His Money, Her Money. Whose 401k is it Anyway?

I’ve seen more than a few articles describing how women need to be saving more for retirement or how women are finding it difficult to save for retirement because of lower wages, a pause in their career, or the expectation that women shoulder the majority of the child costs.  There is also speculation with the announcement of the divorce of Amazon founder Jeff Bezos that he will drop from being the richest man to just another billionaire when he needs to split up his wealth and give half to his wife.  CNBC was even speculating that he would need to sell shares of Amazon to raise cash for a settlement.  If this happens, this would cause a big drop in the price of the stock as the market was flooded with shares that had been locked away, along with taxes of 40% on the sales, bringing in $10B – $20B for the government.  It is much more likely that the shares would simply be transferred, which would not trigger either of these events.  CNBC should know this.

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When I read articles comparing men’s savings to women’s savings, I just shake my head.  The reason is that I see a marriage as a joining of two people together.  They become one entity, each partner using his/her strengths to complement the weaknesses of the other and allowing the other to do far more than he/she could alone.  They form a union to take care of all of the things people need to do to survive and thrive:  make money, maintain a home, raise children, save for the future, gather and prepare food, get care when sick or aged.  This system makes great sense because a conjoined team both focused on the same goals can accomplish so much more than two individuals working separately for each other.  Add a few children to the mix who are also equally focused and truly great things can happen.

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His money, her money

Many articles discuss how women are paid less than men in the same careers.  While there may still be some sexism involved, recent studies are finding that women do start out in the same salaries range as men but fall behind later.  This can easily be explained because women overwhelmingly tend to take time out of a career to raise children and care for elders.  Even if they do work a job, they tend to be the primary ones who pick up the kids after school and stay home with sick kids.  This responsibility makes them reluctant to take on roles that require long hours, flexible availability, and travel.  Most high-paying jobs require a combination of all three of these things.  In some cases, employers may, subconsciously or consciously, pass over consideration of a woman for these roles due to the expectation that they would not be able to provide the sort of dedication required due to other responsibilities.  Sometimes this is true even if a woman does not have children, perhaps out of fear that she will and leave the company high and dry at a critical time. (This is probably the last real sexism remaining in pay differences – the rest can be explained by career choices and breaks taken during careers as described above.)

This lower income is seen as a primary reason women aren’t saving enough for retirement.  Another issue cited is that women tend to put more money into savings, leaving it in cash investments, where men invest the money in stocks and other securities that provide a much higher return over long periods of time.  This is seen as a critical issue to be corrected.

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Maybe it’s time to stop stereotyping

Up until the middle of the 20th century, men were expected to go out and earn money while women were expected to be the primary caregiver for the children and take care of running the home.  Both of these are critical duties.  It is true that a family needs to have an income to pay for things, but it is equally true that children do much better with a loving and caring parent around.  Not only do the children benefit, but whole schools and communities benefit when there are parents giving their time to make things better in the classroom.  Really what makes schools in wealthier communities perform better isn’t money coming into the school – school funding has never been shown to correlate with student performance.  It is that the parents in those communities greatly support education by volunteering their time, both in the classrooms and at home, making sure their students do their work and show up on time, ready to learn.  (Sadly, the great amount of time spent online is greatly cutting into that time, causing all communities to suffer.)  This also creates environments that attract better teachers since their working conditions improve when they are supported, leaving them time to teach motivated students rather than discipline unmotivated ones.

Maintaining the home is also critical.  You can earn plenty of money to pay for things, but time is still needed to shop and maintain everything.  You can’t have two people working 100 hour-weeks and maintain a safe and sanitary home.  Even if work is hired out, there still needs to be someone around to let people in, direct work, and make sure things don’t get stolen.  Also, no one will care as much about your home as you do.

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That said, while the system used through mid-century worked, in that both critical roles were covered, assigning roles based on sex alone is not ideal.  While there is plenty of scientific evidence to show that men tend to be stronger than women (with an overlapping spread that causes this to not always be the case), there is yet to be found some gene or physical feature that indicates that women are better designed to be full-time parents and homemakers than men.  There are culture and tradition that drives individuals into these roles, but there are many men who perform poorly in the workplace who would be much better at raising children and women who don’t have the enormous patience and negotiation skills needed to deal with a toddler.  It is true that men were more suited for outside work in the past when it involved plowing a field with oxen or moving around heavy objects by hand in a factory,  Automation and machinery has greatly reduced the amount of physical strength required to do many tasks, however, eliminating this argument.  Many of the jobs invented since the 1950s also involve little or no physical labor at all.

Saying that women are going to be more risk-adverse than men in their retirement investing or that they will not negotiate for higher salaries like men do is also a stereotype.  There may be cultural drivers to cause this to be the case, but there is no physiological reason yet discovered that would cause this to be true.  We are all individuals and all different and cultures can be changed.  Making broad assumptions based on sex is wrong.

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Becoming one

While it does not make sense to divide up roles by gender as was done in the past, splitting up tasks in a marriage makes great sense.  Everybody has different strengths and weaknesses.  The beauty of becoming one in a marriage is that each spouse can use his/her strengths to benefit the marriage by taking care of the tasks that fall within his/her strength.  An individual who has the drive and desire can be far more successful at advancing at work and bringing in the needed money to the household if he/she has someone to take care of raising the children full-time and help take care of things at home that need to be done during the day.  Neil Armstrong could have never walked on the moon if he didn’t have someone to make sure his children were fed and cared for and there to pay the bills and get the mail while he was gone for both the missions and all of the training and preparation needed for the mission.

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Likewise, an individual can put a lot more time into the care and training of his/her children if he/she doesn’t need to worry about having the money needed to pay for things.  (One can say rightly that this is probably the more important role most of the time since little people do in the workplace will be remembered beyond the end of the next fiscal year, but our children will have an impact on society for decades to come.)  Having more money available because the working spouse is more successful in the workplace opens up still more opportunities.

The alternative to becoming one and dividing up tasks doesn’t tend to work as well.  Obviously, having both spouses be full-time parents and homemakers would not work because there is work that needs to be done to provide the food, clothing, and shelter needed to maintain life.  Working outside the home also means doing things for others, so even if a couple has enough wealth to sustain themselves without an outside job, just raising children and maintaining a home reduces the impact on society a family can have.

Having both parents work outside of the home also doesn’t work out as well as dividing up tasks, particularly when there are children involved.  Children receive less attention and end up on their own more often, meaning that society and the internet are there to shape their values and not the parents.  There is also less or no volunteering at the school or the opportunity to home school the children and provide an even better education than is found in a traditional classroom.  Because children often require a flexible schedule when it comes to working because of sick days, snow days, the need to take kids to school or pick them up during normal working hours, and the long summers, job types and promotion opportunities tend to be limited for working parents.

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Financially, the added costs for daycare, driving two vehicles more often, and clothing often offset the additional income earned with two jobs.  There is also the added cost and health impacts of eating a lot more meals out because it is easier to go out or pick something up when both spouses are working.  Having one individual at home means time for food shopping and more complicated meal prep like separating large packages of meat or baking bread to save money.  Many people would actually be better off financially having one individual work full-time and the other be a fulltime parent than to have both spouses work.

Back to his money, her money

So, what about the whole his money, her money issue?  Well, if a couple truly becomes one in a marriage, there is no his money, her money.  I believe that money should be primarily kept in joint accounts since it helps with the process of becoming one with money by having everything go in and come out of a central pot, rather than saying I’ll pay for this and you can pay for that.”  I understand, however, that there are reasons that some couples choose to keep separate accounts.  One reason would be if one was a spendthrift and would spend everything if not regulated.  The extreme case of having a spouse with an addiction is another example of where it would make sense.  Retirement accounts also are in the name of one individual and not both.

Regardless of the names on the accounts, however, all money coming into a marriage belongs to both, as does all spending and all debts.  If you’re thinking differently, you’re really fooling yourself.  During a divorce, all assets will be on the table unless there was a prenuptial agreement for assets brought in before marriage.  Likewise, if one spouse runs up huge credit card bills, all assets owned would be targets of a lawsuit, not just those owned by the spouse who made the purchases.

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This is why articles talking about how men are doing better at saving for retirement than women are silly.  Unless you’re talking about single individuals, a man putting money in his retirement account would also be putting money away for his wife.  He is putting their money away, even if it is put into the 401k at his work under his name.  If he dies before his wife, which is likely given life expectancies, the money from that plan would go to his wife.  If they get divorced, barring any grave wrong that she does to him, she would get at least half of his 401k plan.

If you have investing questions, please send to vtsioriginal@yahoo.com or leave in a comment.

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Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

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