A Hidden IRA Benefit Most Advisors Miss

Financial advisors should take a hard look at the unsexy, underappreciated Individual Retirement Account as something other than what it has grown to be — that big rollover opportunity.

Not only can IRAs give financial standing to women of a certain demographic, by controlling money in their own name they’ll learn how to invest greater sums in the future. So says Marcia Mantell, a former Fidelity vice president of retirement and founder of Mantell Retirement Consulting, in an interview with ThinkAdvisor.

Baby boomer and millennial moms alike who left the labor force to raise children can benefit from opening an IRA. Indeed, many married or formerly married women reaching the point of retirement are shocked to find that reporting little or no income for 30 or 40 years has severely impacted their eligibility for Social Security benefits — all because they opted to be at-home moms.

Hence, Mantell, 55, who has trained financial advisors for more than 25 years, recommends that FAs take the initiative and suggest that, where appropriate, married clients move money from a joint taxable investment account to an IRA in the wife’s name.

(Related: 10 Things to Know About RMDs)

An important “hidden value” of the RIA is that it empowers women by way of ownership and control over money that they alone own, Mantell notes.

Though starting out small, IRAs often grow, with compounding, to six figures over decades, says Mantell, who develops retirement strategies for wirehouses, large RIAs, insurance companies and clearing firms. She is a frequent speaker at industry events and conferences, such as Pershing’s Insite.

ThinkAdvisor recently spoke with Mantell, author of “What’s the Deal with Retirement Planning for Women?” (People Tested Books 2015), on the phone from Plymouth, Massachusetts, where her consultancy is based. Mantell’s blog, BoomerRetirementBriefs.com, is directed at both advisors and consumers. Here are highlights from our interview:

THINKADVISOR: What’s one of your beefs about retirement planning for women?

MARCIA MANTELL: The big stat that floats around the industry is: About 90% of all women wind up being the sole controllers of the money. That’s great — but you need to be in the money game all the way along. And that comes with ownership, not a joint checking account. If you become sole owner of all that money at 85 but have never had money of your own, how are you supposed to make wise decisions?

Many women don’t realize till their mid-60s that they have no money of their own for retirement. What’s the solution?

I want financial advisors to start looking at empowering married women to have financial standing in the household. A really easy way is when the advisor is sitting across from Sally and Sam, and looking at their accounts — of which Sam has three in his name — they should say, “Sally, you have an investment account with Sam, but you’ve got nothing in your own name. Let’s remedy that. One easy way is to open a contributory IRA.”

How often do you think FAs say that?

Never, I would bet.

Many advisors claim they went into the business to help people. This is one way they can help women.

Yes, they should be encouraging female clients — the other half of a [couple] relationship — to have money of their own to make sure they’ve got some skin in the game. An IRA is a pretty low-risk investment to start out with. Advisors could help women by redirecting money from a joint taxable account into an IRA of which she is the owner. That brings freedom.

Is “women,” overall, a market segment?

In the industry, the “women’s segment” is painted very broadly — that is, we all have the same issue: “Women have money. They just need to learn to invest.” But the boomer women I talk to have missed Step One: They don’t have any money. They were at-home moms raising kids. Then, when they reached retirement age, they found they have no money in their name.

So is this issue just about boomer women who took on the traditional role of homemaker?

No. There’s a whole bunch of millennial moms that have stepped out of the work force to raise children. So the cycle continues. Is she planning for her future? One day she’ll be 65. Is she going to look at her contribution of raising children but have no money because it will all be in her husband’s name?

How popular are IRAs in general nowadays?