Even With a Pension, A Woman Should Save Early for Retirement

THE number of full-time women workers in the United States receiving pension coverage has reached its highest point ever.

Nevertheless, half as many women as men retiring from the work force receive pensions, and their benefits are typically less than half those of men, according to the Pension Rights Center in Washington.

The remedy, analysts say, is for women to start saving for retirement early. Women should ask themselves: ``Do I have a pension, and what am I going to do about this?,'' says Cindy Hounsell, coordinator of the Women's Pension Policy Consortium in Washington. The consortium is sponsoring a campaign called ``Pensions Not Posies,'' to educate women about planning for retirement.

In order to grow a $500,000 nest egg for retirement, a woman only has to save $1,800 a year if she starts in her 20s, says Martha Priddy Patterson, director of Employee Benefits Policy & Analysis for KPMG Peat Marwick's consulting practice. If a woman starts in her 40s, she says, she must save $5,000 a year. If she waits until age 50, she must save $15,000 annually. (This assumes a 10 percent return.)

Reasons to save

Analysts cite several reasons why women need to save early for retirement: First, they earn less money on average than men, so it is more difficult to build adequate savings. Women, more often than men, also go in and out of the work force to raise children, and they change jobs more frequently.

Many women, therefore, are not on the job long enough to become vested in a pension plan. Women over 25 stay with an employer an average of only 4.8 years, compared with 6.6 years for men, according to the Bureau of Labor Statistics. Vesting usually takes five years.

One reason women put off saving for retirement is because they tend to save for family events first, such as children's education, says John Michel, vice president of retirement planning for Merrill Lynch & Co. ``That has caused them not to necessarily view their own personal retirement as a priority,'' he says.

There is no easy rule as to how much women should save for retirement, Ms. Priddy Patterson says. On average, women should start saving about 5 percent of their before-tax annual income when they are in their 20s, she says. This is assuming that women expect to receive Social Security and employer pension benefits.

Bold investments

Women also should become bolder investors, Priddy Patterson says. ``What seems to be a persistent attitude is women's greater reluctance to assume risk - they want the safer, lower-return investment - and that means that they have to save much, much more,'' she says.

B. Douglas Bernheim, an economics professor at Stanford University, recommends that women save about 20 percent of their after-tax income each year.

``For the average women ... they don't have as much earnings growth [as men], so they need to save sooner,'' he says. And women live an average of eight years longer than men, so they are more likely to outlive their assets, analysts say.

Mr. Bernheim is the author of a 1993 report sponsored by Merrill Lynch about saving for retirement. The report shows that a single female earning $30,000 a year with a pension should save $26,180 by age 35; $50,540 by 45; $81,660 by 55; and $107,670 by age 65.

That same female without a pension would have to save $35,180 by age 35; $71,410 by 45; $115,360 by 55; and $155,600 by 65. Bernheim stresses that these figures are conservative and are based on the optimistic assumption that taxes will not increase and Social Security will not be scaled back.

As companies continue to trim work forces, men's employment patterns are beginning to mirror women's, Ms. Hounsell says. This suggests that the issue of inadequate pension coverage is beginning to affect men, too. ``Even the men ... who lost their jobs are not going to have the benefits that they thought,'' she says.

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