When a spouse dies, many women face severe financial hardship despite being part of a married couple for decades. This "widowhood penalty" often results from men failing to ensure their wives are financially secure if tragedy strikes.

Why does this phenomenon persist?

Traditional gender norms

Part of the answer lies in longstanding societal norms around gender roles. Traditionally, financial matters were viewed as the man's domain, with many husbands taking a paternalistic approach to money management. A 2018 study from UBS made these surprising findings:

• 56% of married women leave investment and financial planning decisions to their husbands.

• 85% of married women who stay out of long-term financial decisions believe their spouses know more about financial matters.

• Eight out of 10 women are content with the current distribution of financial responsibilities in their marriages.

• 80% of women will end up alone.

• 98% of divorcees and widows would advise other women to take an active role in finances now.

The most counterintuitive finding was that these outdated views of the traditional roles of men and women weren’t confined to older generations. The study found that millennial women were more likely to leave investment decisions to their husbands (61%) than older generations (54%).

For men with this mindset, preparing their wives to be autonomous financial decision-makers after their passing may not be intuitive or prioritized.

Psychological barriers

Psychological barriers also play a significant role in the widowhood penalty.

Our brains are wired to focus on survival and avoid thoughts of our demise. Discussing mortality can bring up feelings of fear, anxiety, and existential dread. This avoidance is a defense mechanism that helps us cope with the uncertainty and finality of death.

Even for those with a life insurance policy or will in place, plans can quickly become outdated as family situations evolve. Failing to regularly review and update beneficiary designations, powers of attorney, and other legal arrangements can unintentionally disinherit a current spouse in favor of former partners or other parties.

Human biases

Deeply ingrained human biases further compound the issue. A well-documented psychological phenomenon is the "illusion of invulnerability,"  which describes our tendency to underestimate our susceptibility to misfortune and premature death.

Closely tied to this effect is overconfidence bias, where people have an unjustified level of faith in their ability to control situations. Some husbands may incorrectly believe their stable career and savings will be sufficient to secure their wife's future without specialized insurance or estate planning.

Blended-family complexities

Further complicating spousal financial planning is the increasing prevalence of blended families with children from multiple previous relationships. Navigating the complex web of intentions and potential conflicts around providing for current and former spouses adds complexity that, without professional legal guidance, can easily result in unintended bequests or bitter family infighting.

Financial literacy deficits

Widespread gaps in basic financial literacy contribute heavily to the widowhood penalty. A National Financial Educators Council survey found that financial illiteracy cost Americans more than $415 billion in 2020.

Lacking foundational knowledge about asset allocation, insurance products, estate laws, and strategies for generating sustainable income can severely hamper a surviving spouse's ability to manage money over an extended period.

Severe consequences

The consequences of this phenomenon are severe and far-reaching. On average, a woman's household income drops by a staggering 37% after being widowed. This immense financial shock explains why the poverty rate for widows is three to four times higher than for elderly married women.

Potential solutions

Solving the widowhood penalty will require a multi-pronged approach.

Cultural shift: Breaking down antiquated gender financial roles and norms and empowering women to participate equally in household money management from the start of relationships.

Financial education: Improving financial literacy levels through dedicated personal finance courses in schools and hands-on educational programs that build tangible money management skills.

Open conversations: Couples need to have direct, unambiguous discussions to align on financial values, goals, and comprehensive contingency plans in the event of the death of a spouse or divorce.

Professional guidance: Working closely with qualified financial advisors to create comprehensive, regularly updated financial plans that provide long-term income security through insurance, Social Security maximization, tax optimization, and sustainable withdrawal strategies.

Final thoughts

The widowhood penalty robs countless women of hard-earned financial security each year and perpetuates the generational cycle of poverty. By democratizing financial know-how, fostering open dialogue between partners, and working with professionals, couples can take the necessary steps to safeguard their future together through life's expected and unexpected transitions.