Husband-focused Financial Plan: A Widow in Poverty?
Three life decisions need to take into account a woman’s retirement
Women often defer to husbands on financial decisions. But what if your man is setting you up for an old age — your likely time as a widow — of impoverishment?
Childcare and work: The intense collision of work-from-home and 24/7 childcare-from-home will ease once there is a widely adopted coronavirus vaccine. But the financial damage imposed on many wives will last a lifetime.
A recent survey from Fidelity reports that nearly four in 10 women are considering quitting their jobs or scaling back their responsibilities. That would be a continuation of a trend that has persisted since the coronavirus first hit. In September, four times as many women left the workforce as men.
Fidelity estimates that a 35-year-old woman making $75,000 who steps away from her career (and workplace retirement contributions) for one year could end up with nearly $160,000 less in her 401(k) at age 67. That’s just one year, and doesn’t factor in potentially lower Social Security benefits. A longer hiatus can cost women far more.
The same Fidelity report more than hints that husbands may be pushing their wives into this decision, intentionally or not. Women surveyed said they do about 70% of the childcare. And 70% of the homeschooling. And 70% of the cooking. And 70% of the housework.
With that out-of-balance division of labor it’s not surprising that wives/mothers are leaving their jobs. If the life chores were more evenly shared, it stands to reason that more women just might find it possible to keep working.
To the extent that your household is considering these hard choices, relying on “who earns more” to settle the question is dangerously simplistic. The fact is your household earns more with you both working. And don’t minimize the psychic cost of having a spouse stop working. Yes, love of family comes first. But that doesn’t mean that the desire to engage in a meaningful career is not important.
So the first option should be to consider how to make it possible for both spouses to continue to work. A more equitable division of home labor seems like a productive place to start.
And both spouses/partners should be clear-eyed in understanding this is not just about getting through the pandemic. The long-term cost of lost retirement security should be a part of the decision. And that cost is likely to fall most on the wife.
Social Security claiming: Wives are typically younger than husbands, yet women on average live longer than men. About two of three Social Security retirement checks sent to people at least age 85 go to women.
There are two key planning decisions that can boost the retirement security of a wife. The highest earner should plan to wait until age 70 to start collecting Social Security. Doesn’t matter who is older or younger. If the highest earner delays to age 70 it ensures that the surviving spouse will be able to collect the biggest possible benefit. Note: When you are both alive, you each collect a benefit. When a spouse dies, the survivor is entitled to just one of those benefits:
100% joint-and-survivor pension benefit: And husbands who have a pension should be aiming to take the 100% joint-and-survivor option. Yep, that means a smaller monthly benefit check while the pension payee is alive. But it also ensures the largest possible payment will continue if you die before your spouse. Opting for a smaller survivor benefit can be a double whammy at the absolute wrong time. If you do die first, your spouse will already be adjusting to a household collecting less from Social Security. To also impose a suddenly smaller pension payout can be an added challenge.