Happy New Year's Boomers: Your Retirement Resolutions

To be a Boomer means many things. Even as our bodies age and our eyes lose some of their focus, one thing we can all see clearly, is our retirement. Are we really looking though?

Jimi Hendrix once wrote: "I used to live in a room full of mirrors; all I could see was me. I take my spirit and I crash my mirrors, now the whole world is here for me to see." When it comes to the reflection staring back at us, our retirement, like those images, are a search for imperfection. We don't look at ourselves to admire how good we look; we look for flaws. We don't imagine a future; we see the relics of past decisions.

If you consider yourself a Baby Boomer, the reflection in the mirror is an image that polarizes: we are comfortable in the what the future holds or we are worried. There is good reasons for this feeling of either hope or dispair, with no real middle ground. This group has seen the demise of the defined benefit plan (pensions) and the introduction of the defined contribution plan (401(k)). You have seen the greatest bull market in investing history and witnessed two major crashes that have rattled your confidence in the decade following. You are the first generation to realize that your future is in your hands and you were not ready for the responsibility.

If you are younger than a Boomer, you are the first  generation to have never seen any other opportunity to finance your future than with a 401(k). And you have come to realize that this is not the plan it was intended to be. 401(k) plans were not designed to be the one and only vehicle for retirement. We were sold a notion that this was the end-all-to-be-all plan that would afford us a better retirement than our parents only to find out that it hinged on two extremely volatile concepts: your ability to consistently earn money and your level of contribution. Your 401(k) became your anchor and your wings.

I imagine that many of you will look back on the highlights of 2011 and find yourself in either one or two camps: you were able to hold onto your job, pay your bills and put some money away for retirement or you will be looking back at a year of indecision, regret and the promise to do better in 2012. You may be celebrating simply getting through it or wishing it never happened. To that, I offer some simple resolutions to embrace in 2012.

One: Revisit your idea of retirement. You can promise to save more money for your future, increasing your contribution to your plan or perhaps, in the absence of a plan, begin one of your own using IRAs. But you do this without really looking at that future. Retirement will not be the same of any two of us. For some it will be a life of struggle, an ongoing effort to make ends meet when they may never  met while they were working. For some it will be the realization that the balance between the now and the future relies on a level of personal sacrifice we were smart enough to embrace while we were working. For others, it will simply be a resignation of sorts, a belief that it will never happen.

Retirement is three things: A time when we find new opportunities outside the confines of what we called a career, a place of unimaginable risk and/or a chance to take a breather. It is not a place of no work and all play. It is not a time spent waiting for the end to come. It is not what we imagine because, if we looked closely at that image we see flaws. So we don't look as closely at those who are retired, examine how they live and ask if this is what they had planned. In revisiting the idea of retirement, your concept of that future, consider looking closer. If you don't like what you see, resolve to change it. But don't look away.

Two: Don't reflect on what you've done. You made mistakes; we all have. Some of us took too much risk, some not enough. Some contributed as much to their retirement as their budgets allowed, others did not. Some of us made poor mortgage or credit decisions, others did not. No matter what you did or didn't do, looking back will not improve the look forward.

Looking forward doesn't mean turning your back on on any of those events. It means focusing all of your energy on fixing them. This is a twofold effort, the first being getting the budget you may not have in line with your paycheck and focusing on paying down your mortgage (keep in mind that even if your home is underwater - meaning your mortgage is greater than the value of the house itself - the interest you pay on than loan is eating away at your future invest-able or save-able dollars). Does this mean you should not put money away in a 401(k) plan and redirect every dollar to the day-to-day? Not at all. Keep in mind that a 5% contribution will, in almost every instance, not impact your take home pay.

Three: Don't over think the process. From every corner of the financial world you will hear: rebalance your 401(k). If you chose a minimum of four index funds spread across four sectors, or four ETFs that do the same thing, rebalancing is a waste of time. You diversify so you can capture ups in one market and downside moves in another and your contribution doesn't allow you to buy more when one market moves up and allows you to buy more when it goes down.

We want to think we are in control when in fact, the only thing you actually control is how much money you want to put in. Markets will do what they do best: move. It might be up one day and down the next. It doesn't really matter. What matters is that you do something and in 2012, it should be significantly more than you are doing now.

Four: Stop being selfless. One of the hurdles we are told, for women investors specifically, is their inability to put themselves before their family. This is a cause for concern of course but not  a disaster in the making. Take a good long and hard look at your family and ask yourself: could I spend my retirement years living with any of them? Do they want you to?

Five: Embrace the truth. Now there will be an increased amount of pressure from every financial professional to get advice on your investments. This educational effort will evolve in the next several years from long, drawn out seminars on how your 401(k) works to short, ADD friendly videos that last several minutes and offer key points on what to do. The truth still relies on your ability to put more money away. Five percent will net you 25% of your current take home in retirement. A ten percent contribution over the average working career will pay you about 50% of what you earn today in retirement. Fifteen percent contributed to a 401(k) plan with average (modest) historical returns will allow you to live on 75% of your current income. Can you handle that truth?

Six: Stop worrying about it. According to HealthGuidance.org, you are killing yourself with worry. Michael Thomas writes: "Worrying leads to stress and stress has been linked with a number of health problems. People who suffer from high levels of stress are much more prone to cardiovascular disease, gastrointestinal issues, weight problems and there has even been a link made between stress levels and certain cancers." Instead resolve to do more saving than you have ever done, spend less than you did last year and embrace the reality of what fixed income is. Retirement is fixed income. Resolve to live like that now.

Paul Petillo is the Managing Editor of BlueCollarDollar.com/Target2025.com and a fellow Boomer.

This Show was for Boomers: On the radio with Steve Cooperstein

On Monday, we had Steve Cooperstein on the Financial Impact Factor Radio show with Paul Petillo, managing editor of BlueCollarDollar.com/Target2025.com and a fellow Boomer. Steve's recent book was the topic for today's show: “Implications of the Perceptions of Post Retirement Risk for the Life Insurance Industry: Inside Track Marketing Opportunity, But Requiring Focused Retooling”.

It may have been written for advisors and academics and the insurance industry, but in doing so it offers us some interesting insights into how these folks think about us: the end user. Did I mention that Steve is an actuary?

 We talked to him about annuities and Long Term Care Insurance, the impact both of these products have on all age groups, what is wrong with them and how they can be improved. We solved a great deal in the hour we had together!



   

Listen to internet radiowith

Paul Petillo of Target2025.com/BlueCollarDollar.com

and Dave Kittredge and Dave Ng

of FinancialFootprint.com

on

The Financial Impact Factor

at Blog Talk Radio

Investor Equality for Women starts with (Proxy) Votes

Over the last year or two, I have grappled with a situation that many has plagued the most knowledgeable investor advocates, been largely ignored by directors of not only corporate boards and the mutual funds who vote for their shareholders, and as the business of investing has expanded, the folks who bring you the ability to invest. This situation has not improved and in fact, doesn't show any signs of doing so in the near-term.

Martha Burk is a political psychologist, women’s issues expert, and director of the Corporate Accountability Project for the National Council of Women’s Organizations (NCWO) and because of this involvement with these issues, has helped advise numerous presidential candidates over her fifty year career. And even as she recently pointed out in a column posted in the East Texas Review concerning the number of women now serving on the boards of directors as less than representative of the workforce at large, the difficulties of making the corporate world more representative of the workforce that now represents a majority of women comes with a cost.

Her points are valid when she suggests that the problem is not as simple to solve as it seems. Simply selling your shares in a particular institution will not change the way the corporation is run, how representative it is of the shareholders or worse, how your mutual fund, the proxy voter for every 401(k) investor, approves or disapproves the boards the vote for on your behalf. While money can always walk, the message it sends is muted when it comes to the numerous layers, twists and turns it must take when trying to send a message.

Last week on the Financial Impact Factor radio, we spoke with Lewis Braham about the sad state of the proxy vote. For those of you who may not be versed, the proxy vote is what you mutual fund does for you when it comes time to vote for the underlying investments in your fund choice. For an S&P 500 index fund, your mutual fund company votes for you on 500 separate occasions. While the conversation during this broadcast was centered on the mutual fund giant Vanguard and their ability to say one thing and do another when it comes to this task, the issues is systemic amongst almost all mutual funds.

And while Ms. Burk does suggest that the corporate boards need to be more representative of the shareholders, those shareholders are in the greatest majority in the funds we own and not as individual investors who could simply sell their shares and move on. And while this sort of revolutionary stance feels good, it also jeopardizes the long-term financial goals that women already trail when compared to their male counterparts.

So from which direction do we approach this complicated topic? If you were to suggest that women find more suitable mutual fund investments, and Ms. Burk does by offering a socially responsible fund family such as PaxWorld, the cost of doing so can be so egregious as to actually add to the problem. Because most SRI type funds are actively managed with a host of caveats (on what and how they should invest the fund assets) placed before its investment teams, the cost of running such funds can run as high as 2%. Add to that, or should I say subtract from the paltry returns most of these funds have posted, and you could easily trail the broadest of benchmarks by 5% or more in returns. Advocacy apparently has a very high cost.

Nothing says responsible like keeping the socially conscious from gaining ground for retirement. Which brings us to another fork in the road. While Ms. Burk wants better exposure at the corporate level, a move that would increase the voice on executive compensation, there is no guarantee that much would change.

In fact, women still trail their executive male cohorts in terms of top level, high paying jobs. This keeps the statistics for female compensations statistically lower, often skewing the numbers. More women at the top would level those numbers dramatically but as we have witnessed, over the last ten years, the pace has been much slower than most would like to see.

Over the last six months, I have had numerous conversations with women concerning this topic and two things stand out.

One, I'm not so sure women believe me when I suggest that the financial crisis we recently had would have in large part been preventable had women been at the helm. Even women who have made their living in the world of finance seem surprised by this proclamation. While women have their own set of biases when it comes to investing, intuition plays a major role in how they approach decisions. To advance to the top, empirical evidence, the sort of thing that men survive on often displaces this feeling of what is right and wrong. They may know better but convincing men to act otherwise is often back-burnered in favor of profits.

Two, because of this parsing of information to make it more digestible to the men who already reside at the top of these companies, this additional layer of thinking about what is right and perhaps what might be wrong would have kept the markets from reaching bubble-like status. Do women get exuberant about investing? Of course they do. But for different reasons. Do women desire the same compensation? Of course they do and when they do, the

The solution will be slow in coming. As Ms. Burk does point out, the workforce is now more skewed towards women while their presence at the executive level, both corporately and on the boards of mutual fund companies has been stagnant. It has been well noted that women who participate in their retirement plans at work has increased, it still lags behind men in total invested dollars.

It is easy to suggest that women increase their contributions to these plans. But doing so only enables the current corporate structure to stay in place. Ms. Burk's assertion is correct: "The money female workers pour into these retirement funds is huge, and the folks that control the votes ought to pay attention to who is represented on the investment end. All these entities should have policies against supporting all-male boards."

Beautifully Broken: Boomer Resolutions

Even as the news told us with the turn of the calendar that the first Baby Boomer was eligible to retire, all of us wondered if they did. Were their retirement accounts so much better than ours? Did they make promises that they kept? Were they able to dance between the raindrops rather than simply weather the storm? We may never know more than we know about ourselves. But what do we know about ourselves and our retirement plans? Does the answer lie in how we approach our New Years resolutions?

By the time you read this, your New Year's resolutions may already be broken. If not, in the next couple of days they will be seriously tested. This doesn't make you a bad person - in part because you have broken them so often in the past. But there is a pattern in your lapses and if you promised yourself to build a better financial plan, focus more of your income on your retirement accounts, and/or simply spend less, breaking those commitments can have longer range effects that simply gaining a few pounds.

Why do we break the resolutions in the first place? In large part, our resolutions are well intended. But they tend to be an all-or nothing type of promise to not do better so much as to change course. This might relatively easy to do if you are 20 years old. But the older you get, the longer it will take for that ship you call life to readjust its headings.

Which brings us to the second reason we fail to follow through: lack of patience. As much as I hate to bring up the dieting analogy, it does apply to the way you treat your finances. Nothing is instant. You can't will away years of bad habits and as soon as one of those bad habits creeps into your diet, its over. In the world of finance, it might be a purchase done outside of your budget that has the ripple effect of bringing the resolution down.

Statistics have shown that resolutions morph from something that is a need-to-keep promise to one's self to a nice-to-keep promise. This is another reason why, by the end of the first week in January, you have back-burnered the promise to increase your 401(k) contribution, put your credit cards away, talk to your children about money, talk to your husband about the course of your retirement plan. Even if the idea was to build a plan, something anything more than what you have haphazardly pieced together, you have already lost some of the goals you set forth.

Men have no problem breaking resolutions if they make them at all. Women often see it breaking a resolution as a sign of some weakness. Both are wrong. Here are five easy steps to make your financial promises stick in the new year - and if you haven't made any, this will help you make some commitment without the pressure of a change in the calendar.

1. Be patient. No retirement plan was hatched in a day or a week or a year. Most 401(k) plans have internet access available to their plan participants. Log on and find out where you are in terms of contribution. If it is less than 5%, change it to 5%. This is usually the threshold where your pre-tax contribution has no effect on your take-home pay.

2. If you are a couple, do this together. One resolution to keep is that retirement plans are best used if they are combined. Not physically, but on a decision level. One plan might be better, the other might be more generous in the match. One of you might earn more where a 5% contribution is actually a larger dollar amount. One plan might have better investment opportunities. If don't approach this together, you will not get the benefit of two plans as one.

3. Add 1% a month every month thereafter until you reach the 12% mark. This will be not-as-painful but will require you readjust your spending habits.

4. Educate yourself about risk and how much you can embrace. Women have been studied and most of those surveys have drawn similar conclusions: women are more pragmatic when it comes to investments. If men and women looked at what they want and how their plan could help to achieve it, they might find themselves much better situated 15 years down the road than if they chased the next-hot investment cycle.

5. Take a look at your beneficiaries. Your investments and insurances need to be specific. Your will needs to be clear. And if you do this, you will find that this forces you to look deep into the future at a time when one of you - most likely, the woman, will still be around.

Paul Petillo is the managing editor of BlueCollarDollar.com and Target2025.com and a fellow Boomer.

Boomer Women may Want to Work Longer: But will they be Allowed?

Boomer women, faced with lesser time in the workforce are increasingly looking at the option of working longer. The question is: will their employer see this as beneficial? And if they do, how far are they willing to go to permit this extended work career?

We know two things in this post or almost post-recession era we are currently in: One, older workers are returning to work or not leaving the workforce at all and two, younger workers who traditionally made up the bulk of the workforce, are being crowded out by this newer pool of older workers. Delaying retirement due to economic concerns that have stymied our financial well-being has been news for quite some time. But what if the new face of the workforce is slightly wrinkled and framed in grey?

According to a study conducted by WorkplaceFlexibility.org and authored by Richard W. Johnson, Senior Fellow at The Urban Institute: "As the U.S. population ages and the number of Americans reaching traditional retirement ages increases, employers may need to attract and retain more older workers, many of whom are highly experienced, knowledgeable, and skilled." Basing the study on well-known assumptions, Mr. Johnson explores the shift in the workplace to accomodate the older worker who is increasingly choosing to hang on to their employment longer.

Among those assumptions is a longer life. As the older population reaches retirement age, they are finding the ability to continue working a possibility in large part because the work these folks tend to do is less physically demanding that many jobs were just a decade ago. While financial concerns are most likely to enter into the newsworthy conversations, the study seems to suggest that this trend is centered more on women than men.

The result is increased complications both for the company, the worker and the benefits they might or should be receiving at that age. The result is an experiment unlike any conducted prior to this where the lines blur between what is full-time work and what is full-time retirement.

Phased retirement, the new buzzword in this process involves reduced hours and responsibilities that include some perks normally reserved for women and men in the workplace who temporarily leave because of families. Among those phased perks are "flexible work arrangements, including part-time employment, flexible schedules, telework, contract work, and job sharing."

For the employer, the fringe benefits often accessible to the older workforce, such as traditional pensions could open the door to age discrimination. And this could hurt women more than men. Even as women have made great strides over the last several decades in pay, benefits and workplace populations, it is this group that is most likely to continue, or want to continue working beyond the traditional age of 65. Men, despite the reports of longer and healthier lives, choose to retire more now than when the jobs they engaged in were more physically demanding and strenuous.

Because the focus of this report is on the effects various policies and practices surrounding this transitional time of a workers life, Mr. Johnson points out some of the incentives and disincentives for working or not. Social Security has been gradually pushing back the retirement age and will probably continue to do so in the coming years. Defined benefit plans or pensions further complicate this trend by penalizing the annuitized payment should the worker continue to be employed.

The shift over the last three decades to defined contribution plans (401(k)s, 403(b)s) are much more accommodating to this segment of the workforce that wants to work longer. They can continue to contribute to a DC plan long after the traditional pension retirement age has been reached, adding the potential for greater lifetime incomes in the process. Because of these types of plans, workers reaching retirement age are more likely to work at least two-three years longer than they may have previously anticipated.

The study also revealed that if the employer provides health benefits for early retirees. of which according to a 2009 study conducted by the Kaiser Foundation only 29% of the employers do, that person is more likely to retire. Take them away or not provide these benefits and the worker will stay on the job longer.

Because Social Security benefits are calculated on a 35 year work history, one that favors men who have never had any interruption in their work history, this group is more likely to take their leave from the workforce. For women, each additional year worked eliminates a zero earnings year that may have come due to family leave because of children or the need to take care of aging parents.

The question facing employers is whether to retain these workers. In most instances, the older worker is at the top of the pay scale and poses a greater cost on the health benefits provided. Mr. Johnson notes: "Another study found that employers were less likely to call back older job applicants than otherwise identical younger applicants (Lahey, 2008). And it takes laid-off workers age 50 and older much longer than younger workers to become reemployed, even though older unemployed workers appear to search just as intensively as their younger counterparts (Johnson and Mommaerts, 2010)." Even if the desire to work longer is there, the opportunities may be limited.

Employers have acknowledged that the pool of potential retirees in the coming years will have a negative impact on the skill level of their employees. Yet few have done anything to address this shortfall of talent and skill. "For example, in the Cornell survey only 26 percent of employers allowing phased retirement would provide the same health benefits to workers after they reduced their hours. About two-fifths of employers allowing phased retirement in the Cornell survey, but only 9 percent of employers in the Ernst & Young survey, would allow in-service pension benefits."

The problem will need to be addressed by Congress at some point. Women Boomers face the greatest challenge in the coming years as they attempt to make up earnings shortfalls and look to adjust their schedules to a more flexible arrangement.

Employers will also need to address the issue as well. they may say that the talent looking to retire is worth retaining. But their current policies don't suggest they are doing much in the way of providing incentives. They may say they desire the older workforce. In practice, they have yet to make substantive moves to permit this choice.

Paul Petillo is the managing editor of Target2025.com/BlueCollarDollar.com and a fellow Boomer.

You're a Boomer, Remember?

I often post here, generalizing on the Boomer as a single entity. Yet Boomer women face some greater challenges. And in many instances, it is the approach financial planners take that makes all the difference.

Douglas Wolk writes about comics, not retirement planning, women or independence. Yet, sometimes, quite by accident, the world of the comic book becomes a portal into a world we think we know, or better, wish we knew better. Writing in this past Sunday's NYTimes Book Review, he suggested: "There’s nothing quite as creepy as a creepy drawing: almost real, but just wrong enough to suggest it’s wearing only the torn-off skin of reality." Perhaps, unless we are considering retirement. It offers the same creepy look at our own mortality.  The question is: who is better at realizing what lays ahead, men or women?


There was a survey published recently focused on women and ultimately, how to sell them the same products that men seem so eager to purchase. The process of meeting with someone who knows about finances is filled with potential (from a man's perspective) and more often than not, trepidation (from a woman's).

Exercising caution is a natural reaction for women of all ages as they approach most of the decisions they make. They seem to be gifted with the ability to see just a little further down the road than men and when it comes to finances, this sort of foresight can be especially difficult when financial professionals are attempting to sell them the products that are supposedly well-suited for both sexes.

I have often pointed out that one of the greatest dangers facing women of any age is not their ability to manage their finances. Most understand the need to exert control over the money they earn. The outside influence on how well they do this and the danger they face in making the wrong move is often the result of the men in their lives.


Couples often visit a financial planner together. And financial professionals play to that image in their ads, depicting women in an almost antiquated role of dependent on the success of their husbands, he with arms wrapped around her, providing protection. This is not how women see the world unfortunately and financial professionals, by playing to this stereotype, are alienating the very segment of the population they need to work with the most.

Women, according to the latest survey done by yet another group looking to identify away to tap this group, are not as dependent on their husbands as these financial pros believe. But, at the same time, they must deal with the repercussive effects of how men handle the family finances, the stereotypical approach they often take with those decisions and the role men play in the long-term financial health of women.

If you are a Boomer woman, in the plus fifty range, you have a much greater likelihood of having grown up with the notion that a man was the ultimate protector of your fate, your future and your financial prosperity. Younger women have found, perhaps through trial and error or simply through the power of observation that this is not and should not be the case. Yet when faced with a financial decision, one that could impact them in retirement, women still turn to men for advice. And men fall quite comfortably into that role even if they don't have a clue.

So why do men fail women when it comes to money? We tend to be narrow-minded thinkers - I'm generalizing of course. But we look at the target rather than everything that can play a role in hitting the bull's eye. A man is more likely to see the goal as something that is down a long, straight line. Women know that life is a series of twists and turns and wonder why financial products don't offer these sorts of flexible options.

Flexibility in financial planning relies on the ability to juggle numerous options that decentralize the nest egg - a term that I find increasingly annoying. There is no nest and in many cases, the concept of an egg waiting to hatch portrays exactly this sort of anticipation that good things will happen. They sometimes do. But you need to know what's going on is what you planned to happen and not something left to chance.

There are basically four things you need to consider for a healthy retirement and if your financial planner isn't addressing each of these, you need to find one that will.


First is debt. Nothing draws down your finances faster than servicing something you borrowed money to have. Women are more likely than men to understand this concept.  But men are more likely to assume debt based on their belief that they are in a good financial position. And when are they most commonly feeling this way: when they see how much they have accumulated for retirement and feel good about it.


Two, a financial planner will in most instances, lump insurance needs into one basket. Even if you are both covered by Medicare, the cost of your financing your health in retirement has been estimated at about $200,000 per couple. This "lumping" of different insurance needs, or worse, underestimating those needs is a mistake that should be easy to spot yet is often overlooked. The cost of insuring a working woman is statistically higher than that of a man. Why would you consider those costs differently when planning for retirement, which often leads to not enough insurance in place for the person most likely to live the longest?


Three, taxes and inflation get more complicated and confusing in retirement. Most folks don't anticipate the tax rate of working well into retirement and simply figure they will add value to their retirement income by remaining in the workforce. Depending on how much you are drawing from your retirement accounts, almost half of what you earn can be taxed. Men, who tend to be more optimistic - acting in the role of assuring spouse, often overlook the effect of inflation as well, which will have a greater impact on their longer living spouse. Your financial advisor should be addressing this while you are working.


Four, consolidation of accounts is a typical mistake.  In some instances, it might seem like a good idea. But once again, it is that misguided nest egg notion that allows this to happen. A good financial planner will suggest numerous accounts distant enough from each other to prevent one from impacting the other. Women and men have an increased chance of cross-over investing during their work years (something I addressed a couple of days ago) and as a result, increase the risk in those investments. Keeping accounts separate, diversified and complimentary is key to keeping them safe from a single disaster.

And that disaster, as it was pointed out recently in the NYTimes, can come from your own inability to handle your finances due to dementia. A good financial planner will involve the children in this account structuring as well and in doing so, enable them to review how well the plan is progressing once you enter retirement. Men might balk at this notion. But it is a prudent and wise move and women should insist they know.

Paul Petillo is the Managing Editor of Target2025.com/BlueCollarDollar.com and a fellow Boomer.

Could Lifetime Income Benefit Boomer Women?

Boomers are faced with some immediate challenges.  Among those, after working for decades on "how much I can accumulate" for retirement, we are now asked to look at "how much lifetime income" those investments can generate.  This is not necessarily good news for Boomer women.

Those who have followed me on this site know that as a rule, I don't like annuities. For most of us, this sort of  - and I hesitate to call it such - investment is something you purchase to guarantee income.  Part mutual fund, part insurance policy and wholly too expensive on both counts, annuities, for whatever reason you purchase them, offer the buyer some peace-of-mind.  For women, annuities are particularly troubling and expensive. But the concept of guaranteed income for women in particular, is worth exploring.

When Amy Matsui of the National Women's Law Center spoke to the Senate Special Committee on Aging recently, she opened with the cold hard facts of retirement.  Women she noted tended to have smaller balances in their defined contribution plans or IRAs when compared to men ($34,000 on average compared to the $70,000 men had accumulated).

She strongly criticized the concept of these sorts of plans in part because of the self-directed nature of the plans, the feeble if inadequate investment selections available and the inherent risks these plans pose to the average, even experienced investor. Because women tend to stay in jobs for less time than men, the chances that any defined contribution plan asset accumulation would be less, even below the minimum required balance that would allow them to keep the plan at an old employer.  So they receive the lump sum payment, with the taxes and penalties and of course, the problem of starting over.

Ms. Matsui also points out that women are exposed to "longevity risk" more so than men. When a lump sum is paid by a 401(k) at retirement, the investor is left with managing that money so as to not run out. This can be a particularly daunting task for women - not because they are less savvy investors, many are more so than men - but because they will live longer and may outlive their spouses as well.

But this becomes even more problematic for the women looking to guarantee a lifetime income.  Annuities do not favor the women who need them most. When they shop for annuities, women tend to have smaller amounts to invest and therefore are subject to higher fees and lower effective returns than their male counterpart. Add to that, as Ms. Matsui points out, unlike defined benefit plans (pensions) which are not allowed by law to use gender as a factor in payouts, annuities use what she calls "gender-distinct mortality tables".  Women, because they live longer, get paid less than men even if they purchase the same product with the same dollar amount.

Because of that she fears that Social Security has become the retirement plan women can rely on, even if it isn't for much. Yet the solutions are relatively easy.

Among those solutions is the inclusion of some sort of lifetime income investment in all 401(k) plans. Tucked inside these plans, because of the law guiding how these plans are governed, women would benefit from the gender neutral handling of those options.

Rollover requirements on small balances could be changed as well allowing women to leave smaller balances in their former employer's 401(k). And, with the help of Congress, annuity products could be changed in how they treat women who live longer.

This could alter how women participate in the plans available to them. While it is widely acknowledged that only half the workers in the US have access to defined contribution plans at their place of employment, women lag behind their male counterparts in how they utilize them (only 40% of the women who have access to these plans use them). Is it because women want to know what these investments would be worth when they retire?  If they did, participation might increase.

Ms. Matsui points to the discriminatory process involved in purchasing an annuity.  She points out that a women, purchasing an identical product offered to a man, would receive over 9% less in monthly payments. With increased participation from employees inside a 401(k), the annuity it is believed would cost less and pay more as the risk is spread across a wider, more diverse group.  This doesn't occur when purchasing the annuity as a stand-alone product.

She admitted that she understood the administrative costs associated with maintaining these low balances in an employer's plan.  But Ms. Matsui argued that these low balances can add significant value to a low or moderate income woman at retirement.  The trend towards thinking of retirement in terms of income stream is gaining momentum and small balances should be considered as well.  Some is better than nothing, in other words, and when the post-retirement account can be enhanced even slightly, the quality of the retirees life increases.

The NWLC also wants spousal protection to be among the considerations when looking at the retirement plans of women. Because of the lump-sum payout of the 401(k), the protection in retirement of the spouse is left to the discretion of the retiree.  In a defined benefit plan, the spouse can receive benefits.

When the rollover occurs, the spouse may not receive what they may have gotten once the investment is reinvested and beneficiaries are chosen.  (Wills do not govern how IRAs are distributed leaving the chance that these retirement investment could go to children, even former spouses.) A change that would guarantee 50% to the spouse, unless waived would be a great stride toward improving the spousal benefit and income.

While some of these changes would provide only minimal changes in the lifetime income stream of low- to mid-income level, women, those incremental improvements could go a long way in increasing the quality of life, offsetting the total dependence on Social Security and promote the way we look at retirement from a total return on investments to how much will I get in retirement.

You can read Amy's testimony in pdf form by clicking here.

Paul Petillo is the managing editor of Target2025.com/BlueCollarDollar.com and a fellow Boomer