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Women and Retirement


Planning and saving for retirement may seem like a goal that's far in the future. Yet saving, especially for retirement, should start early and continue throughout your lifetime. Here are four reasons why saving matters for women -- and especially for you!

Do you know?

  • Of the 59 million wage and salaried women working in the United States as of June 2000, less than half -- just 47 percent -- participate in a pension plan.
  • Women's employment patterns are different. They are more likely to work in part-time jobs that don't qualify for pension coverage, or to work fewer years in pension-covered employment because of interruptions in their careers to take care of family members.
  • On average, a female retiring at age 55 can expect to live another 27 years, four years longer than a male retiring at the same age, and needs to save for these extra years.
  • Studies indicate that women tend to invest more conservatively than men, receiving lower rates of return from their investment over time, thus reducing the amount of savings they have at retirement.


Here are eight questions to help you think about retirement and take charge of your financial future:

Do you work for an employer that offers a pension plan?
If your employer offers a pension or retirement savings plan, join it as soon as you can and contribute as much as the plan allows. Most employers providing a 401k plan also match a percentage of the employee contribution. This match is usually 25 - 50 percent of the investment, a much higher rate than that which can be found in an alternative investment. While all job categories may not be included in your employer plan (those of part-time or temporary workers, for instance), your job may be one of those included in your employer's plan. Remember, by saving early you have time on your side. Your savings will grow and your earnings will compound over time.

Have you worked at the job long enough to earn a pension?
In many companies, you may have to work for five years to become eligible to receive pension benefits. Some workplaces have a shorter vesting period. (Vesting simply means that you have worked long enough to earn the right to benefits from a saving or pension plan.)

Too often employees, especially women, quit work, transfer to another job or interrupt their work lives just short of the time required to become vested. Ask the personnel office, pension plan administrator or union representative about the vesting period and other details of your company pension plan.

Do you keep copies of the documents that define the provisions of your pension plan?
In addition to asking questions of company or pension plan officials, you should keep copies of the summary plan description (SPD) and any amendments. The SPD is a document that pension plan administrators are required to prepare, and it outlines your benefits and how they are calculated. The SPD also spells out the financial consequences -- usually a reduction in benefits -- if you decide to retire early (earlier than age 65 in many plans). You probably received a copy of the SPD when you joined the pension or savings plan, but you may request another one from your employer or plan administrator.

Also remember to keep pension-related records from all jobs. They provide valuable information about your benefit rights, even when you no longer work for a company.

What happens to your pension if you change jobs?
You may lose the pension benefits you have earned if you leave your job before you have worked long enough to be "vested." However, once vested you have the right to receive benefits even when you leave your job. In such cases, the company may allow, or in certain cases may insist, that you take your pension money in a lump sum when you leave. However, some companies may not permit you to receive your pension money until retirement. The time when you can receive your pension money is spelled out in the SPD.

A word of caution: If you receive your pension in a lump sum, you will owe additional income taxes, and may owe a penalty tax. A better way is to reinvest your savings in another qualified pension plan or an Individual Retirement Account (IRA) within 60 days. You avoid tax penalties and you keep your long-term retirement goals on track.

If you do want to reinvest the money, it is important that you do not directly receive it. If you receive the money directly, you will have to pay a 20 percent withholding tax on the amount you receive and then file for a refund in the next year, providing proof that you have transferred the funds to an IRA. Instead, you should instruct the pension plan to transfer your pension money directly to an IRA or other qualified pension fund you have established. This is easy to do using simple forms supplied by the new plan. If you want help with the forms, representatives of the plan are generally available to assist you.

Do you know how you can save for retirement even if you don't belong to an employer-sponsored pension plan?
Anyone receiving compensation, or married to someone receiving compensation, can contribute to an IRA. In addition, if you are self-employed, you can start a Keogh plan, a Simplified Employment Plan (SEP) or a Savings Incentive Match Plan for Employees of Small Employers (SIMPLE). As with other retirement savings plans, there may be tax consequences, and possibly penalties, if you withdraw your savings early.

Are you tracking your Social Security earnings?
More women than ever work, pay Social Security taxes, and earn credit toward a monthly income for their retirement. These earnings can mean some income for you and your family in the form of monthly benefits if you become disabled and can no longer work. If you die, your survivors may be eligible for benefits.

In addition, you may be eligible for Social Security benefits through you husband's work and can receive benefits when he retires or if he becomes disabled or dies. Special rules apply if you and your husband have been employed and both have paid into Social Security. Special rules apply also if you are divorced, or if you have a government pension. To calculate your benefit estimate, visit the Social Security Administration's Web site at www.ssa.gov/retire/

Are you entitled to a portion of your spouse pension benefit if you and your husband divorce?
As part of a divorce or legal separation, you may be able to obtain rights to a portion of your spouse's pension benefit (or he may be able to obtain a portion of yours). In most private-sector pension plans, this is done using a qualified domestic relations order (QDRO) issued by the court. You or your attorney should consult your spouse's pension plan administrator to determine what requirements the QDRO must meet.

Are you aware of the rules that govern your pension plan and the pension plan of your spouse if either of you dies?
The rules are different for defined contribution and defined benefit plans. If you or your spouse belong to a defined benefit plan, the surviving spouse may be entitled to receive a survivor benefit when the enrolled employee dies. This survivor benefit is automatic unless both spouses agree, in writing, to forfeit the benefit. You will need to check the SPD or consult with the plan administrator regarding survivor annuities or other death benefits.

If you are a beneficiary under your spouse's defined benefit pension plan, you may want to request a copy of the SPD and other plan documents that describe your spouse's vested benefits. You will probably want to make the request in writing, and you may be charged a fee for the information.

The rules may be different if you or your spouse participate in a defined contribution plan. Consult the plan administrator for details about spousal rights.


Once you've answered these questions, you're on the road to learning more about financial freedom. As a resource for women (and men), the Employee Benefits Security Administration has issued Savings Fitness: A Guide to Your Money and Your Financial Future. The booklet includes a resource and Web site section (see the Resources section to get a copy).


Employee Benefits Security Administration
U.S. Department of Labor
Publication Hotline: 1-800-998-7542
Web site: www.dol.gov/ebsa/

Select from the brochures below and view them on the Web or request them and a list of all available publications from the hotline number above:

Top 10 Ways to Beat the Clock and Prepare for Retirement

QDROs -- the Division of Pensions through Qualified Domestic Relations Orders

Savings Fitness: A Guide to Your Money and Your Financial Future

Social Security Administration
Request a copy of Social Security...What Every Woman Should Know
Web site: www.ssa.gov

Pension Benefit Guaranty Corporation Request
A Predictable, Secure Pension for Life
Web site: www.pbgc.gov

U.S. Securities and Exchange Commission
Request Get the Facts on Saving
and Investing
Web site: www.sec.gov

American Savings Education Council
Web site: www.asec.org

This is for educational purposes only. The information provided here is intended to help you understand the general issue and does not constitute any tax, investment or legal advice. Consult your financial, tax or legal advisor regarding your own unique situation and your company's benefits representative for rules specific to your plan.

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