Women and Money: The Decade that Changed It All

The 1990s ushered in 4 new laws that finally broke through the financial logjam

But that all changed. Thanks to a rowdy decade that ushered in more laws that built on earlier ones allowing women to work and to keep working even after having children. These new laws opened access to saving for retirement and keeping retirement savings tax-advantaged when going in and out of the workforce. And protecting benefits for older workers.

In honor of Women’s History Month, we’re looking back at the 1990s. The most pivotal decade for women and money.

The Evolution of Woman and Money…A Long, Winding, and Very Male History

The evolution of trade, bartering, accounting, and money go back well before antiquity. Accounting records date back more than 7,000 years in Mesopotamia. Minting money has history in Greece, starting late in the 7^th Century BCE. Italian coins were common some 550 years before the Common Era. Silver pennies became currency starting around 800 throughout Western Europe. And China introduced paper money in the 1200’s.

The need to use what we know as a financial system today has thousands of years of history. It changed and adapted to accommodate progress, property and estate transfers, and laws. The history of money was based in each culture by laws set forth by the ruler, king, or leader of the country. And that person was a man.

Women had other roles in developing the community. Roles that were based at home, not at the bank. There was no need an no opportunity for women and money.

Noting a 7,000-year history of money, it is interesting that women and money is a very recent concept. In the US, women’s opportunities are less than 200 years old (starting with some property transfers). And maybe the most important and pivotal changes came about only 30 years ago.

The 1990s: When Women Finally Found a Financial Foothold

At almost glacial pace, women were making some inroads in owning personal financial assets. Laws were on the books prohibiting women access to financial rights. So new laws were needed to fix the situation.

Without the ability to create a strong financial foundation, women were completely dependent members of society. And they certainly could not create a secure retirement. Or even get their own credit card!

New laws slowly opened opportunities for women and money. Arguably, the most important law was winning the right to vote in 1920. The late 1930s saw laws created for Social Security and unemployment benefits. The 1970s were incredibly important for moms who wanted to work to have the opportunity to do so. And, to open up credit, even if a woman didn’t have a husband.

But then came the 1990s. Congress came alive passing in quick succession four new laws that greatly influenced women and money. These laws focused on protecting older worker’s benefits, retirement benefits, and jobs. While the biggest opportunities were for women, these are, in fact, gender-neutral laws. But the advances were pivotal for women’s financial and retirement security.

Only 175 Years of Laws for Women and Money

Laws that supported women’s financial futures were few and far between, but important. A few highlights:

• 1848, New York State allowed property to be passed to women under the Married Woman’s Property Act
• 1920, the 19^th Amendment to the Constitution was ratified.
• 1935 Social Security provides retirement income to workers…but not their wives
• 1939 Social Security Amendments recognize wives and widows and provides retirement benefits
• 1974, IRAs become a savings vehicle under the Employee Retirement Income Security Act , but not for at-home moms
• 1974, the Equal Credit Opportunity Act passed. For the first time, women can obtain credit without daddy’s or hubby’s signature.
• 1978, the Pregnancy Discrimination Act forced employers to behave. They could no longer fire a woman for being pregnant, and must allow her to return to her job, or a similar job.

Each of these laws and others were critical building blocks for financial opportunity for women. And they are all so recent! And they laid the groundwork for the 1990s. That’s the real start to women and money and the financial growth opportunities needed to thrive in today’s world.

Let’s look at the four important new laws for women and money from the 1990s.

Thanks to One Women, We Can All Work Longer with Benefits

In practice, employers could no longer reduce or eliminate benefits for their 65 and older employees. For financial households, this was critical legislation. By 1990, pension plans started to slip away. And those that were in place were trying to clawback benefits. Not allowed under this law, thus protecting retirement income.

Also, by the early 1990s, older workers were often working to shore up retirement assets. Women who had stayed home raising a family for 20 years were trying to make up time at work. But without assurance of health insurance, older workers faced much higher costs than younger workers.

The Backstory: The Power of One Woman

This law was the result of one woman’s fight for her retirement benefits.  June Betts, a worker in the State of Ohio system became disabled and had to leave employment at age 61.

Prior to her exit, the state’s pension system added an age limitation to receiving a pension. In addition, there were separate benefits for retirees and for disabled retirees.

When June retired due to disability, would she get a disabled retiree benefit? Or, would she get the regular retiree benefit? She was awarded the lower retiree benefit rather than the disability retirement benefit.

It was a significant monthly income difference. So, she took her case to court and sued the State of Ohio. And she won. The original pension plan did not include discriminatory age requirements. This restriction was added to save the pension plan money. But in doing so, hurt the retiree.

Congress noticed this outcome. The ruling sent a strong signal that tougher laws were needed to protect older workers’ benefits.

There were 45 co-sponsors to this bill in the Senate. Only one woman, Senator Barbara Mikulski (D-MD) was among the co-sponsors. With only two women in the Senate, she was 50% of the women senators.

Expanding Rollovers of Qualified Retirement Plan Assets

When we think about the impact on women and money, these new laws fundamentally changed their retirement security in two critical ways:

• When their husbands moved from job to job, his retirement savings could now stay in retirement accounts. It didn’t get cashed out, protecting retirement assets for their future retirement.
• For working women, the reality is they pop in and out of the workforce frequently. Especially after having children and dealing with the realities of raising a family. To keep their retirement savings intact for the future is critical to having enough money in retirement.

With the stroke of a pen, this new law set into motion our ability to keep retirement money in favorable, tax-deferred status for decades. And secured the assets for both men and women in a “retirement lock box.”

The Backstory: “Free Money” Wasn’t Free

Until these “rollover rules” were in place, tax-sheltered accounts were typically cashed out when a worker left their job. The former employer sent the worker a check with the amount he or she had saved for retirement. With no information or instructions.

If the worker happened to know they could turn it over to an IRA within 60 days, those savings would stay tax-deferred until retirement. But who would know that back in 1992?

Instead, a former employee received a check in the mail and said, “Wow! Look at this! Free money!” Then when tax time rolled around, they were shocked to find out they owed income tax on that “free money.” And, they lost all the ground they made investing those assets for a future retirement.

But now, with new laws in place, when employees change jobs for any reason, their retirement plan money remains protected. Workers could now move their savings tax-free from a 401(k) or 403(b) to an IRA or to another qualified plan. Furthermore, any worker who didn’t roll their retirement savings had 20% of assets withheld as prepayment of income tax.

This Critical Bill for Women and Money Only Took 4 Women, 32 Congresswomen Co-Sponsors, and 9 Years

This law allows workers to take up to 12 weeks of leave for caregiving each year. It is unpaid leave. But the worker’s job, or one similar, must be there when they return.

Years of hard work, ongoing advocacy, and massive campaigning by four influential women was at the heart of success. Initial drafts of the bill didn’t make it through the process. Then the bill was vetoed twice. But they persisted.

The women who led this effort to provide maternity leave for new moms, had a champion in Congress. Congresswoman Patricia Schroeder (D-CO) initially introduced the bill to the House of Representatives in 1985. With a strong pro-employer view in the House at that time, the initial bill was struck down.

Instead, the proposal moved through the sausage grinder of the lawmaking process for eight more years. In the end, there were 170 co-sponsors in the House, 39% of the representatives. In all, 32 of the 47 women representatives, 68%, became co-sponsors of this bill.

The Backstory: No Jobs, No Income, No Retirement

The effort to draft legislation was initiated by women’s legal groups. They recognized the dilemma faced by millions of families with and without children. They wanted a federal-level, employment law that provided solutions for:

• Inadequate maternity-leave options. Prior to the FMLA, mat leave was inconsistently applied by state or specific employer.
• Maternity leave was set up only for a mother. It did not cover dads or adopting parents. It did not provide equal benefits.
• No family leave options beyond the “childbirth-related disability.” Workers routinely face healthcare needs for older children, parents, spouses, and themselves.

Simply said, there were no provisions to handle real life when you were a worker. And jobs were at stake here. Most of the time, women stepped out of the workforce to provide needed care. Reducing her income to zero. Ending her contributions to Social Security. And eliminating her ability to save for retirement.

Even so, the ultimate bill provides protections for all workers in companies with 50 or more employees.

Women are clear winners here in that they can return to their jobs. The FMLA was the most significant improvement for women and money since the Pregnancy Discrimination Act passed in 1978.

Moms Who Stay Home Have Some Value…But Not Until 1997

It took Congress until June of 1996 to include the “Homemaker IRA” as a retirement saving option. For at-home moms and dads. This little gem was buried toward the end of the Small Business Jobs Protection Act of 1996. And signed into law by then President Bill Clinton.

When the original IRA was created in 1974, at-home moms were prohibited from opening an account. Or making any contributions. (So were at-home dads. But in 1974, at-home dads were extremely rare and not considered by Congress.) Technically, they had no earned income to fund an Individual Retirement Account. Even though they contributed significantly to the financial stability of the home.

A few years later, an amendment allowed at-home moms an option to save “a bit” for their retirement: $250/year. Their working husbands could contribute $2,000/year. Wow. It would take moms eight years to save the same amount as their outside-the-home-working-husbands could save in just one year.

Who thought that was a good idea?

The financial industry presented data, facts, and stats to Congress about the need for at-home moms to save for retirement. Finally, the “Homemaker IRA”, or spousal IRA, became law.

Only 26 years ago wives (and husbands) who did not work outside the home could start savings the same amount in an IRA as their working spouse.

Building a Sturdy Pyramid for Women and Money

We take so much for granted today that women can just walk into any financial institution and open an IRA. Or a credit card. Or buy a house on their own. But it’s only been since the 1970s that any of that is possible.

Virtually everything to do with money is based on a law. It is incredibly complex. And when we look at retirement accounts and assets, the rules get ten times more complicated. Thanks to 1990 laws—that almost miraculously got pushed over the finish line in Washington—women have so much more opportunity today.

We’re only 30 years into the women and money game for retirement. And less than 200 years into asset ownership. Women are making tremendous strides in figuring all this out. But it will take more time, more energy, and more commitment to really get it right.

Women’s History Month falls during tax season. Use this time to take a fresh look at your retirement and other financial accounts. Make sure you know the rules and use them to your full advantage. And know who your Representatives in Congress are. You can see how very influential they are in crafting laws for women.

If You’d Like More Information…

I include several pages in my latest book, Cookin’ Up Your Retirement Plan, for you to take an inventory of everything  you own. The book is available on Barnes & Noble and Amazon.

For an excellent history of what it took to get the Family Medical Leave Act into law, read this brief history.

For more background on the Homemaker IRA, link directly to this blog post: Women Make History for Women’s Retirement Security