Charts and tables that show future retirement benefits usually assume that a person will stay in the same job until they retire.
But for many people, especially women, that's not true. For a variety of reasons -- raising children, caring for children or elderly parents with long-term illnesses, or following their husbands to new jobs in different cities -- women are far more likely than men to have breaks in their careers. And those breaks can cost them a lot of money when they retire.
Women who leave the work force for even a few years can lose as much as half the retirement benefits they would have received had they kept working at one job, according to a recent study by the Bureau of National Affairs. This, combined with the fact that women earn less than 64 percent of men's wages, can leave them with a very small pension.
While some companies are recognizing this problem and taking steps to improve the situation, there are things women can do to make sure they get all the benefits owed to them.
"Most benefit plans don't seem to be geared to this kind of work pattern," says Martha Priddy Patterson, a benefits lawyer in Washington who suggested the study to the bureau and conducted and wrote it for them.
"For the first time, we have a whole generation of women who have been in the workplace," and will be retiring over the next several years, Patterson says. "For many 50- and 60-year-olds, their retirement income pattern is already set."
Today, she notes, "women's career patterns are getting closer to men's." But many women who have entered the work force over the last 20 or 30 years can be adversely affected by past patterns in their retirement benefits and savings.
She cites the case of a 55-year-old woman now earning $24,000 a year. The woman has held three jobs, working part time for 10 years and full time for 17 years, and did not work for eight years. If she keeps working until she's 65, her yearly retirement benefit will be $6,800 or a lump sum of $57,800, compared with a annual benefit of $8,750 or a lump sum of $74,000 if she had stayed with one job for all those years.
In another case, a 45-year-old nurse who has been out of the job market for seven years would have a lump-sum benefit of $52,300 at age 62, versus a benefit of $104,700 under the same plan if she had a continuous, one-job career.
The most important thing women can do to maximize retirement income is to find out how their pension plan works, what to expect from it, and how to get everything that's coming to them. One way women, as well as men, can do this is by paying attention to when they leave a job, says John Kieley, a partner and actuary at Hewitt Associates, a benefits consulting firm. "We see lots of people who leave just prior to being vested," he says. "I've seen people who would have been vested at the end of the next month."
Quitting before being vested, Kieley explains, can penalize the worker in a number of ways, depending on how the pension plan is structured. With a defined contribution plan, such as a 401(k), the worker might miss out on the employer's contribution.
So people leaving a job after just a few years should check with their company benefits department and find out when their vesting date is, and postpone the departure, if possible.
Also, Kieley notes, more companies are allowing new workers to make a tax-free "rollover" of pension money from a previous employer into their pension plan. This keeps the money growing tax-free, and removes the temptation to spend it on something else, he says. So ask about it and take it if it's available.
In many businesses, particularly those with a high number of female workers, such as banks, insurance companies, and hospitals, women often leave for a time and come back to the same employer. When they return, Kieley recommends they inform the pension or savings plan administrator that they are "re-hires." The personnel department probably knows this, but the word might not get to the pension people and credit for earlier service would not be factored into the final pension.
In a similar vein, Patterson recommends that women taking maternity leave inform both personnel and the pension office that this is a maternity leave and not a break in service, which would mean a break in credits toward their pension.
And even if a woman is sure she's only going to be at one job for a few years, that's no reason not to join the retirement plan, Kieley says. "Many people don't take advantage of a savings plan, thinking they'll only be with the company a few years. That's unfortunate. They're missing out on a chance to save every year, and the employer match, if there is one."
For their part, employers could do more to help women who have breaks in service, Patterson says. There should be an ongoing program to educate everyone, men and women, on the importance of retirement benefits and on current plan provisions. If they are not doing so, she suggests companies offer more retirement plan options for women's career paths, liberalize break-in-service rules, and consider pension payments that are calculated on a woman's average pay in her final years, not her lifetime pay, to help those who have a gap in their early years.
While more and more companies are improving their pension policies, Patterson says, "I would argue that it's up to the women themselves to take the right steps. Be clear as to what your benefits and benefit rights are.