Love should always be the primary reason for two people to tie the knot, but the financial benefits of marriage are an added incentive. From the tax benefits of marriage to changes in Social Security and even the correlation between marriage and credit score, there’s a lot to be aware of after you say “I do.” Put simply, there are many financial planning opportunities available to married couples but they do not happen automatically, so partnering with a professional can help you ensure you're taking advantage of everything you can to build a secure financial future.
Tax Benefits of Marriage
One of the major financial benefits of marriage is its effect on your taxes. There are several myths about the tax benefits of marriage, so let’s dispel them. First, most married couples do not pay more in taxes than they would as individuals. Of course, on rare occasions, the opposite may occur, but most of the time, married couples enjoy a few tax breaks on their tax return when filing jointly.
Additionally, the myth of a marriage tax is rather outdated. Married couples don’t automatically pay a tax just for getting married. Rather, the marriage tax refers to a situation in which you and your spouse make enough money together that it pushes you into a higher tax bracket. Subsequently, you’ll both pay more in income taxes. However, even if this marriage penalty does occur, the other tax benefits of marriage far outweigh this minor drawback. More often than not when tax planning, joint filing results in a lower tax bracket, especially if you earn vastly different incomes. This means you’ll wind up paying less in income taxes than if you remained single.
Marriage also means that you may be eligible to receive additional tax credits. When filing your taxes, you can also claim a larger charitable contribution deduction as well as itemized tax deductions instead of the standard deduction. For more insight into the tax benefits of marriage, consider speaking with a financial advisor. A wealth manager will be aware of recent changes to tax legislation that may also benefit married couples and help them avoid any potential tax penalty.
Social Security Spouse Benefits
A key financial benefit of marriage involves Social Security and spouse benefits. Namely, each spouse can not only collect their own Social Security benefits, but they also have the option to collect up to 50 percent of their spouse’s benefit. This comes in particularly useful when one member of the couple is a high earner.
While no one wants to think about being a widow or widower, a good financial plan takes all possibilities into account. As a married couple, either spouse can collect up to 100 percent of the deceased spouse’s benefit, securing a planned level of retirement income, even if something unfortunate occurs. This can allow someone who did not earn as much as their spouse to still be well taken care of, and it also aids in providing for children. Typically, the surviving spouse must be at least 60 years of age before they can begin collecting the Social Security survivor benefits. Full spousal benefits take effect once the widower has reached retirement age.
Health Insurance Benefits to Marriage
Perhaps one of the most important benefits of marriage is the advantage of health insurance for married couples. This is especially true if both spouses are working at jobs that offer employer-sponsored health insurance plans. This affords each spouse the opportunity to see which employer offers a better plan to jointly enroll in. Doing so often means large savings in health insurance premium costs as well as better coverage along the way, resulting in significantly less spent on healthcare over time or through extensive treatment plans.
Here's another myth we can bust today: you have to wait until the next open enrollment period to change your plan. False. Health insurance companies offer the option for individuals to change plans within 60 days of being married. That means shortly after getting married, one or both of you can change plans without having to wait until the standard open enrollment period. Depending on the timing of your wedding and your company's open enrollment, this can result in big savings.
These spouse benefits go beyond your standard healthcare insurance premiums. Long-term care insurance for married couples is also usually cheaper. That’s because insurers consider married couples to be less of a liability since one spouse can usually take care of the other for some time. Similarly, married couples generally save money on their car insurance policies compared to a single person. Of course every provider is a little different, but most try to incentivize a coverage plan for the entire family and as such will incentivize you to jointly enroll.
Your Marriage and Your Credit Score
It's a myth that your credit score goes up after getting married, but there is truth in there being benefits. As your credit score is one of the primary factors used to determine your eligibility for loans or opening new credit cards, one spouse can take advantage of the other’s superior credit score if need be.
For example, if one spouse was receiving unfavorable terms on a car loan due to a low credit score, the spouse with a higher credit score could cosign to improve the terms, often to significant savings over time. Additionally, borrowing jointly has advantages, as lenders will consider the combined income of both spouses when making a determination.
Obstacles & Opportunities: Our Final Thoughts
There are many myths out there about what a marriage will or won't do to your finances. The best idea is to talk to a professional to separate fact from fiction and lean into a financial plan to avoid the most common obstacle for newlyweds: bad spending habits.
Referred to as lifestyle creep, the sudden feeling of a dual income and new once-in-a-lifetime experiences can cause even the the most frugal person to start spending beyond their means. Having a financial plan in place before you get married, and having a professional to help hold you accountable to your goals is incredibly helpful.
Having a wealth manager who is also a Certified Financial Planner can help you better take advantage of the financial benefits of marriage as well as navigate ever-changing tax and benefits laws. Ultimately, a proactive financial advisor will teach you how to manage your finances better so that you can continue to make wise financial decisions for your spouse and yourself.
Are you ready to learn more about what financial planning can do for you? Contact us for a financial analysis or to schedule a consultation. Our elite team of wealth managers will help you identify areas that need your focus. We'll help you to make the right decisions with your money to reach your financial goals.
