Regaining Financial Balance

That 401(k) Isn’t All Yours

Time for financial advisors to address the power imbalance for married women

by Marcia Mantell, RMA®, NSSA®

Ms. Mantell is the founder and president of Mantell Retirement Consulting, Inc., a retirement business development, marketing & communications, and education company supporting the financial services industry, advisors, and their clients. She’s the author of “What’s the Deal with Social Security for Women?”, “What’s the Deal with Retirement Planning for Women?”, and blogs at


March is Women’s History month. It’s an ideal time to reflect on the progress the laws and financial industry have made to empower women and money. We can acknowledge that financial products are more available to women today than at any point in history. Without changes to the laws that govern banking and credit, real estate and estates, women would still be asking for daddy’s permission or their husband’s signatures to gain fair and equitable access to cash and credit. And, rights to inherited property.

But We Aren’t Finished Yet…

On the surface, it appears that men and women have financial equity. But look a little deeper. All is not equal for one large subset of women: married women. Whether married women worked outside the home or were at-home-moms, they often experience a significant imbalance of financial power in their households. Especially when it comes to their retirement security.

That’s because on this evolutionary arc of women’s financial gains, one bastion of critical financial power is stuck in archaic rules, hidden legal nuances, and unfortunate misunderstandings. That’s the mighty 401(k).

“For the most part, wives are the financial stewards of the house. But the way the 401(k) is set up, it excludes them from the biggest financial decisions of their lives,” says Danny Bullock, a life-centered planner in Rhode Island.

It’s high time we, the financial advisors and the financial industry, address the financial inequities 401(k)s impose on married women. It’s time to change the conversation.

“Financial advisors are trained on the analytical side of money. Not on the relationship side,” remarks Bullock. “But we need to move away from that discomfort. We financial advisors need to make sure we’re bringing both parties to the table. We must talk to husbands and wives together.”

It’s Not 1982 Anymore

In 1982 high fashion included big shoulder pads, wide ties, and pastel blue tuxedos with ruffled shirts. You don’t see anyone in those get-ups anymore. Thankfully, our fashion sense has evolved over time. It’s time for the 401(k) from 1982 to evolve in the same way. Time to make sure married women rightfully own their retirement security from the very beginning. Not just when they become a widow.

Due to the legal structure of employer-sponsored retirement plans, problems arise in 401(k)s for married women. There are often unintended consequences.

But in every situation, the financial security for married women in their retirement years can be jeopardized if all parties aren’t

1) fully disclosing and discussing the facts of how these plans operate,

2) who controls the investment decisions, and

3) who has access to the money. In other words, who is in control for both spouses?

401(k)s Are Technically “Individual” Accounts—But Not Really For Married Clients

Today, 401(k)s are the critical underpinning for retirement income, replacing the security provided by defined benefit plans. So, getting “this 401(k) thing” right to deliver retirement income is more important than ever. And yet, structurally, it is set up to fail married women. When employers switched from providing guaranteed pensions to offering retirement savings opportunities to their workers, the burden for success fell squarely onto the employee.

Unlike pension plans, 401(k)s allow one spouse to choose to participate or opt out. One spouse decides how much to save. In the case of married couples, these decisions fall individually to the worker-owner who, for the purposes of this article, is typically the husband. Therefore, the decision the husband makes directly impacts his wife’s security decades into the future. And she often has no idea.

Operationally, 401(k)s are designated as an individual account. There is no such thing as a “joint 401k”. There is no communication to the wife. There is no “official” way for her to see the account. She must rely on her husband and their financial advisor.

The account is not intended to be used for only one spouse. As with defined benefit plans, the 401(k) should provide retirement income for the couple. At first, that assumption was obvious as 401(k)s were required to make distributions in the form of a joint and survivor annuity. And, a survivor benefit between 50% and 100% was required to go to the spouse.

But over time, rolling plan money to an IRA first became the common path. IRAs, which are indeed individual accounts, give one spouse full discretion over the assess, investments, and beneficiaries. A wife can be excluded from money intended for her retirement at the push of a button. As a result, the balance of financial power can and does shift significantly on the financial home front.

Investment Decisions Are Solely At The Discretion Of The Worker-Owner

For an “individual” account, whether a 401(k) or a Rollover IRA, who makes the investment decisions or approves a financial advisor’s recommendations? Who’s in control of rebalancing and managing the account for the best possible outcome?

Today, 401(k)s are the critical underpinning for retirement income, replacing the security provided by defined benefit plans. So, getting “this 401(k) thing” right to deliver retirement income is more important than ever. And yet, structurally, it is set up to fail married women...

Bullock added to our discussion, “We have to recognize the wife is also a client. Many advisors don’t insist on meeting with both married people. The advisor’s client seems to be the husband. That’s a big part of the problem for wives.”

Unless the worker-owner husband grants access to the 401(k) or IRA, a wife has no way to view the account or make investment or trading decisions. She is left in the dark throughout the accumulation years, and the combined growth and income years of retirement.

Granting access to an IRA is easy. The IRA owner fills out a simple form to grant view access, limited access, or full trading authorization to the account. But, a 401(k) requires a Power of Attorney to be on file with the recordkeeper. How many of your clients have gone to this length to set their 401(k) up to operate like a joint account?

From an advisor’s vantage point, all individual retirement accounts should be considered and managed as joint accounts for married couples. The money is fully intended to provide income for the two people throughout retirement. But, when the wife has no access to see the account or influence the investments, she also limits her success to have adequate income in her older years. If that isn’t a completely lopsided balance of financial power, I don’t know what is.

Wives Are Also Restricted Access To 401(k) Money

Further slanting the balance of power is that the 401(k) worker-owner is the only person with access to the money in the plan, whether for a loan or hardship withdrawal, for an in-plan or required minimum distribution. Or critically, whether to roll the full account to an IRA that becomes an individual account. At least until he dies.

Technically, a married worker-owner must obtain “permission in writing” from the non-owner spouse to take any of these distribution actions. Or to change beneficiaries on the account. She must sign an agreement and obtain a notary signature. But riddled with loads of impressive legal language, it is not clear to either spouse that she is forever giving up her rights to this money. In reality, even if a wife understood the full implications, would she ever not sign? Would she deny a seemingly reasonable request from her husband? Of. Course. Not.

It is unreasonable to expect either spouse understands the implications of forfeiting rights to their largest retirement income account. Husbands are not doing this as a malicious act. They don’t realize the predicament they are asking their wives to put themselves in. They are often trying to get their household financial situation in order and rolling to an IRA with a financial advisor who has investment and retirement income expertise is valuable.

Yet, this single transaction further erodes the balance of financial power if the conversation doesn’t also change.

Start Changing The Course Of The Conversation Today

Many financial advisors are not paid today to advise on a client’s 401(k). However, most would agree that presenting the option to roll over employer plan assets is a key business driver. Yet, these “individual” plan registrations can trigger a series of unforeseen consequences for married women. Therefore, financial advisors must be the ones to modernize the discussions with married clients and clearly address the implications of moving the 401(k) to an IRA. It’s high time to include her opinion and input into the decision-making.

Try this Q&A with your client couples. Ask each separately these ten basic questions about each other’s 401(k)s:

  • How much money is going into employer retirement plans?
  • How much is the company matching?
  • How is the money invested?
  • Did the plan value increase beyond the contributions year over year?
  • When was the last time the account was analyzed and rebalanced?
  • What choices do you have for getting the money out of the plan?
  • What happens to plan money when the worker-owner dies?
  • What happens if the assets roll to an IRA and the owner dies?
  • Who is the primary beneficiary on the account?
  • Who owns the account?

What’s The Real Opportunity For Financial Advisors?

When you broaden your focus from the just the business opportunity to include protecting the purpose of the money in accounts that should be operated as joint accounts, you can acknowledge a few realities:

1 –The laws that govern plans are not going to change quickly. But your financial advice can immediately adapt and evolve. You can explain what is really going on with plan assets and protect married women’s access to their own retirement income.

2 – Bring the 401(k) into the conversation with both spouses. Lead the way to a more equitable understanding of the hidden operations of plan accounts.

3 – Secure your future relationship with the family. It is ridiculous to think that an 85-year-old new widow is going to become investment- savvy. If you don’t ensure she has equal access to all accounts that are equally her money, how have you earned her trust?

The place to start? Your own home. If you are married to a woman, can your wife answer those 10 questions? Have you helped her engage in the financial labyrinth that is the retirement system, despite how busy she is? If not, the balance of power in your own home is off-balance. The financial industry is striving to move forward in the evolution of women’s financial empowerment. Financial advisors can move faster. Use women’s history month to address the power imbalance that exists for many married couples.