Sixty percent of Social Security recipients are women. Women are not a side issue in the debate over how best to finance the current system and whether to replace it partially or totally with a system of individualized private accounts or to add-on subsidized voluntary savings accounts. Women are central to the debate. Women's views on financing and benefits are critical to the President's and Congress's ability to pass legislation changing Social Security in 1999 or any other year.

Women are extremely skeptical that steering payroll taxes into individual private accounts will work for them to provide sufficient security in retirement. Women have lower earnings and live longer than men on average; therefore they have to stretch a smaller income over more years. They save less and have much less access to employment pensions. The security of Social Security as it's presently configured--the life-time guaranteed benefits, the higher returns for lower earning workers, the cost of living adjustments, and the spousal benefits (including benefits for widows and divorced women)--is critical to women. None of the privatization plans put forward provide all these assurances to women.

Moreover, any transition to a system of pre-paid retirement benefits (saving while working to pay for retirement later) while the current pay-as-you-go system is still in place (today's workers pay for today's retirees' benefits), requires the transition generations to pay for two systems at once. This either requires more taxes or other sources of revenue to support both plans or requires that benefits be reduced for the existing plan. This double payment will be particularly disadvantageous to women, since they earn less and have less with which to make the payments. The benefit cuts will affect women disproportionately as well, since they are more dependent on Social Security benefits than are men and since more women than men are in or near poverty even with the current benefit levels. A mandatory "carve out" plan that uses a portion of the payroll tax to create a parallel structure of private individual savings accounts alongside the current insurance-based system is expensive and unnecessarily complicates the Social Security system.

The Universal Savings Accounts proposed by the President have the advantage of not requiring that Social Security funds be diverted to private accounts. Rather the new accounts are to be entirely voluntary, funded by individuals' savings and matched by tax credits (funded by the budget surplus) using a progressive formula (lower income savers get larger matches). Because of the matching funds, many individuals will prefer to save in these new vehicles than in the many existing alternatives. These individual savings accounts still raise several issues that need to be addressed:

• the administrative costs of having many small individual accounts may be high;

• the ownership of the accounts for married and divorced couples must be addressed;

• the future funding of the credits, when the budget does not have a surplus, is a serious fiscal issue.

The President also proposes to transfer the bulk of the surplus to the Social Security Trust Fund and to allow a small portion of it to be invested in equities. These two strategies ensure the solvency of the system for an additional 20 years, to 2055 approximately.

Both insurance-based systems like our current Social Security system and savings-based systems are valid forms of facing risk and financing retirement. Most families use both insurance and savings to protect against risks and provide for "rainy days." The President's proposal seeks to strengthen both types of protection.

Despite the many protections in Social Security that meet women's needs, there are still ways in which the system's rules, which are gender-neutral on their face, disadvantage women:

• using 35 years of earnings to calculate benefits, when far fewer women than men have that many years of paid work--proposals to increase the number of years of earnings used will disadvantage women further;

• not providing earnings credits for years taken away from paid work to provide family care;

• inequities between one- and two-earner couples such that, for couples with the same total pre-retirement income, those who shared the responsibility for earning more equitably have lower retirement benefits from Social Security than more traditional families in which the husband worked for pay substantially more than the wife;

• a drop of between 33 percent and 50 percent in the surviving spouse's Social Security benefits relative to the couple's benefits when both were alive, even though research shows the surviving spouse needs all but 20 percent of the couple's previous income to maintain the same standard of living; the surviving spouse is most typically a woman and the drop in benefits is largest when she worked enough to contribute substantially to the family income.

• the application of the "earnings test" (which requires benefit reductions when retirees earn more than the allowed amount) indiscriminately, regardless of how much prior work history the retiree has; some women who began work late may wish to keep working as long as they can to increase their future Social Security benefits (the President proposes to eliminate the earnings test entirely);

• the application of the "pension offset" rule indiscriminately, regardless of the size of the government pension and Social Security payments received; many female retired civil servants have small government pensions and small Social Security payments, yet Social Security payments are reduced accordingly. This gender-neutral rule affects women more adversely than men because women's benefits are likely to be much smaller because of life-time low earnings; the loss of even these small benefits hurts them disproportionately. Also private pensions are not required to be offset against Social Security; men are more likely to hold private pensions than are women.

Few reform proposals on the table address any of these issues that affect the size of the benefits women receive. Improving women's benefits is critical to reducing poverty among elderly women. Women over 65 are nearly twice as likely to be poor as men over 65 (13 percent vs. 7 percent), even though without Social Security women's poverty rate would be exceptionally high, 52 percent. Older unmarried women are even poorer, with a poverty rate of 22 percent. Social Security has worked well for women, but it could work even better.