Tuesday, October 23, 2007

Why one woman turned down a $40,000 pay raise

Vickie Elisa, 49, of Atlanta, Georgia, says she turned down a job offer that included a substantial pay raise for one reason only: to retain her pension at her current government job. The New York Times' Fran Hawthorne profiles Ms. Elisa, and WISER, in an article today in its Retirement section. Like Ms. Elisa, more and more women are realizing that great jobs can no longer be determined by high salaries alone. Factors such as health insurance, a pension or a 401(k) employer match often mean more money in the long run, and this is important particularly, as WISER's president Cindy Hounsell points out in the article, for women who would like to work into their 70s, but are unable to physically.

Have factors other than pay ever caused you to reconsider or turn down a job? Contact WISER at info@wiserwomen.org to tell your story. Full NYT article here.

For Women, Greater Obstacles to Retirement
Published: October 23, 2007

VICKIE ELISA was ready to jump at the offer of a consulting position — and a $40,000 raise — in Washington six years ago. But a benefits expert whom she worked with at the DeKalb County Board of Health in Atlanta stopped her short. The new job had no pension plan, the expert pointed out, whereas Ms. Elisa would be eligible for one from the State of Georgia that would pay as much as 90 percent of her salary after she retired.

“I never ran the numbers that way,” said Ms. Elisa, now 49. “I always said, ‘I don’t need to think about this till I’m 60.’”

Since turning down the consulting offer, Ms. Elisa has done a lot more thinking about retirement. Instead of retiring in three years at 52, she is planning to work until she is 57 or even 61, which would increase her pension by at least 21 percent. She is also planning to put future 401(k) contributions into more aggressive stocks.

More women are doing such retirement financial analysis, for good reason. They can’t afford to retire. Whether they have a traditional pension or a 401(k) plan, women consistently enter retirement with about half as much money as men do.

The explanations have been known for years. Women generally earn only about 80 percent of what men earn. That hurts because the formula for a traditional pension is based on income, while the lower earnings make it harder for women to put money aside in a 401(k).

Yet those skimpier 401(k)’s must stretch over a longer time frame, as women outlive men by about five years, on average.

Moreover, women tend to work in service or part-time jobs that often do not provide retirement plans, and they are more likely to drop out temporarily to take care of children and sick parents, which cuts into their earnings and pension accumulation. When they do save, women gravitate toward conservative investments. Although that can be wise in volatile times, such a strategy usually means lower earnings over the long run.

Since these problems are well known, why have employers and their investment managers done so little to change things? Companies make some efforts to educate women on staff, but they contend that antidiscrimination laws constrain them. For their part, women’s advocates say they need to focus on the bigger issue of pay disparity.

So the burden is falling largely on women themselves — to save more, to invest more aggressively and to postpone retirement.

“What do women have to do now? That’s really the question,” said M. Cindy Hounsell, president of the Washington advocacy group Women’s Institute for a Secure Retirement, known as Wiser, and the expert who worked with Ms. Elisa. “Women are starting to talk, but I don’t think they realize the magnitude of the problem.”

1 comment:

tbarr60 said...

I've been noticing a number of stories about how well paid civil servants are. Whether it's small city managers making $200,000 or uniformed servants retiring while still in their forties, it seems like the government is not compensating in a competitive way but are overpaying rather than improving work conditions so that they could attract employees. In this case, they are apparently over compensating by $40,000.