American Journal of Nursing 2000 May Volume 100, Issue 5

At the time of this writing, Christine M. deVries was deputy director of programs at the ANA.

Planning Your Retirement

Secure your future with foresight and savings

Cathy's story resonates with millions of women who find they are facing retirement with inadequate resources. A major contributing factor to this situation is little or no pension income. In 1997, the Christian Science Monitor reported that 50% of working women and 80% of retired women had no pensions. Reports from the U.S. Administration on Aging indicate that poverty increases with age and is especially prevalent among older women of color and older women who live alone.

"Inadequate retirement savings is an issue that many nurses may face," says Monica Vollmuth, MA, RN, CS, a member of the ANA's Congress of Nursing Practice and Economics (CNPE) Ad Hoc Committee on Pensions. "But preparing for a secure retirement isn't taught in nursing school."

A secure financial retirement depends on three factors: a Social Security retired-worker benefit, an employer-sponsored pension, and individual savings. Estimates call for employees to replace at least 60% to 80% of their preretirement income to maintain their lifestyle after retirement. Generally, women need even greater retirement income than men because they live longer and more often do so without a spouse.

Social Security

Social Security was created to provide a "floor of protection" for retired workers and their spouses, but it was not intended to be an individual's only source of retirement income. Because many elderly women depend solely on Social Security for retirement funds, they find themselves living at the poverty level. It is critical for nurses to understand how the Social Security system works, how their benefit will be calculated, and whether they are more likely to receive a Social Security benefit based on their own earnings or the earnings of their spouse. Nurses must also be aware that many nonprofit hospitals were not required to participate in the Social Security system until 1984, which could significantly affect their future benefit.

Private Pensions

A Heinz Foundation study shows that only 13% of women aged 65 and older receive a pension; among this group, the median income from the pension is $3,000 per year. Not only do few women receive pensions through employment, but the nature of those pensions has been altered. Before the 1980s, the majority of pensions were termed "defined benefit" plans. These are based on length of service and earnings level and currently cover about two-thirds of individuals with private pensions. The fastest-growing type of coverage, however, is the "defined contribution" plan. This type of pension is the primary plan for more than 15 million American workers, increased from six million in 1981, according to the Employee Benefit Research Institute. Although defined contribution plans are often riskier for the employee (because they are affected by investments), their popularity continues to rise. One type of defined contribution program dominates the market;the 401(k) plan.

"Nurses who have the opportunity to participate in a 401(k) plan should take full advantage of the program," advises Teresa A. Lyons, MBA, BSN, RN, chair of the ANA's CNPE Ad Hoc Committee on Pensions.

An increasing trend affecting employees' ability to earn adequate pension income is that many workers do not stay at their jobs long enough to achieve the highest income replacement rates possible under their pension plans or even to become vested and eligible for any retirement benefits. This is especially true of registered nurses whose average tenure at any one job is three years.

Some employers are experimenting with new types of retirement plans that may benefit the aging registered nurse workforce. For example, a recent survey conducted by Watson Wyatt Worldwide, a pay and compensation consulting firm, found that 16% of 586 employers were offering "phased retirement." This arrangement, which calls for employees approaching normal retirement age to reduce their work hours and job responsibilities (pay reduces accordingly), allows employers to retain skilled workers and employees to gradually ease into retirement.

Personal Savings

Voluntary savings are increasingly being emphasized as a major source of retirement income. However, Americans generally only save about 4.2% of their disposable income, according to the U.S. Department of Labor. The Heinz Foundation report notes that the median savings income among women aged 65 and older totals $860 per year.

In June 1998, the ANA participated in the National Summit on Retirement Savings. This initiative, spearheaded by the Clinton administration, sought to identify the best way of providing retirement resource education and encouraging workers to set aside retirement savings. It's important that nurses utilize good financial planning techniques. "Every individual (whether married or not) should plan for retirement as an independent economic unit," says Martha Priddy Patterson, an employee benefits lawyer. "Don't ignore the possibility of divorce or widowhood. At the very least, all individuals should have a retirement savings account."

ANA Action

The ANA's pension activities have generally focused on three areas: advocating a national portable pension system through legislative and regulatory strategies; developing an ANA retirement savings program; and providing educational programs for registered nurses about financial planning and retirement preparation. Most recently, the ANA's CNPE has prioritized the issue of nurse pensions by creating the Ad Hoc Committee on Pensions to develop pension and retirement information for registered nurses.

"It's critical that all nurses become experts in the area of their own retirement income," Lyons states. "We need to provide women with resources so they become their own financial planners."

Vollmuth agrees: "It's the ANA's responsibility to help make sense of the confusing information being presented to nurses on retirement. This issue is critical as the registered nurse workforce ages in the next 10 years."

Tips for a More Secure Retirement

How do you view your financial future? Determine which steps will increase your retirement resources.

• Create a retirement savings account.
• Take full advantage of any defined contribution pension plan offered by your employer. Maximize your retirement contributions with your current employer, including contributions to a 401(k), if allowed.
• Learn about any defined benefit pension offered by your employer and collect pension information from all former employers.
• Learn financial planning. Join a group or hire a planner to teach you the best way to optimize your personal financial resources.
• Learn how to maximize your Social Security benefit. You may profit greatly by working an extra year to ensure Social Security coverage.
• Learn about your spouse's work and pension history. Do you receive the benefit if your spouse is disabled or dies? Does your spouse have an individual retirement account? Who is the beneficiary?

Resources

Social Security Administration
Visit www.ssa.gov or call (800) 772-1213 to learn how much your Social Security benefit will be worth if you continue in the workforce until retirement.

Women's Institute for a Secure Retirement
Heinz Family Foundation
To order "What Every Woman Needs to Know About Money and Retirement" ($3), call (202) 393-1990 or go to www.wiser.heinz.org .

American Association of Retired Persons (AARP)
To obtain various publications on 401(k), pensions, and general retirement, write to:
AARP,
601 E St, NW
Washington, DC 20049

or visit www.aarp.org .

Department of Labor
The Pension and Welfare Benefit Administration has a number of publications about pensions. Call (800) 998-7542 or visit www.dol.gov/dol/pwba/public/pubs/main.htm .

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