Retirement Tool

Social Security plays an important role in providing economic security for women. Nearly 60 percent of the people receiving Social Security benefits are women. In the 21st century, more women work, pay Social Security taxes and earn credit toward monthly retirement income than at any other time in our nation’s history.

Today, women have challenging choices to make. Some may spend their entire adulthood in a career or job outside the home. Some may work for a few years, leave the labor force to raise children and eventually return to work. And some may choose not to work outside of the home. Whether they work, have worked or have never worked, it is essential that women understand how Social Security can help them and their families.

Women tend to care for many people—spouses, children and parents. And although they have made significant strides, women are more likely to earn less over their lifetimes than men. They are less often covered by private retirement plans and more dependent on Social Security—and for a longer period of time since, on average, women live about five years longer than men.

Social Security offers a basic level of protection to all women covered by this program. When women work, they pay taxes into the Social Security system, providing for their own benefits. In addition, their husbands’ earnings can give them Social Security ­coverage as well. Women who do not work are often covered through their husbands’ work and can receive benefits when they retire, become disabled or die.
Over the years, the level of Social Security protection for women has been strengthened. For example, the amount of benefits for a surviving spouse was raised and benefits for disabled spouses also increased. Economic protection for divorced women improved with the removal of the requirement that the divorced wife must be dependent on her husband. Also, the number of years the couple must be married in order for the divorced spouse to qualify for benefits decreased.

Besides understanding the benefits to which they may be entitled, women also need to be aware of other aspects of the Social Security program. They need to know about providing Social Security coverage for anyone they may hire as a household worker or childcare provider. And they need to know some basics like what to do if they change their names.

While Social Security is a vital program, especially for women, it was never intended to cover all of their financial needs. To live comfortably, everyone needs to plan accordingly. Living within one’s means and saving for the future are big parts of that plan.

Source: Social Security Administration

Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) is a plan in which a small business with 100 or fewer employees can offer retirement benefits through employee salary reductions and matching contributions (similar to those found in a 401(k) plan). It can be either a SIMPLE IRA or a SIMPLE 401(k). SIMPLE IRA plans impose few administrative burdens on employers because IRAs are owned by the employees and the bank or financial institution receiving the funds does most of the paperwork. While each has some different features, including contribution limits and the availability of loans, required employer contributions are immediately 100 percent vested in both.

Source: U.S. Department of Labor

Employee Stock Ownership Plan (ESOP) is a type of defined contribution plan that is invested primarily in employer stock.

Source: U.S. Department of Labor

A Federal law that sets standards of protection for individuals in most voluntarily established, private-sector retirement plans. ERISA requires plans to provide participants with plan information, including important facts about plan features and funding; sets minimum standards for participation, vesting, benefit accrual, and funding; provides fiduciary responsibilities for those who manage and control plan assets; requires plans to establish a claims and appeals process for participants to get benefits from their plans; gives participants the right to sue for benefits and breaches of fiduciary duty; and, if a defined benefit plan is terminated, guarantees payment of certain benefits through a federally chartered corporation, known as the Pension Benefit Guaranty Corporation (PBGC).

Source: U.S. Department of Labor

In a defined contribution plan, the employee and/or the employer contribute to the employee’s individual account under the plan. The employee often decides how their accounts are invested. The amount in the account at distribution includes the contributions and investment gains or losses, minus any investment and administrative fees. The contributions and earnings are not taxed until distribution. The value of the account will change based on the value and performance of the investments.

Source: U.S. Department of Labor

A type of defined benefit plan that includes some elements that are similar to a defined contribution plan because the benefit amount is computed based on a formula using contribution and earning credits, and each participant has a hypothetical account. Cash balance plans are more likely than traditional defined benefit plans to make lump sum distributions.

Your employer’s retirement savings plan is an essential part of your future financial security. It is important to understand how your plan works and what benefits you will receive. Just as you would keep track of money that you put in a bank or other financial institution, it is in your best interest to keep track of your retirement benefits.

Those responsible for the management and oversight of your retirement plan must follow certain rules for operating the plan, handling the plan’s money and overseeing the firms that manage the money. You should also understand and monitor your retirement plan and your benefits.

• Different types of retirement plans;
• What information you can get about your plan;
• When and how you can receive retirement benefits;
• What to do if you have a question or find a mistake;
• The responsibilities of those who manage the plan and its investments;
• Your responsibilities to understand and monitor your plan; and
• Specific circumstances such as how a divorce or change of employer ownership may affect your retirement benefit.

Source: U.S. Department of Labor