Counting on Your Husband's Retirement Income? Things Women Should Know!

| August 10, 2015

Retirement planning at times can be tough to meet your goals. For married women who are not employed there are certain challenges they face. We’re going to look at how this can affect their retirement planning and some basic things they should know.

Women have unique challenges when planning for retirement. Women are more likely than men to put their careers on hold, or stay out of the workforce to raise children or take care of other family members. This leads to women generally working fewer years and saving less. This may force them to rely on their husbands' savings to carry both of them through retirement.

What are some of the challenges women face?

  • There’s the risk of divorce. 
  • The risk that retirement funds won't last two lifetimes (this can hit women harder because they live longer than men). 
  •  The risk of bad pension payout decisions.

What are some things women should know?

Let’s start out by looking at pension and survivor benefits.

A pension is guaranteed income (in other words, an annuity) paid to you at retirement and possibly later, to your surviving spouse. If your husband will be paid a pension at retirement, one of the biggest decisions to make is which pension payout option to choose.

Should you choose one of the joint and survivor options, which pays income over both spouses’ lifetimes?

Should you pick the single life option? The single life option looks great because it pays the highest monthly income – but BEWARE, it pays NOTHING to you when your husband dies! It’s only on one life.

Do you know what the annuity company does if your husband chooses the single life pension option and dies the next week? They have a party!!! They get to keep your money! There’s no survivor benefit with a single life option!

Fortunately, to protect spouses and cover your assets, federal law requires that the plan cannot pay you a single life annuity unless both spouses agree. Otherwise, the benefit must be paid over both your lives, with at least 50% of that income going to the surviving spouse. You can breathe easy now.

You can get an explanation of benefits from the plan for more details on your payout options.

Divorce and qualified domestic relations order (QDRO)

Women should be aware of how employer sponsored retirement plan balances and benefits will be split in a divorce. Some of these plan balances can be very large, so this is important to know. Under federal law, there’s a rule called a qualified domestic relations order (aka, QDRO). Some of you already know about this document. If you and your spouse divorce, you can seek a court order giving you all or part of your spouse's retirement plan benefit. The plan has no choice but to follow the terms of the QDRO.

Non-working spouse can have your own IRA

For couples where the husband is working and the wife is not (no earned income), there is an account you should know about. It’s called a "spousal IRA" and you can add to this IRA even if you aren't working (your spouse must have earned income). A spousal IRA is your own IRA, in your name, and it can be a Traditional or Roth IRA. So with regular contributions over time, this could be a nice source of income later on, and you don't need your spouse's consent to set one up.

Social Security benefits

Women should remember that if their husband passes away, there could be survivor benefits from social security! Also, if you are divorced, there might be social security benefits available to you (even if you’ve been married more than once). If you’re in this situation, assume nothing!!! Instead call us to talk about your circumstances.

Those are some key areas our female population should keep in mind when saving for their own retirement. Of course, we help people make decisions in all these areas, including pension options, and we can help you too, just contact us! Thank you for reading!

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.