What Women Need to Know About Retirement

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What Women Need to Know About Retirement

Ebook - Economics

What Women Need to Know About Retirement Foreword By Teresa Heinz Kerry
There is great beauty, and great valor, in every woman’s struggle to leave her mark on this world. We all know the women and the stories: The bravery of a single mother juggling two jobs; the strength of a grandmother who still goes to work every day to help raise her grandchildren and save enough to one day retire; the amazing grace of our aunts and sisters and best friends fighting to overcome breast cancer or another illness. The poise of every young woman who refuses to listen to the ads and institutions that tell her she is only valuable if she is blonde, and thin, and perfect.

We must celebrate these women’s stories and what they tell us—that we are not alone, and that we can change the way things are. Today, at the start of the 21st century, when a woman decides to take her finances into her own hands, and to provide for a secure and comfortable and dignified retirement, she is confronted with having to make many complicated choices and many difficult decisions. And it’s not surprising, then, for a woman to feel overwhelmed, alone and on her own.

This book and its authors are here to tell all working women two important things. First: You Can Do It. Second: You Are Not Alone. We are here to share the practical wisdom gained from experiences like yours, to help you take control of your life and prepare for your retirement.

We have to help each other prepare so that you, your mother, your sister, your daughter, your best friend, won’t end up like so many elderly women today who are living in poverty and despair and disrespect. Many of these same women lived comfortably before retirement. Poverty in our country has a distinctly feminine face. The largest growing segment of our population is poor, elderly women.

We shouldn’t let this happen in our lives. We must take charge and have faith that in unity there is strength, in knowledge there is power, and in our action there is a future.

Over the last several decades, women across generations have knocked down barriers in the workforce. Today we are doctors and lawyers and CEOs. We build cars and ships and machines and microchips. We design new products that protect our environment and our health. We tend to the sick and cure diseases. We drive trucks in wars. We are senators and governors. We are waitresses and chefs. And at the end of the day, we are still the caretakers of every home — the glue that keeps things from spinning into chaos. When our children, our spouses, or our parents need care and caregiving, we are called on and we are there.

This is what we have accomplished together after decades of hard work. And this hard work must continue in order to achieve equal pay, pensions, and the chance to be caregivers and not be penalized for it in retirement. ...

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A joint project of the Heinz Family Philanthropies and The Women's Institute for a Secure Retirement
Edited by Jeffrey R. Lewis and Cindy Hounsell

Table of Contents:
Foreword
By Teresa Heinz Kerry……………………………………………………..2
Dedication
By Jeffrey R. Lewis.………………………………………………………..5
Chapter One:
Women and Retirement Income: Some Facts to Get You Thinking
By Cindy Hounsell………………………………………………………….7
Chapter Two:
A Lifetime Money Plan
By Elizabeth Warren and Amelia Warren Tyagi.…………………………...12
Chapter Three:
Understanding Stocks, Bonds, and Investing in Financial Markets
By Beth Kobliner……………………………………………………...20
Chapter Four:
Six Things You Need to Know about Social Security
By Jo Anne B. Barnhart…………………………....31
Chapter Five:
Prescription for Your Health Care Future: What You Need for a Healthy,
Worry-Free Future
By E. Lisa Wendt………………………………………………...39
Chapter Six:
Where Will Your Retirement Money Come From?
By members of the Consumer Education Committee of the Actuarial
Foundation……………………………………………………............50
Chapter Seven:
When the Unthinkable Happens: How to Make Financial Plans for
Unexpected Events
By Jeffrey R. Lewis and Maria Cordone..…………………………………..56
Biographies…………………………………………………………………64
Resources…………………………………………………………………...67
Glossary……………………………………………………………………76

Glossary of Terms:

Annuity: Provides a regular series of payments, usually monthly, over a specified period of time, often for life. The purpose is to provide a steady stream of income.

Beneficiary: The person designated to receive pension, life insurance or other benefit payments if the participant or insured dies first.

Covered: A person who works for an employer who provides a plan, but until or unless certain requirements are met, such as length of service, she may not be eligible to participate in or receive benefits from the plan.

Defined Benefit Plan: A traditional pension plan, insured by the government, that pays a certain specified benefit, usually based on age at retirement, rate of pay, and the number of years worked. The employer is responsible for the plan and bears the risk.

Defined Contribution Plan: A retirement plan in which contributions are made by the employee, the employer, or both. The final payout depends on how much is invested and the success of the investments. This type of plan is not insured by the government, and the employee bears the risk.

Early Retirement Age: A term used by Social Security, early retirement age, generally 62, is the earliest age a worker can receive retirement benefits from Social Security.

Employee Retirement Income Security Act (ERISA): The federal law, which took effect in 1976, which regulates private pensions.

401(k) Plan: A voluntary savings plan, named for the section of the tax code that established it. Employees contribute a portion of their salaries, and employers may match some or all of their employees’ contributions. Depending on the type of 401(k), it can be tax deferred or tax free at withdrawal. The employee bears the investment risk.

403(b) Plan: A voluntary savings vehicle for the non-profit sector, also named for the section of the code. It is similar to the 401(k).

Individual Retirement Account (IRA): An IRA is an individual savings account that gives tax advantages to those saving money for retirement.

Joint & Survivor Benefit: The worker receives monthly pension benefits for life, and at the worker’s death, the survivor will continue to receive some portion of those benefits. This option results in lower monthly payments during the worker’s lifetime.

Lump-Sum Payment: Payment of an entire accrued benefit.

Participation: Whether a worker is included in a company’s pension plan. Employers, for example can place requirements on participation such as a worker must work more than 1,000 hours in any year, or must have worked for the employer for at least one year.

Pension Integration: Subtraction of part of an individual’s Social Security benefit amount from the pension benefit amount.

Portability: The ability to take a vested retirement benefit from one employer and roll it either to a retirement plan with another employer, or to an individual retirement account (IRA).

Qualified Domestic Relations Order (QDRO): A court order, or a court-approved property settlement agreement, that requires a pension plan to pay a share of a worker’s pension to an “alternate payee”—usually the ex-spouse.

Roth IRA: Taxes are paid on the contributions before they are put in the Roth IRA (they are not deferred). However, the money is not taxed when it is withdrawn at retirement.

Saver’s Tax Credit: A tax break for low-wage singles and couples who contribute to a 401(k) or an IRA.

SEP-IRA: Simplified Employee Pension (SEP) that allows self-employed workers to save for retirement and small business employers to provide pension benefits to their employees.

SIMPLE IRA: A salary-reduction plan similar to a 401(k) for businesses with 100 people or fewer.

The Windfall Reduction and the Public Pension Off-Set: Both are offsets that affect your Social Security benefit amount if you have worked for federal, state, or local governments that did not contribute to Social Security.

Tax-Deferred: Money that is not taxed at the time you earn it, because you have invested it in a tax-deferred savings vehicle, such as a traditional IRA.

Vested: You have a legal right to receive benefits from a savings or pension plan.

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