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Investing tops Soc. Security
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July 20, 1998: 2:57 p.m. ET
Report says women would be better off under system of investment accounts
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WASHINGTON (CNNfn) -- Most retired women in the United States would be better off under a system of individually-owned private investment accounts than under the current Social Security system, according to a report released Monday.
Virtually all women -- whether they are stay-at-home moms or corporate executives across the range of incomes -- would receive a greater income in retirement if they opted for 401(k)-style private investment plans, the report said.
The report, titled "Benefits of Social Security Privatization for Women," was done by the Cato Institute, a conservative, free-market oriented Washington think tank.
The study concludes the "dual entitlement" rule of Social Security means women who have worked all their lives and paid payroll taxes often receive less Social Security benefit in retirement than women who have worked less or not at all. This is because dual entitlement prevents a women from collecting her own retirement and spousal benefit if her husband's income is greater, according to the study.
A fully privatized Social Security system -- which would still have safety nets for the most poor -- would give women the ability to make their own economic decisions.
The Cato study found that women who retired in 1981 would receive from $100 to $1,500 a month more under a fully privatized plan than under Social Security, said Darcy Olsen, who wrote the report.
The researchers compared benefits for women under Social Security, under a partially privatized "double-decker" system and under a fully privatized plan in which couples share their income from the beginning of the marriage.
They looked at a group of women who retired in 1981 and formed a second group of women by projecting the likely earnings of women across the range of income.
Of the women in the 1981 group, only 3 percent would have received lower benefits in a privatized system than the current Social Security system, according to the study.
Lower-income women, who are not used to investing in private capital markets, would not be disadvantaged by a private system, Olsen said. A bigger private pension market would offer prospective female investors more information about investing. Such advice is already available in seminars at libraries, Olsen added. 
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