By Marcia Mantell, RMA
For centuries, women fought for equal access to money and property. And financial power. The Married Women's Property Act of 1848 allowed married women in New York State to own and control certain property separate from their husbands. Wyoming was the first state to allow women to vote in 1869—50 years before the country ratified the 19th Amendment in 1920.
It wasn’t until 1974 that women were allowed to open their own credit cards and bank accounts without daddy’s signature or their husband’s approval. Unbeknownst to wives, husbands could unilaterally take out a second mortgage on their jointly owned house and property and leave her with the debt. Until 1981. And only starting in 1997 could at-home moms finally save the same amount in their IRA as their husband who worked outside the home.
As we celebrate National Women’s History Month, we honor the women and men who have improved women’s financial access, equality, and power. Yet, here in March 2021, we must also recognize that many women still do not have financial equality at home. While gains continue to be made, we cannot deny there are many married women who still take a financial back seat to their husbands.
Every Married Couple is Unique
Among the 62 million married couples across America, there are any number of combinations of how the couple divides and conquers daily living and how they set up their financial household. Their ability to save for retirement is highly influenced by the opportunities provided by their employers and how much cash they can afford to stash away.
We can categorize married couples’ retirement savings households into several broad categories:
Husband has a 401(k) – Wife has no 401(k)
Husband has no 401(k) – Wife has a 401(k)
Husband has a 401(k) – Wife has an equal sized 401(k)
Husband has a larger 401(k) – Wife has a smaller 401(k)
Husband has a smaller 401(k) – Wife has a larger 401(k)
In same sex-married couples, it’s likely that one spouse will have a larger retirement account than the other.
In many cases, a couple decides to save jointly for their retirement in only one of the spouse’s 401(k)s. And, more often than not, they save in the husband’s plan. Or, if you are one of the 25% of mothers who stays home with the children, you don’t have a 401(k). You may be a wife working in a job that is more traditionally female-centric: at a school, hospital, library, state government, etc., that offers a state pension or union retirement plan instead of a 401(k).
Regardless of the specific situation and how a married couple chooses to save for retirement, we find serious inequities with how 401(k) plans and IRAs operate.
The Imbalance of Financial Power between Spouses
When access to any kind of financial asset requires one spouse to “ask permission” of the other, or when laws allow only one spouse total control of a financial account, the result is a power imbalance in a marriage. A spousal inequality is established and a false sense of ownership to that money is set up between spouses.
This is what is happening with the most important accounts we have that provide retirement income: 401(k)s and IRAs.
Shockingly, if a married woman wants access to retirement assets that happen to be saved in her husband’s accounts—intended for their joint benefit and use—she has absolutely no right to that money. Unless she asks for permission. Or unless her husband is so savvy in the working operations of these plans that he already filled out proper forms granting her permission. Either way, the situation sets up a serious imbalance of financial power. And, they probably have no idea until she wants to spend some of her money.
To be fair, the same financial power imbalance occurs for husbands, and for the spouse with significantly less savings in same-sex married couples. They too are completely removed from their spouse’s 401(k) and IRA. In the spirit of Women’s History Month, and the ongoing efforts to improve financial equality for women, this article addresses the wives who learn they have no access to retirement assets in their husband’s 401(k)s and IRAs.
How 401(k)s Create a Spousal Power Imbalance
Referring to the spouse’s categories above, you can see that most married woman expect some retirement income from her husband’s 401(k). Except in the case where the husband has no 401(k) at all. Even wives who have their own 401(k) learn they have no access or say about his 401(k). In fact, she is prohibited by law from making any decisions about one of the largest assets that will become her retirement “pot of gold.”
All investment and access decisions are singularly in the hands of the worker whose name is on the 401(k). If a wife wants to be involved in the decisions about the 401(k), there is no legal way for her to do so. She is a non-owner and has:
· No view into the accounts,
· No say in the starting or stopping of contribution amounts,
· No ability to select or change investments,
· No way to get information about the account from the financial institution,
· And, worst of all, no way to access so much as a single dollar from this account.
Said another way, she has no purchasing power with money that is fully intended to be hers in retirement. At least until he dies, or they divorce.
That “My 401(k)” Is a Myth for Married Couples
Most married workers, husbands or wives, with a 401(k) claim that account as “mine.” But it was never meant to be for just one of the spouses. Over the last 40 years, the 401(k) has mostly replaced defined benefit (DB) plans. Original DB plans were required to make predictable income payments until the second spouse died. That payout requirement doesn’t come with the 401(k).
However, 401(k)s are fully intended to provide retirement income for both spouses. Wives, too, have a major stake in that “my 401(k)” account owned by husbands. They just don’t have equal rights to it.
Yet, we can clearly see the intent of equality when it comes to death or divorce. If a husband dies while assets are in the plan, it is generally required that the sole beneficiary be his wife. And, if a married couple gets a divorce, the 401(k) assets are generally split 50-50. But, while both spouses are very much alive and happily married, she has no say into her retirement money.
The fact of the matter is most workers think of their benefits in different buckets. Health insurance is a “family” benefit but the 401(k) is “my" retirement money. There are no “my 401(k)” accounts when you’re married. For either spouse.
The Real Danger of “Individual” 401(k)s On Wives
The most concerning situation for wives arises during the rollover of 401(k) money to an IRA. Despite the requirement that the non-owner spouse signs a form agreeing to the transaction, the reality is that she is signing away critical protections offered in a 401(k).
The very real, yet hidden danger is that the wife has just given up her claim to her retirement money. Neither spouse really has any idea this is what just happened. And, it’s not a malicious action on the husband’s part. It has everything to do with the way the laws are written for retirement accounts.
As soon as the qualified plan money in that 401(k) rolls to an IRA, it is now truly and exclusively in an individual account.
The non-owner wife is powerless to be involved in the IRA. And, unlike in a 401(k) where she is the default beneficiary (unless she signed a form agreeing to forfeit this right), not so with an IRA. The IRA owner has exclusive, unfettered rights to name and change beneficiaries at any time. That is about as far from a financial power balance as things get. And, there’s more…
What Happens When She Wants to Spend Some of that IRA Money?
Well, she hopes her husband will agree with her request and grant her permission. All withdrawal decisions are his to control. It is his singular choice if and when to pull out any or all cash. Ultimately, it is his obligation to meet required minimum distributions (RMD) starting at age 72. But she’ll have no view into the account and whether the RMD was met.
Unless a wife has an equal amount of retirement assets owned individually in her own right, there is a serious financial power gap between the spouses they may not realize. Wives, who have gained much financial equality, are backed into a corner. Today, wives must ask their husbands for money to do things they want to in retirement. Is it any different than asking husbands for permission to open a credit card?
Is there any good news?
Fortunately, there are two areas spouses can focus on to help balance the financial power in the relationship. The first: the IRA owner can take several proactive actions once the 401(k) money is in an IRA. This serious flaw can be somewhat remedied:
The owner can fill out a form to grant “full trading authorization” on each IRA. That allows her equal and unlimited access to view, trade, and withdraw money when she wants or needs. Without asking for permission.
Even with trading authorization, her name cannot be on the IRA checkbook. But she can request withdrawals be electronically routed to a bank account.
He can authorize his wife for full check writing access if he fills out a durable Power of Attorney naming his wife as his sole POA and sending the form to the financial institution.
Most importantly, he can show his wife that she is named as his sole, primary beneficiary every year. It is insanely easy to remove a beneficiary—simply click the “remove beneficiary” button.
The second: for wives who also have 401(k)s they can recognize that they are in the driver’s seat and make sure their husbands are well-informed. In these cases, she gets to decide how much money to contribute and which investments to select. But, when it’s time to rollover their plan money to a rollover IRA, it’s important for the wife to allow her spouse access to the account.
Where Do You Go from Here?
While this article focused on women married to men being in a less-than-equal power situation, the same applies for married men and spouses in same-sex married couples. Husbands don’t have any more control of their wives’ 401(k)s than she has of his. Current tax and retirement laws even today create financial inequities between spouses. And, as more wives save and invest in 401(k)s the power imbalance shifts from just getting the short stick on the side of a wife and now includes short-shrifting husbands, too. Neither situation is right. The rules and implications are opaque and hidden behind the excuse of “but they signed the form.”
Financial power imbalance is not always easy to see. And, ten times harder to fix. But you can take the reins in your own home to set up a financial power-house that is equal and balanced.
Here’s a place to start: Without looking at statements or online, how many of these questions can you answer about your spouse’s individual retirement accounts?
1. Where is my spouse’s 401(k)? [Name the financial institution, not the employer]
2. Does my spouse have any IRAs and where are they?
3. What investments are in the IRA and 401(k) and are they meant to deliver growth or safety?
4. Am I the one and only primary beneficiary on every retirement account?
5. Where can I independently see what’s going on in each account?
6. If I call the 800 number to the financial institution, will they give me information about my spouse’s IRA or 401(k)?
7. Can my spouse change the beneficiary on their IRA at the push of a button?
8. How do I get informed of any changes my spouse is making in the accounts?
9. If I want to take money out of my spouse’s IRA, how do I do that?
10. How much money do we have for retirement?
If both of you answered 9 or 10 questions fairly quickly and accurately, it looks like your financial balance in the household is quite good.
If one or both of you answered 7 or 8 questions correctly, there are some actions you should take to even out the balance of financial power.
If either of you answered fewer than 7 correctly, it looks like there is a financial power imbalance. Work together to allow access to accounts, to get information on the accounts, and carve out more time to talk about your retirement savings and how to ensure equality.
Time for Law Changes
This financial inequity and imbalance clearly highlights that we’ve got some room for improvement. Even if a wife has equal amounts saved in her own 401(k) and IRAs, there is a problem. Spouses shouldn’t get access to their own retirement money only upon death and divorce. Asking for permission in this day and age is nothing short of a throwback to 1840s colonial America. On behalf of all women, I say “No thank you” to that.
It’s time to take a fresh look at the laws on the books when it comes to 401(k)s and IRAs. Women’s retirement security is of utmost importance and concern. We know women live longer than men. And, we have clamored for years that women need to get more engaged with money. That’s a pretty tall order when they are completely shut out of their retirement assets. We can do better to ensure financial power balance for married women.
About the author: Marcia Mantell, RMA®, NSSA®
Marcia Mantell is the founder and president of Mantell Retirement Consulting, Inc., a retirement business consultancy. She developments innovative programs, marketing materials, and educational workshops in the financial services industry, for advisors and their clients. She is author of What’s the Deal with Retirement Planning for Women?, What’s the Deal with Social Security for Women? and blogs at BoomerRetirementBriefs.com.
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