I am pleased to be here today to discuss our work on the retirement security challenges of older women. During work on our
COVID-19 has resulted in catastrophic loss of life and substantial damage to the global economy, stability, and security. Worldwide, there were 27,738,000 reported cases and 900,000 reported deaths due to COVID-19 as of
Early in the pandemic, state stay-at-home orders and federal recommendations to postpone nonessential medical procedures contributed to declines in hospital/facility stays and patient visits for non-COVID-related conditions or impairments.
The current economic downturn also will likely have adverse effects on the retirement security of future retirees. The overall
Workers who experience unemployment are likely not able to contribute to their retirement accounts, and may need to draw on those accounts to cover expenses./4
Older workers’ retirement security may be particularly affected because they have less time before retirement to recover from any impact of a recession on savings, housing, and investments./5
We are also in a low interest rate environment, and the
In 2017, we issued a special report on the nation’s retirement system that incorporated insights from a panel of retirement experts on how to better promote a secure and adequate retirement with dignity for all./6
The panel agreed on the need for a comprehensive evaluation of the nation’s approach to financing retirement. We recommended that
My statement today summarizes our
For this work, we held 14 focus groups on financial security in retirement with older women (generally over age 70) in nine locations throughout the country, and administered a written questionnaire. We talked to a total of 190 women. While our findings from focus groups are non-generalizable, they provide rich insights into the perspectives of older women. We also analyzed recent nationally representative data from the 2019
According to our estimates from the 2019
According to the 2019 CPS, about 43 percent of women age 70 and over are married while about 57 percent are not married. Unmarried women may be at greater risk than married women of poverty in old age because they cannot pool resources with a spouse, including against the risks of job loss, illness, or disability, and therefore unmarried women may be more vulnerable to economic and financial shocks. In addition, women who never married are also unable to take advantage of some federal benefits and other protections that are conferred through marriage, including a
Older Women Perceived Their Retirement Security to be Influenced by an Unpredictable Future
Women in all 14 of our focus groups said they felt uncertainty or fear about meeting future expenses, suggesting a sense of fragility around retirement security./8
Of the 179 women who responded to our written questionnaire about whether they expect their financial situation to change, 91 reported that they expected their situation to stay about the same, 50 reported that they expected it to deteriorate, and 15 reported that they expected their financial situation to improve./9
Women in all our focus groups defined financial security in retirement as the ability to maintain their independence.
Some of the reasons women gave for feeling financially secure were that they had multiple sources of income, household savings and investments, home equity, money set aside for emergency expenses, or that they were debt free or frugal. The reasons women gave for feeling financially insecure were being unable to pay for essential expenses, were in debt, lacked savings, or had to work or rely on assistance for housing or food expenses to make ends meet.
Table 1: Top Five Future Concerns of Questionnaire Respondents
Table omitted: https://www.aging.senate.gov/imo/media/doc/SCA_GAO_Dodaro_9_24_2020.pdf
Source: GAO participant questionnaire.
Women said that issues related to work, including pay inequality and not being able to work as long or as much as they wanted to, hindered their retirement security. Women in 13 focus groups discussed how caregiving responsibilities can influence a woman’s ability to work. In five focus groups, women said they stopped working before they wanted to in order to care for an ill family member. When we asked our focus groups what, if anything, should be done to safeguard the financial security of older women in America, several of our focus groups discussed how equal pay should be addressed.
Pay Disparity Illustration
To illustrate the potential effect of an earnings gap between men and women working fulltime for an entire career, we simulated hypothetical 44-year careers for a woman and a man, each earning the median for fulltime workers for their age and gender between ages 21 and 65, using
This finding suggests that the woman earning the median at age 65 (
Source: GAO Analysis 2019 Current Population Survey Annual Social and Economic Supplement | GAO-20-718T
Women in the majority of our focus groups said they perceived a societal expectation among their generation that men handled the finances, especially in the context of marriage./10
After divorce, some women explained that they needed to rebuild credit and pay legal fees, and that they lost spousal health insurance coverage./11
Some women said that divorce reduced their income relative to their expenses by moving them from a two-earner household to a one-earner household, which is a circumstance widows confront as well. Women in three focus groups who were single mothers said that they prioritized spending on their children’s needs over saving for retirement, which left them worse off financially.
All of our focus groups discussed how a lack of personal finance education hindered their retirement security. Some women said they did not fully understand that monthly
In almost all of our focus groups, women said they wished they had made better financial decisions when they were younger.
For example, some focus group participants said they practiced poor financial habits when they were younger or had regrets about their financial decisions, such as overspending, accumulating debt, making poor investment decisions, and not saving for retirement earlier in life. One woman shared the following sentiment. « My mindset was making sure I got up to go to work every day, make sure there was food on the table, rent was paid, and all that. Who… cared about retirement at that time? I was like, as long as I was getting up and going to work, it was fine. But as that day came, I realized I should have been paying more attention. Instead of putting
We asked women what they did not understand about finances when they were younger that they wish they had known. In response, some women said they faced challenges understanding how investments worked or how important employer matching policies and compound interest were to building wealth. Women in 12 focus groups said that seeking advice from a financial advisor was a positive experience for them, but women in 10 focus groups had negative experiences, which they said included receiving poor advice, paying high fees, or becoming a victim of fraud. In a few focus groups, women noted that finding a trustworthy financial advisor can be difficult or that knowing the correct questions to ask professionals can be challenging.
We asked women who completed our written questionnaire to provide advice for younger women about how to prepare financially for retirement. Of the 163 responses to this question, saving and investing were the two most frequent pieces of advice, as shown in figure 1.
Figure 1: Top Four Pieces of Advice for Younger Women from Older Women on Our Written Questionnaire
Figure omitted: https://www.aging.senate.gov/imo/media/doc/SCA_GAO_Dodaro_9_24_2020.pdf
Although we did not directly ask focus group participants about any specific costs, concerns about the cost of health care were discussed frequently in all 14 focus groups. Women raised concerns about being able to afford medical procedures or prescription drugs, which may not be covered or fully covered by their health insurance. Women in three focus groups shared stories of skipping dental exams or vaccinations because they could not afford them. Of the 161 women who responded to a question on our written questionnaire about whether Medicare was sufficient to cover all of their current healthcare needs, only 28 reported that it was.
In the majority of our focus groups women discussed how health care costs would likely increase as they aged, and how difficult it is to predict how much money they will need for their future health care needs. Women said their prescriptions had increased in price or were no longer being covered by their insurance, which they said sometimes left them in positions where they had to use a cheaper alternative or forgo the medication altogether. Women in eight of our focus groups shared concerns about potentially needing to pay for long-term care as they age. Concern over health care costs was one of the topics discussed more frequently in our rural focus groups than our urban focus groups.
Costs associated with housing were a topic of extensive discussion in 13 focus groups. Property taxes were a concern among half of our focus groups, with some women saying they have experienced large increases in their property taxes in recent years. Other examples of costly housing expenses discussed in our focus groups included condominium fees, homeowners insurance, utilities, yard work, and home repairs. Renting presented challenges for women in four focus groups who were concerned about the high cost of rent or the unpredictability of rent increases. Older Americans devote a substantially larger share of their total budgets to medical care and shelter than others, and costs for medical care and shelter have generally increased more rapidly than costs for most other goods and services.
Fewer than Half of Households with Women age 70 and Older Reported a High Level of Confidence in Their Retirement Security
According to data from the 2016 Survey of Consumer Finances (SCF), an estimated 42 percent of households with women age 70 and older reported having a high level of confidence in their retirement security./13
An estimated 25 percent of households of women 70 and older reported a low level of confidence in retirement security, and 33 percent reported a medium level of confidence. Households with women age 70 and older had a median level of household wealth –defined as net worth, or assets minus debt– of approximately
Figure 2: Distribution of Income and Wealth of Households with Women 70 and Older, by Retirement Confidence Level
Figure omitted: https://www.aging.senate.gov/imo/media/doc/SCA_GAO_Dodaro_9_24_2020.pdf
We saw differences in retirement confidence by race, homeownership, retirement plan participation, education, and marital status. For example, about 23 percent of households with white respondents and 40 percent of those with
In high confidence households, financial assets made up almost half of the total household assets. These high confidence households had about six times the financial assets of those that reported medium retirement confidence, and 18 times the financial assets of those reporting low retirement confidence (see fig. 3). Older women’s households reporting high retirement confidence also had more non-financial assets, such as home values, than those in households reporting low retirement confidence–but the difference in the amount of non-financial assets between these groups of households was smaller than the difference in the amount of financial assets. Among households with older women reporting low retirement confidence, a relatively small portion of their assets were financial, limiting their access to liquidity and their ability to leverage compound interest for wealth building.
Figure 3: Financial and Non-Financial Assets of Households with Women 70 and Older, by Retirement Confidence Level
Figure omitted: https://www.aging.senate.gov/imo/media/doc/SCA_GAO_Dodaro_9_24_2020.pdf.
Liquidity, or the degree to which an asset can be bought or sold quickly at a price reflecting its value, is an important predictor of retirement confidence for households of older women at all levels of wealth. The most liquid assets are checking, savings, and other transaction accounts. We found that almost 40 percent of households with older women had less than
On Average, Rural Households Also Have Low Liquidity.
We found that households with older women–those age 70 and over–in rural areas had relatively low liquidity. For the median older rural woman’s household, financial assets, which are relatively liquid, were worth 14 percent of total household assets. For the median older urban woman’s household, financial assets were worth 36 percent of total household assets.
According to the
Between 2013 and 2016, rural median household income increased by 2 percent while median income of urban households increased by 10 percent. Median household wealth of rural households increased more than it did for urban households (25 and 13 percent, respectively), but mean household wealth of urban households increased more than it did for rural households (27 and 3 percent, respectively), reflecting in part the growth of the assets of highly wealthy households concentrated in urban areas.
Homeownership, often a large portion of total assets, is a means of building wealth but can also constrain household liquidity. In our multivariate models, owning a home was associated with a 2 to 3 times higher odds of having high retirement confidence when the home does not constrain liquidity. Home equity was a larger portion of wealth for low confidence homeowners than for high confidence homeowners. Among low confidence households with older women that owned homes, equity in their primary home made up 70 percent of their household wealth, on average, compared to 39 percent of household wealth for households reporting high retirement confidence.
Guaranteed income from defined benefit plans and
For millions of older women’s households, the present value of their future
Most women have less income to maintain their living standards in retirement than they did when they were working, and, on average, unsurprisingly, they increasingly rely on
Women generally spent their non-housing assets first, rather than selling their home (or otherwise accessing home equity). A significant decline in non-housing wealth contributed to a decline in the overall wealth of the older cohort across the age range of 74 and 90. The older cohort began at age 74-78 when 58 percent were unmarried. By the time they were 86-90, 80 percent were unmarried. These changes with age may help explain the sense of fragility around their retirement security that we heard expressed by women broadly across our focus groups.
Chairman Collins, Ranking Member Casey and Members of the Subcommittee, this concludes my prepared remarks. I would be happy to answer any questions you may have.
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1 See GAO, Retirement Security: Older Women Report Facing a Financially Uncertain Future, GAO-20-435 (
3 See GAO, Income Security: Older Adults and the 2007-2009 Recession, GAO-12-76 (
4 The CARES Act waives the 10 percent additional tax for certain early withdrawals from eligible retirement accounts for amounts up to
5 See GAO-12-76.
6 See GAO, The Nation’s Retirement System: A Comprehensive Re-evaluation Is Needed to Better Promote Future Retirement Security, GAO-18-111SP (
7 See GAO-20-435.
8 To ensure we incorporated a range of perspectives from older women living in different locations and communities, we conducted the 14 focus groups in all four Census regions: Northeast, South, Midwest, and West. To ensure we incorporated the perspectives of women in geographically distant or more isolated communities, in addition to urban areas, we also conducted groups in rural locations within each of the four regions. We composed groups of women of similar socioeconomic status to facilitate open discussion about personal finances, but also composed groups with the goal of racial diversity, age diversity above age 70, including single and married women, and those still working as well as retirees.
9 These numbers do not add to 179 because 21 women responded that they did not know, and 2 responded that the question was not applicable.
10 While we report our findings by the number of focus groups in which a topic was discussed, it does not necessarily mean that there was a consensus or agreement among all focus group participants on a given topic. However, we often report perspectives that were commonly shared across a large number of focus groups, or were frequently discussed by participants. We spoke to 190 women in total for this report. The majority were 70 to 80 years-old, and 19 were over 80. Among these women, 129 were white, 42 were
11 We recently reported that establishing a legal claim to a former spouse’s retirement account can be costly and complex. See GAO. Retirement Security: DOL Could Better Inform Divorcing Parties About Dividing Savings, GAO-20-541 (
12 The initial enrollment period for Medicare Parts A and B usually begins 3 months prior to the month an individual turns 65 and ends 3 months after the month the individual turns 65. In general, individuals who do not enroll in Part B during their initial enrollment period must pay a permanent penalty of increased monthly premiums if they choose to enroll at a later date. In addition, signing up late for Part D prescription drug coverage can result in late enrollment penalties, which are based on the amount of time an individual has gone without Part D coverage or other creditable prescription drug coverage.
13 The low, medium and high retirement confidence groups are based on household reporting of how adequate its income in retirement is to maintain its standard of living. Low confidence in retirement security (or low retirement confidence) indicates a household reported that its income was not adequate to maintain living standards in retirement, medium means the household reported enough income to maintain its living standards in retirement, and high means the household reported more than enough income to maintain living standards. The statistics in this section from the SCF are estimates based on a sample of households in which the head of the household or the spouse of the head of the household was a woman age 70 or older. The respondent to the SCF survey was generally the head of household, which might not have been a woman.