I love to see photos of the women’s marches back in the first part of the 1900s. When women took a bold stance to win their right to vote. It’s been over 100 years since women rallied for such an important cause. Today, we may need to once again lace up our walking shoes to fight for another critical right. We need to fight for married women and 401(k)s. The laws on the books today purposely cut married women out of their own retirement income. And they don’t realize it until it is much too late.
Lacking Legal Rights
401(k) retirement plans were in their infancy just as boomer women were getting a foothold in the workforce. That was in the early 1980s. Most boomer women were married by then. The majority were having children. And they were juggling it all.
Across that generation, no one had any idea what was to come. That these 401(k)s would become so important decades later. And they would be critical for creating income in retirement.
Fast forward to today. Shockingly, married women do not have the same legal rights as their husbands when it comes to securing their retirement income. We are living in a time of unfair laws levied directly from the US Congress.
When Congress wrote the 401(k) rules and regulations back in the mid-1970s, the country was very different. Considerations for married women were not part of the equation.
The result is a financial power imbalance between married people. You can read more details about what is happening in the law in an blog I wrote back in 2021. Nothing much has changed.
It’s time again to address the shortcomings and realities of our retirement laws against married women. Women’s History Month is the best time to do just that.
I Love Getting Emails from People who Read my Articles
In March, 2021, I wrote an article for Retirement Daily, Married Couples: Isn’t That My 401(k) Too? That article goes along with the blog post mentioned above.
Just this February, a gentleman emailed me out of the clear blue. He said he had been researching everywhere to find an answer to his married women and 401(k)s question. And happened to stumble upon my article from 2021.
In his email he asked me to answer a critical question. And to settle a dispute between his wife and him. The question was: Is my wife correct that my IRA is half hers?
I was taken aback by this question. It is EXACTLY the issue I have been standing on a soapbox about for years. He got right to my key point. There is a big—maybe gigantic—problem for married women and 401(k)s.
Let’s Paint the Story
The man who emailed me I’ll call Richard. His wife of 20 years is Sally. He retired a couple of years ago with a sizeable 401(k). When he left the job, he decided to roll his 401(k) to an IRA at a retail investment firm. He wanted to manage the investments himself, especially now that he had time on his hands.
As with most rollovers initiated by a worker, there is a catch. No one knows about it before trying to get money out of a 401(k) plan. Before the money could leave the 401(k) plan, his wife would have to agree that he could move it.
She literally has to sign a spousal consent form. This grants the worker, Richard in this case, permission to roll 401(k) money to an IRA. Like most wives do when their husbands ask her to sign something, she of course signed on the dotted line. And Richard rolled the money into his own IRA.
But What Did Sally Just Do as A Married Woman with That 401(k)?
Sally was an at-home mom and worked part-time here and there over the years. Like half of married women who are in traditional marriages, he was the bigger earner. And she ran everything going on at home.
Every couple is different in how they communicate. In the email from Richard, he mentioned that they talked about their investments. So when Richard told Sally how his new IRA was doing, there was good news after the first few months. His investments had positive returns. Then, a few investments turned sour, and the IRA balance wasn’t looking so good.
Sally made it clear she was not happy with this latest news and turn of events. She told Richard she wanted to take the wheel of this IRA. She would be in control now. At least for her half.
Furthermore, she wanted to use a chunk of that money to pay off a car loan and the mortgage.
Unfortunately for Sally, she was going to find out from me that she was not going to get her way.
Wives Sign Off All Rights to Their Future Retirement Finances
It is reasonable for any spouse to think they are entitled to half of their retirement money. After all, they had been saving together for years. Even though the money was directed into only one spouse’s account. That shouldn’t matter. This money is for both spouses to have a comfortable retirement.
Ah, but it does matter. And in a really big way.
Sally found out the hard way after she gave her approval for the rollover how married women and 401(k)s don’t mix. The IRA became 100% Richard’s money. Furthermore, she believed she could invest at least some of the IRA assets now that the 401(k) was closed. That she could choose new mutual funds or individual stocks and bonds. Or that she could pull some of the money out to pay for other things. She even thought she had access to information about her money in this IRA.
That is absolutely not correct.
When Sally signed that spousal consent form it wasn’t only to allow Richard to move the money from an employer 401(k) plan to an IRA. What she really did was give up all rights to that money.
But She Had Access to that Money When It Was in the 401(k), Right?
Wrong.
Sally, like all wives, never had any control over that account. Only Richard owned the 401(k) housed at his employer. Another unpleasant reality of our laws today. There’s only ever one owner of a 401(k) plan. Or a 403(b) plan. Or any other kind of tax-deferred retirement savings plan.
The only real difference between plans held in an employer plan and an IRA is the death benefit. 401(k)s offer better protection than IRAs to the spouse if the owner dies first.
Otherwise, the spouse who didn’t own the plan never had any rights to that money from the very beginning. That is to say, Sally never had any access to the account. She had no say in how much he was contributing, or what investments he chose.
Well, what rights did she have as Richard’s wife? Only the right to 50% of any remaining assets if he died with money still in the 401(k).
Holy moly. Really? I have no say in Dan’s 401(k)? And he has no say in mine? Them’s the rules, folks.
Spousal Consent Forms and Rollovers Aren’t Really the Issue
It is extremely common to misunderstand these spousal consent forms. They are not at all clear. Yes, by signing the form, she gives up her rights as a beneficiary to receive any money after he dies.
But that’s not the entire issue. For married women and 401(k)s, and IRAs, it’s never stated she can’t spend any of that money. And has no way to access it. No checkbook. No debit card. And she sure can’t call the financial institution to request a transfer.
No matter how much Richard and Sally love each other, she has absolutely no claim on this money. Technically and legally, 401(k)s and IRAs are individual accounts. There is no such thing as a joint IRA.
The rollover to an IRA made no difference in her access to this money meant for her retirement.
I’m sure Sally was seething when Richard shared my answer with her. But it’s important to know the spouse who owns the 401(k) and rolls to an IRA is doing nothing wrong. This is how the retirement laws work. Today. In 2024. In America.
But we only find that out much too late in the game of life.
Our US Laws Create a Rift in Marriages
Married women are shocked to learn they are completely subordinated under the law when it comes to 401(k)s and IRAs. In a twist of fate, some husbands have been subordinated under their wives.
Unlike the early Boomer women who stayed at home, in many households today, both spouses work outside the home. And each typically saves at least something in the retirement plan if offered at work.
After 40 years of saving, one spouse is going to have a smaller 401(k). The other a bigger 401(k). That spouse will solely control the bigger account. And in most cases today, that is the husband.
So you might be wondering what the heck Congress was thinking back in 1974. That’s when the Employee Retirement Income Security Act, called ERISA, passed. And again in 1987 when the 401(k) was created. I wonder that every day!
Today, those are the drastically outdated, antiquated, and downright outrageous laws that must be changed. That’s why I believe it is time for women across the country to unite and fight. We are completely locked out of income for our own retirement security. By law.
Should Every Woman Have Her Own IRA?
Absolutely, positively YES. It doesn’t matter if you have a big job and do great things for clients, patients, or humankind. Or if you are an at-home wife and mother. The IRA is the single most important financial account a woman can have.
Followed by a checking account. And a credit card or two!
I am so adamant about this I think that should be the law. That every single person must have an IRA. Why is that so important? For the same reasons I shared with Richard when I exchanged emails with him answering his question.
- By law, only one person owns IRAs. That means the owner:
- Does not have to grant access to anyone to see the account or the statements.
- Is the only one who invests and manages that account.
- Is the only one who can make transactions—the only one who can decide when to put money into the IRA. Or to take money out.
- More importantly, the owner is the sole decision-maker to name beneficiaries. And there is no law saying the beneficiary must be your spouse. (This situation especially kills me.)
What Should Spouses Do Now that They Know the Realities of IRAs?
Retirement laws don’t only stink for wives. They also penalize husbands who didn’t work where they had access to employer plans. Or in cases when the plan was better at her job.
There’s no winner when married couples find out their entire retirement paycheck is solely controlled by just one of the spouses. No longer will a paycheck from an employer land in the joint checking account to pay the bills. In retirement, paychecks must be created from your own personal assets. Like from IRAs.
There are limited, but important actions each owner of an IRA should make.
- Confirm you’ve named your spouse as your sole, primary beneficiary. This ensures they get 100% of the remaining retirement money if you die first.
- You can set up limited access on IRAs so your spouse can see what is going on in the account.
- If you are both savvy traders, IRAs do allow for trading authorization to a third party. That way each spouse has full access to making investment changes.
- An owner can also get “interested 3rd party” statements sent directly to the spouse. This is a duplicate statement for the non-owner spouse.
A truly unfortunate situation for married couples
Here’s an unsuspecting situation that can test even the most solid marriages. It’s up to each couple to work together to ease the financial power imbalance between them. The law sure isn’t going to help.
I did have one last bit of advice for Richard in our email exchange. I suggested if he really wanted to stay married another 20 years, something had to change. (Said with a great deal of humor!)
First was to set up and fund an IRA for Sally. If it’s not too late. And then, the two should probably talk more about how they will be creating retirement income. It’s really not so simple when only one spouse controls all the money.
I really hope to hear from him again one day. That he and Sally made it another 40 years!
More Resources about Married Women and 401(k)s
Read more of my posts that cover different angles of the financial power imbalance for married couples:
Take the fun quiz for married couples
The Decade that Changed It All
And to benchmark where the 401(k)s in your household stack up, check out this average balance by age article.
