Rights Center, which

helps to coordinate a multi-State network of pension information

and counseling programs and Administration on Aging-funded programs established several years ago in large measure at the instigation of this committee, under the guidance of then Chairman

Chuck Grassley of Iowa.

Again, thank you all very much, and Irene, we will ask you to

start.

STATEMENT OF IRENE LAMARCHE, RETIREE, BOISE, ID

Ms. LAMARCHE. I accepted the invitation to come not because I

wanted to say ‘‘poor old me’’—because I am rich in many ways. In

order to conclude my statement in the 5 minutes allotted, I am

going to read it rather than do it extemporaneously.

Senator CRAIG. That is fine.

Ms. LAMARCHE. I am a 76-year-old woman who, in spite of working most of my life, has very limited retirement resources. There

are a number of circumstances that have contributed to my situation.

First, I was born in 1925, and I am therefore a Social Security

‘‘notch baby,’’ which most people these days do not understand.

Just by circumstances alone, I am entitled to less Social Security

than others. I paid my way through college during and after the

war by working in a men’s clothing store for 50 cents an hour.

After graduation in 1947, I taught high school math, first in Superior, WI, and then in Ironwood, MI, before taking a position in St.

Maries, ID. I was married in 1949 and left the workforce for a

number of years while I gave birth to and raised four children.

In 1957, I took a teaching position at Borah High School in

Boise, ID, and taught mathematics there for 6 years. In 1963, I

taught math at Saint Teresa’s Academy in Boise in its last year of

existence.

Unfortunately, none of the teaching positions paid into Social Security, but rather, into a small teacher retirement fund. When I

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ment account, and because it was always so little and money was

scarce, I had to spend the money.

While working at Borah, I also taught skiing part-time at Bogus

Basin Ski Resort outside Boise. After I left teaching, I taught skiing full-time at Bogus Basin. Then, I spent 8 years, from 1969

through 1977 as Director of the Bogus Basin Ski School. I did have

a small retirement plan with Bogus Basin, and I cannot remember

if they contributed to Social Security or not before I was the director.

After 30 years of marriage, I was divorced in 1978. At that time,

I did not work. As part of the divorce agreement, I was paid $750

a month for 2 years for what was termed ‘‘rehabilitation pay.’’ I

also received the family home, along with the mortgage, in the settlement.

At the age of 55, I had to go back to work. I worked in a number

of positions where Social Security deductions were taken from my

paycheck—taxpayer information for the Internal Revenue Service,

as a personal assistant to Verna Harrah in Sun Valley, for an office

design firm, and as organizer and Executive Director of the First

Security Winter Games of Idaho at the request of the Idaho Centennial Sports Commission.

At age 62, I began to draw Social Security benefits to augment

my income. I had since sold the family home and was able to invest

approximately $60,000.

At age 66, I stopped working completely, primarily due to health

issues. Because of the teaching jobs I had that did not pay into Social Security, being a ‘‘notch baby,’’ and my divorce, I am currently

receiving $518 a month in Social Security benefits plus Medicare.

Additionally, I receive approximately $500 a month from investments I was able to make from the money I received from the sale

of my house, money I saved from my job in Sun Valley and with

Winter Games. At this time, I was putting my youngest son

through college.

I have been living in an apartment where the rent has increased

to $695 a month. I no longer can afford to live there and have been

forced to find another apartment. I have been on a waiting list for

2 years with Idaho Housing to receive vouchers for rent subsidy—

and incidentally, that is the first help I have ever asked for. I have

finally reached the top of the waiting list and will be able to receive

help from this agency. While I have not received final confirmation

from Idaho Housing as to how much they will subsidize, I moved

into an apartment complex on May 14 that accepts the subsidies.

Regular rent for a one-bedroom apartment is $545 a month, but I

am hoping that I will only pay $300—since this report was written,

I have found out that it is $315 a month.

I have never lived extravagantly and have scrimped all my life.

If not for the money I received from the sale of my home, I would

be in a terrible financial position. I never had extra money to put

aside to save for retirement and thought I could rely on Social Security. Had I not been divorced, I may have been able to receive

a larger benefit because of my former husband’s contributions. Incidentally, I cannot remember if his contribution to my Social Security is $13 a month or $31 a month, but that is all I get from his.

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As it is, if he drops dead, I will be entitled to a larger benefit based

on his contributions and the number of years we were married.

Thank you for the opportunity to testify before this committee.

Senator CRAIG. Irene, thank you very much for that thorough explanation of your life and your work history, and of course, the benefits of it, or the lack of benefits of it. I think that is very valuable.

I think it is quite typical of many women your age, and it is valuable for us to hear that.

Senator CRAIG. Joan, welcome to the committee. Joan has a story

that is very important for the committee to hear about.

Let us hear from you now, please.

STATEMENT OF JOAN MACKEY, PENSION COUNSELING

CLIENT, SALEM, NJ

Ms. MACKEY. Good morning. My name is Joan Mackey, and I am

honored that you have invited me to speak today about the importance of educating women on the pitfalls they may encounter in

preparing for retirement.

I must tell you that I would not be in the situation that I am

currently in if I had only known when I was going through my divorce what I know now.

My husband, Lavond Mackey, Sr., and I were married for 21

years. We lived in Philadelphia, PA. Throughout our marriage, my

husband worked at the Home of the Merciful Savior for Crippled

Children, a rehabilitation center and group home for children with

cerebral palsy and other physical disabilities. He worked as the

chef for the home, preparing meals for the children.

Although I also worked at two jobs, we were primarily dependent

on my husband’s income. That is because I was also caring for our

three children.

By 1990, my marriage had fallen apart. My husband had become

so abusive that to protect my children and myself, I had to move

out of our home. I was able to find a lawyer to help me with the

separation agreement later that year. In it, my husband agreed to

stay away from us and provide support for the children. At that

time, our oldest child was only 12 years old.

I filed for divorce in 1994. At that time in our lives, we owned

very little. I had a car; my husband did not. We rented our home.

I had no savings, insurance, or investments. My husband had spoken from time to time about investments and savings accounts, but

at the time of our divorce, he had hidden them or spent them, because my attorney could not find anything. I knew he had a pension and life insurance through his job, but to be honest, I never

thought about it in connection with the divorce, and my lawyer

never mentioned it. I was just concerned with getting the child support we needed to pay our rent, food, and other bills.

The divorce court order was just 2 pages long and repeated almost exactly what was in the legal separation order—that my husband would stay away from us and pay child support. There was

no mention of the insurance or pension.

My ex-husband continued to work for the home, now called HMS

School for Cerebral Palsy, until 1996 when, after more than 18

years, he had to quit working due to cancer. He died in 1997. The

last months before he passed, he told me several times that I would

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get money from his insurance and pension at the home so that the

children and I would be taken care of.

After he passed, I asked the home about the insurance policy and

pension benefits my ex-husband had mentioned. The lady at the

benefits office told me that they could not pay me anything because

I was not married to my ex-husband when he died. This just did

not make sense, because my ex-husband had told me so many

times that the benefits would be mine.

I went to Community Legal Services in Philadelphia and found

a wonderful lawyer willing to help me. We learned that the benefits manager at the home actually wanted to pay me the widow’s

pension benefit my ex-husband had talked about, but the lawyer

for the home had said no, that they could pay me if I had gotten

a divorce court order directing them to pay the benefits and that

if they did it without a court order, the plan would get into trouble

with the Government.

This still did not make sense. It did not seem right. So the pension plan provided benefits for widows at no cost to husbands, and

my husband had not given those benefits to anyone else. If I had

only known to ask for the benefits during my divorce proceedings,

there would have been no problem paying them to me.

I am now 48 years old, and I am very worried about what I will

live on when I cannot work anymore. I know firsthand the importance of retirement security. Both my father and my mother are receiving pensions. I could not imagine what their lives would be like

without them.

I have worked all my life, but until recently never had a retirement plan through my employer. I currently work as a real estate

broker and do direct marketing for a cleaning company of which I

am part owner. The cleaning company has a 401(k), and I have

worked hard to contribute the $4,000 that is in there now. But I

am worried that I will not be able to save enough money. The survivors’ benefits from my ex-husband’s pension would make a big

difference.

I know that I am not alone in being frightened about my future

financial security. I hope that this committee will get the word out

to women throughout the country about the importance of educating themselves about retirement before it is too late, and most important, that they need to ask about their rights to survivors’ benefits when they are going through a divorce. If my experience is any

guide, women cannot count on their lawyers to ask about the pension.

Thank you for inviting me to share my experience. I hope that

my story can help other women. I would be happy to answer any

questions.

Thank you.

Senator CRAIG. Joan, thank you. That was very valuable testimony, and your advice is extremely important.

John, let me turn to you. John Hotz is Deputy Director of the

DC-based Pension Rights Center.

Please proceed, John.

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STATEMENT OF JOHN HOTZ, DEPUTY DIRECTOR, PENSION

RIGHTS CENTER, WASHINGTON, DC

Mr. HOTZ. Good morning, Senator Craig.

My name is John Hotz, and I am Deputy Director of the Pension

Rights Center. The Center is the Nation’s only consumer organization dedicated solely to protecting and promoting the pension rights

of American workers, retirees, and their families.

For 26 years, the Center has been at the forefront of efforts to

help individuals understand and enforce their retirement rights. I

also coordinate the Center’s Technical Assistance Project, providing

training and legal assistance to the Administration on Aging’s Pension Information and Counseling Program, a network of pension assistance projects around the country offering free pension help to

those who need it, particularly disadvantaged seniors, women, and

minorities. We thank you for inviting us to testify on the resources

available to women to enable them to avoid pension pitfalls and effectively prepare for their retirement years.

You have just heard Joan Mackey testify about her experience

with one such pitfall, not knowing to ask for a widow’s pension

benefit at the time of divorce. Sadly, Joan is not alone. We hear

from numerous women each year who tell us their own version of

Joan’s heart-wrenching story. Her situation is different from theirs

in only one critical respect. Joan found out of the few legal services

attorneys in the country willing to help in the complicated area of

pension law.

For other women around the country with pension questions and

problems, the good news is that tremendous strides are being made

in building a nationwide pension counseling and assistance system.

In 1992, recognizing the complexity of pensions and their importance to the retirement security of older Americans, Congress established the Pension Information and Counseling Demonstration

Program as part of the Older Americans Act Amendments. Last

Congress, thanks to the leadership of this committee and particularly its former Chairman, Senator Charles Grassley, the counseling projects became a permanent program of the Administration on

Aging, providing free, personalized pension counseling and advocacy.

The AOA program is currently providing invaluable hands-on assistance to individuals in 16 States on all kinds of retirement-related problems. Since its inception, the Pension Information and

Counseling Program has served over 10,000 individuals and has

helped those clients receive more than $40 million in pension and

other retirement benefits.

Due to these impressive and cost-effective results, the AOA is interested in expanding the program nationwide. But the best way

to communicate the value that the AOA projects bring to women

in need of pension assistance is through an example.

Sallie Mae B. is a typical project client. An impoverished elderly

widow from rural Alabama, Sallie Mae contacted the Alabama

project for help. Her husband had lied to the lumber yard where

he worked, claiming that he was divorced and naming his daughter

from another relationship as his pension beneficiary. Only after her

husband’s funeral did Sallie Mae learn from the lumber yard supervisor that she should have something coming from his pension.

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The project argued that Sallie Mae was still married at the time

of her husband’s death, but the plan had already begun to pay the

daughter and refused to reverse itself. It took months of hard work,

but the project finally convinced the plan to pay Sallie Mae the

$25,000 she was due—a very significant sum of money for her.

In addition to this kind of personalized assistance and advocacy,

the projects also publish fact sheets and other educational materials for women and make referrals to Government agencies and

pension professionals.

Pension-related Government offices willing to help include the

Labor Department’s Pension and Welfare Benefits Administration,

the Employee Plans Division of the Internal Revenue Service, and

the Pension Benefit Guarantee Corporation. Private services

include the National Pension Lawyers Network, a pension and domestic relations lawyer referral service operated by the New England Pension Assistance Project, and the American Academy of Actuaries’ Pension Assistance List, a network of actuaries willing to

help participants check the accuracy of their pension calculations.

Although great strides have been made toward the development

of a nationwide pension assistance service delivery system, gaps

still exist. To help close these gaps, we are turning to the internet.

Under contact with the Labor Department, we developed a prototype for a pension assistance website that we will formally launch

later this year with funding from the Administration on Aging and

the Public Welfare Foundation.

PensionHelp America is specifically designed for pensioners, pension plan participants and their families. It will provide a free pension information search engine, as well as referrals to counseling

projects, Government agencies, attorneys and other professionals.

It will also allow users to search for benefits from pension plans

sponsored by companies that have moved, been bought out or have

otherwise gone out of business since the individual last worked

there.

As the Pension Rights Center has worked to build a nationwide

public-private partnership of agencies and professionals to assist

individuals with their pension questions and problems, we have ensured that issues faced by women remain a top priority.

We would be pleased to work with the committee to continue the

growth of pension assistance in America and to increase retirement

security for older women and all American workers.

We thank you for allowing us the opportunity to share this information, and I would be pleased to answer any questions that you

might have.

[The prepared statement of Mr. Hotz follows:]

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Senator CRAIG. John, thank you very much. That is good news,

and we will look forward to some of those products.

Irene, what retirement advice would you most appreciate having

received at some time in your life that might have changed the decisions you made or the actions you took? Have you thought of it

in that context?

Ms. LAMARCHE. Well, to begin with, I never thought I would

have to worry about retirement and so I did not do anything about

it. But as soon as I was divorced, I got rid of my credit cards, and

thought if I cannot pay cash, I cannot buy it, and then, with the

sale of the house—it was at a time when the housing prices were

down in Boise—I did not receive, of course, what the house was

worth. So I put it all in utilities that would pay me a income every

month from interest and such. When, they were all called, I put the

money into income bonds.

I just had not planned for any problem. I quit my job at the ski

school thinking that it would help save my marriage, which it did

not do, and therefore gave up one of the best jobs I ever had, and

that is when I started thinking about what I needed to do.

Senator CRAIG. Well, as I said, for the record, I think it is very

valuable that we hear that story, and you told it well.

Ms. LAMARCHE. Also for the record, the investment lady from

New York I thought had a very good idea, having been an educator

myself, about having a way of teaching young people, not just

women but men, how to prepare for the future by having something in the educational system that tells kids how to write a check

and what their Social Security can do for them and how to invest.

Senator CRAIG. Well, I have no disagreement there. Having

raised three children, I know that in both my wife’s and my efforts

with them, the enticement of credit cards is very, very strong. It

is when they are adults and they are out seeking credit and all of

a sudden find out that they might not have been as responsible as

they should have been or maybe as mom or dad told them, so it

is probably better sometimes if that information comes from another source. I readily agree that that kind of financial education

ought to go on in our high schools today for all of our children and

for this country; it would be very valuable.

Irene, thank you.

Joan, your story is not only important for the record, but obviously, knowing what you know now and had you known it at the

time of your divorce—how much in pension income would you have

had the opportunity to have had you had the knowledge that you

now have?

Ms. MACKEY. Do you mean monthly?

Senator CRAIG. Yes.

Ms. MACKEY. I think we talked about—what was it——

Mr. HOTZ. Somewhere between $150 and $200 a month.

Senator CRAIG. That would have been very helpful; absolutely.

Ms. MACKEY. Yes, it would have.

Senator CRAIG. Are you still pursuing the case?

Ms. MACKEY. Yes, I am.

Senator CRAIG. Well, my best hope to you in being able to gain

that. To think that if you had only had that knowledge at the time

of the divorce, and that would have made you eligible, is an amazVerDate 11-MAY-2000 10:28 Oct 03, 2002 Jkt 000000 PO 00000 Frm 00082 Fmt 6633 Sfmt 6633 C:\DOCS\80874.TXT SAGING1 PsN: SAGING1
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ing factor. You want to go around—and I hope you do—and shout

that very loudly to all of your friends.

John, is there any hope for Joan to be able to gain this pension,

in your thoughts or experience?

Mr. HOTZ. Yes, there are two tracks. One is legal, and the other

is legislative. We are arguing—there is a very technical regulation

that actually, literally read, would support Joan’s position that her

beneficiary election that her husband had made actually survives

the divorce. However, it is common practice in the pension industry

on the plan side to say that there is no survivor benefit without

one of these court orders.

So we are trying to work with the Technical Division of the Internal Revenue Service to get an interpretation of that regulation

that would support Joan’s position. That is sort of the legal side.

On the legislative side, we will just be looking for a change in

the law that would allow for women to be protected if they do not

know to ask for this at divorce, legislating that if there is not a

court order that one be basically implied in situations where it was

not asked for.

Senator CRAIG. OK. That would be extremely valuable.

Listening to your testimony, John, I am struck by the almost extreme complexity of this country’s pension system, a complexity

that is compounded when questions of divorce or survivorship enter

into the picture. Working on the front lines as you and your colleagues do, what recommendations might you have of ways to simplify the system to make it easier for women like Ms. Mackey and

Ms. LaMarche in dealing with their situations?

Mr. HOTZ. It is sort of the nature of the beast to be complex because it is a creature of the Tax Code.

I think that what would take the greatest stride toward making

the system simpler would be to give greater access to that system

to our low and moderate wage-earners. Something needs to be done

to allow very popular programs like the 401(k) program to be accessible by low and moderate wage-earning families or single parents

or whomever might want to contribute to a program like that.

First, more employers need to have programs that allow people

to save. Then, low and moderate wage-earnings do not have enough

money to actually put into that program, so they cannot begin to

take advantage of, first of all, the savings benefit and the

compounding, but they cannot get that employer match. So we

need to work on access and coverage.

Senator CRAIG. You have certainly reinforced the point of the

first panel, and Laurie mentioned that.

In your experience coordinating numerous pension counseling

programs around the country, what are the top two or three most

critical warnings or pieces of advice that you might give women in

dealing with their own or their spouses’ pensions?

Mr. HOTZ. Probably that would be not to give up the pension at

the time of divorce in a tradeoff for some physical or other monetary resource like the house or the car. It seems oftentimes—and

it is mostly women that we see in this situation—if there are children involved, oftentimes, having that home can be very important,

but they do not realize the long-term financial impact of giving up

a portion of the other wage-earner’s retirement benefits.

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Far and away, that is probably the most significant issue that

the projects that I work with across the country are dealing with.

The No. 1 issue is spousal problems related to divorce.

Senator CRAIG. Yet, at the time those kinds of decisions are

made, that is probably the most stressful time in that person’s life,

and they are looking for the immediate sense of security. It is very

difficult to look out long-term.

Mr. HOTZ. Even when you do have the knowledge, it is a difficult

thing to wrap your mind around.

Senator CRAIG. Yes. As you mentioned, the Administration on

Aging’s Pension Information and Counseling Program is what it is

today in part because of this committee’s work. But short of asking

for more money, which we would probably all like to do, is there

anything that we in Congress can do to help improve the program

even more, based on your perspective of it?

Mr. HOTZ. Well, every year, the appropriations bill comes around,

and supporting the program through appropriations is always a big

assistance, and in the past, the committee has been a tremendous

support. So although it is now labeled as a permanent program

under the Older Americans Act, we still need that support on an

annual basis.

Senator CRAIG. Irene, Joan, and John, again, thank you for your

testimony this morning and helping us build the record. Both

Chairman Breaux and I are increasingly concerned about the reality of what we are looking at here. Statistics are one thing, but

personal testimony builds on an understanding of what those statistics mean across the country as we find older women really in

very difficult situations for all the reasons that we have heard this

morning.

We thank you for being a part of this hearing and helping us

build the record.

The committee will stand adjourned.

[Whereupon, at 11:05 a.m., the committee was adjourned.]

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