This issue brief examines the potential impact on women of a number of proposed Social Security reforms. Some of the changes would maintain the system's social insurance principles, while others call for a privatized system that would allow workers to invest all or part of their Social Security contributions in the private market. Privatization, even partial privatization, poses big risks, especially for persons with limited resources. How the market has performed historically, for example, cannot be counted on to apply to specific groups of workers or to the time that a particular cohort retires. The market does not just go up, and declines can be swift, deep, and prolonged.
Women appear to be more conservative investors than men.
Under a privatized system, two investors with identical earnings but different investment philosophies could end up with very different retirement benefits. Women, in such instances, could expect the lower accumulations. Because Social Security is gender neutral, men and women with identical work histories and earnings can expect identical benefits. In the private market, however, sellers of annuities can take into consideration women's longer life expectancy. Thus, the same accumulation may purchase lower monthly benefits for women than for men.