The U.S. Census Bureau shows among married couples, the number and percentage of women outearning their husbands have continued to grow since 1981, when 15.9%, or about 4 million wives, earned more than their husbands did. In 1998, that percentage had risen to 22.7% of wives ? more than 7.4 million.
Among employed women, married or not, 55% provide half or more of the household income, according to the 1995 study, "Women ? The New Providers," conducted by the Whirlpool Foundation, Families and Work Institute and Louis Harris & Associates Inc.
But what does this change mean for financial advisors? Advisors interviewed for this article varied in the number of couples with higher-earning wives with whom they work ? anywhere from a few clients to 20% of their business. Although the role reversal may cause some relationship problems, advisors say most of their clients in this situation seem comfortable in their nontraditional roles. Couples with high-earning wives may manage their finances differently and sometimes need more complicated financial plans than more traditional clients. And because two significant incomes often are involved, these couples may have more options and sometimes can plan on retiring earlier.
Who are they?
Couples with wives who outearn their husbands may not be typical, but enough of them are out there for advisors to relate situations with very different circumstances. Advisor Diahann Lassus provided three examples that show the diversity of these clients.
Until recently, the corporate world offered limited advancement for women, prompting many ambitious women to create their own entrepreneurial opportunities. "I have one couple where she owned a business and the business was so successful that he quit his job and came to work for her. They are probably in their mid-thirties. In that case, it was a really tough position for them. What happens if that doesn't work? But it has, and it's worked very well. They handled it very well in terms of their division of responsibilities," says Lassus, of Lassus, Wherley & Associates in New Provi-dence, N.J., and Naples, Fla.
Another couple are both corporate executives in their early forties. "They both make very good money, but she's in a position of higher power; therefore her compensation is about two to three times his, especially the stock options. It's off the charts. But they seem to be very comfortable with that. It hasn't seemed to create any issues for him at all," Lassus says.
With another couple, the husband lost his job, and he wasn't able to find anything that looked really interesting or cost effective, so he retired. "He takes care of all their financial stuff. She travels and has a real high-power job. For him, it was very difficult in the beginning, but he's adjusted very well and having a grand time with it now," Lassus says.
Joe Harper, owner of Harper Associates in Columbus, Ohio, and Naples, Fla., also advises a couple with a higher-earning wife and a retired husband. "She's an association president, and he's a retired civil servant. He's at home taking care of junior-high- and high-school-age children at this point, while she's working every day. He had a high-risk, very intense job. It's a relief he's not in this high-stress position, so his health and outlook on life are a lot more calm and complacent. He works a couple of days a week and enjoys having the time to spend with the children. It appears to be working very well for both of them."
A client with a very different situation is a woman widowed fairly young who remarried a tradesman. "She has an extensive portfolio, and this fellow has virtually nothing," Harper says. But they've worked things out.
Another example Harper offers is a husband-and-wife doctor team. "The wife outearns him, but maybe by only $50,000, so maybe it's $200,000 and $250,000. That was a second marriage, and they do have children and combination family," he says.
Strong men wanted
"It takes two very grown-up people to handle this issue. And I speak from experience," says Cheryl Holland, president of Abacus Planning Group in Columbia, S.C. "My husband is very talented, extremely good at what he does as an architect. He makes extremely good money. The reality is my job is more financially lucrative. We have to be very open and respectful on how we play that out. For a lot of women who make more money, it's very anxiety producing to see themselves as the breadwinner. But if you're together enough to come to a financial planner, usually you're a pretty together couple."
Advisor Sharon Luker, a CFP licensee with VSR Financial Services Inc. in Dallas, says she thinks a marriage needs to be very strong for some men to adjust to their wives earning more than they do. "This even happens when you are single. I happen to be single, and if they perceive I make more money than they do, they treat you differently. They are competing with you."
Fred Raffety, president of Robert Lawrenz Consulting in Rockford, Ill., says he has advised couples in the past where the husbands couldn't adjust to their wives making bigger salaries, but Jody and Dennis Schumacher (see sidebar) are an example of one couple who did. Jody made millions and retired after she sold her photocopier and facsimile business, and Dennis has continued to work managing a pipeline for a gas company. "In this situation with Jody and Dennis," Raffety says, "I've always felt that he was strong enough and supportive enough that it worked for them."
Adds Raffety: "The concept of women making more money is still new enough that some guys can accept it and some cannot. It's always going to depend on the people, but I would suspect 10 years from now it's going to be more acceptable, and 10 years from then it'll be even more acceptable. I suspect there's been a force set in motion that is going to continue on here, and I think it will get better."
Yours, mine and ours
With one-earner couples, advisors say, money that comes in usually is thrown into one pot to be spent and invested as needed. But with many two-income couples, particularly those with two high-earning partners, separate expense accounts are common, with perhaps a joint account for household expenses. Sometimes, these couples keep their investments separate as well.
"In many cases where you have the couples who are both really active in careers, they make either joint decisions or they each make independent decisions on their own accounts," Lassus says. "We encourage that. We encourage a joint account for emergencies and reserves, but for investment accounts for estate planning and things like that, we encourage them to have their own separate accounts. Also, it's a good idea anyway, because if you have inherited assets or things like that you always want to maintain that separately."
One reason investments may be managed separately is because the partners have different investment styles. Luker notes the husband of one of her female clients uses a different advisor. Her client recognizes she and her husband may go further than most couples in separating their finances. "She says 'I've been married before, and I had a very controlling husband. I do my thing; my husband does his thing. We love each other. I pay this bill; he pays that bill. We have separate advisors, and we don't plan on bringing it joint. It works perfectly.' Her husband is a lot more aggressive an investor than she is, and in some ways, you do need two different advisors because some advisors are a lot more aggressive than others," Luker says.
Still, not all couples in which the wife has a greater income manage their money separately. Harper notes the physician couple he mentioned share decisions financially and pool their resources. Other advisors say they have some dual-income clients who take that approach as well.
Long-term planning
Financial plans can be just as complex for one-earner couples as for dual-income families, and both face many of the same issues, advisors say. Still, analyzing the financial situation of two high-earners can be more complicated. "If you have a couple where only one spouse is a wage earner, then you're only looking at one times all that stuff. If you throw in the two earners, especially if they're both at a high enough level that you're dealing with stock options, deferred compensation and all those issues, literally everything is times two, and it's very complicated. And very time-consuming to pull it all together and understand the impact," Lassus says.
One issue that can arise with couples in which the wife is the higher earner is whether more life insurance should be taken out on her. Some planners, like Holland, say her clients in that situation typically do take out more insurance on the wife. "That's a very easy decision to show people how to make. You do the numbers, and they draw the line. Basically, they absolutely need to pay off the kind of lifestyle they're typically living on a two-earner income," she says.
On the other hand, Chris Cooper, president of Chris Cooper Inc. in Toledo, Ohio, says he's had a different experience. "I have couples like this: The woman is a psychiatrist and the man is a chemical engineer. She makes $250,000 a year; he makes $60,000 a year. They live on a $300,000 income, and they have an $800,000 mortgage. If she dies, can he pay that mortgage? No. But will they take out life insurance? No, because you'd have to take out more on her than on him. So he has to admit he's dependent. It's harder for men to do that. It gets very difficult emotionally to get through that particular barrier right there, to get them to listen. I say, 'Look, reverse the roles,' but it's very hard to get the man to see that. That's an actual example, and I have several like this."
In second or third marriages, Cooper says, higher-earning wives he's advised sometimes are inclined to disinherit their spouses. "They say, 'If I die, I'm leaving all to my kids, and he can't even stay in the house.' Then you say, 'No, you need to leave him your pension, you need to leave him your 401(k), but what you do is leave it in a trust with a QTIP provision, so that when he dies, it goes on to your kids.' "
Overall, Holland says, she's found estate-planning issues usually aren't much different for couples with high-earning wives than for other clients, except if young children are involved. "They realize their very young children could inherit significant wealth, so we have very serious conversations about who should be guardian and who should be trustee. We typically have a client with young children who has significant wealth write a letter to the guardian and to the trustee about the purpose of the money, beyond just choosing them. It provides a little more guidance there and a little more for the children to hang their hat on when they get to be of age and they've got $2 million or $3 million. So for them, that's really the critical issue, but as far as the other estate-planning goes, I haven't seen an impact."
Retirement planning can present different issues when a wife outearns her husband. Phillip Cook, CFP and owner of Cook & Associates in Torrance, Calif., says in couples where the wife makes more money, an advisor may place less emphasis on the husband's retirement plan. That's the case with one couple he advises: The wife is president of the Internet division of a major newspaper. The husband's career is secondary, and because of that, not as much emphasis has been placed on his retirement plan.
Also, the wife's health can become a financial issue, particularly in retirement planning, he adds. He advises a couple in which the wife, who earns well into the six figures, was recently diagnosed with breast cancer. Her husband, who owns a business, doesn't earn as much as she does. "At this point everything is OK, but she doesn't want to work for as many years as she originally thought, so we have to rethink their situation," Cook says.
Another issue regarding retirement planning, particularly for high-earning, dual-income couples: "Do you keep each person's money separate if you have two 401(k)s or two IRAs, or do you combine?" questions Holland. "Let's say one only has one good fund choice; do you put all the international in that one account or do you keep them individually allocated and do the best you can?" She says some of her firm's clients have blended plans, while others look at their accounts separately.
Sameer Shah, managing director of Shah & Associates in Tampa, Fla., says his firm encourages clients to take a holistic approach. "We integrate the entire plan. A lot of advisors compartmentalize things. We say the right way to do this is look at it as one portfolio. One spouse may have a very liberal 401(k) plan, for example a self-directed situation where there's a lot of flexibility. The other may have a very structured plan, where there's only two or three options. That becomes a key factor in our planning, because what we try to do is to allocate tax-efficient asset classes to taxable accounts and tax-inefficient asset classes to the deferred accounts. The best situation for us is when one or both have self-directed IRA plans, where we can do more interesting allocations in terms of asset classes that are not the traditional asset classes, like small-cap international securities, REITs, even going as far as hedge funds. We say, 'Look, your wife's plan or your husband's plan is highly undiversified, but that doesn't matter, because in the plan of your overall situation, it's very diversified. Instead of being incredibly volatile, they add this incredible diversification to the overall portfolio.' "
Advisors say dual-income couples, particularly when both the wife and husband make high salaries, usually have more options when it comes to retirement planning than single-earner couples have.
"They have much more flexibility and many more choices in terms of retirement because they are able to save significantly more. You see many of these couples, especially in their early forties, who are in major high-stress jobs making a lot of money, but looking down the road and saying, 'I don't necessarily want to retire in my fifties, but I'd really like to do something less stressful and spend more time with my family,' and all of those issues. And they have that opportunity because of the fact they have the two incomes. They can put more money aside, so they can make some of those choices," Lassus says.
Says Harper: "That's really a beneficial situation, because it's much more likely they're going to have enough money to retire early and hit their financial objectives because of that dual-income stream. So I see it as a benefit as opposed to a problem. If you have two people producing $200,000, it's a lot easier to achieve their financial goals than if you have someone who's making one of those incomes."