We’re all familiar with sordid tales of gold diggers — people who marry just for the money. But what about people who don’t marry for money?
To be clear: There’s a heck of a lot more to deciding whether or not to tie the knot than finances, but money does play an important role in life and relationships. Understanding how your finances can change when getting hitched is a worthwhile intellectual exercise and can empower you and your partner both now and in the future.
As always, at the end of the day, only you know what’s right for you and everyone’s circumstances are different. But, if you’re considering marrying your significant other, here are seven ways your finances may change when (or if) you say, “I do”.
1. Social Security
If you’re married and your spouse earns significantly more than you, there’s the potential that you’ll collect higher benefits.
On the flipside, if you are divorced (but were married for at least ten years) you can still collect on your ex-spouse’s social security benefits. This means that depending on the income level of your ex and your current partner, you may be in a better financial position to remain unmarried and continue to collect at the rates established based on your ex’s income.
(Note: We didn’t say these scenarios were easy.)
2. Student Loans
There are two important financial factors to consider when it comes to student loans and getting married:
When you get hitched, your income will be combined (assuming you’re married and filing jointly) and used to determine certain student loan limits. This means, should your earnings grow significantly, your payment amount may, too.
Additionally, if your combined income exceeds a certain threshold, you may no longer be eligible to claim your student loan interest as a deduction when filing your taxes.
3. Roth IRA Contribution Eligibility
Your Roth IRA contribution eligibility doesn’t double when you get married. Instead, contribution eligibility is based off of your household income. Combining your finances may limit your contribution eligibility more drastically than if you and your partner remain two, unmarried individuals.
4. Estate Planning
We could talk about the complexities of estate planning and finances until we’re blue in the face, but for a basic primer, check out our Estate Planning 101 article.
It’s important to know, here, that you can pass finances to your spouse without having to worry about gift taxes. If you’re not married, however, you will need to keep track of any gifting because Uncle Sam may want a piece.
5. SALT Deduction
If you think you’ll be itemizing your deductions, this is a must-know! SALT stands for State And Local Tax. For most people, this includes property taxes, state income taxes, and some have local taxes, too. SALT deduction limitations say you can only deduct 10k per year, and it doesn’t matter if you’re married or single. That means a married couple can deduct up to $10,000. But an unmarried couple could deduct up to $10,000 each.
6. Child Tax Credits
If you’re a single parent planning to get hitched, depending on your newly combined income, you may no longer qualify for child tax credits. Or you might. Again, it all comes down to your specific numbers.
7. Health Insurance Premiums
Buying insurance on the marketplace can get very expensive. If you get married, you may have the option to join your spouse’s company plan. Of course, on the flipside, many employer’s insurance plans have a significant increase when switching from an individual plan to a family plan, so that may not be your best option, particularly if you qualify for Medicaid. Also worth noting, many companies offer family plans to employers even if they are not legally married, so make sure you understand your benefits before making assumptions.
To Wed or Not To Wed?
Something else to consider? Understanding your potential spouse’s money mindset and their relationship with money. Knowing your partner’s money habits (and hangups) before saying “I do” will better prepare both of you to navigate the complexities of life (and finances) together.
We are firm believers that only you know what is best for you. And there are certainly many, many reasons to get married (or not) beyond bank accounts. What feels right for you trumps any and all of the financial factors outlined here.
Running these types of financial scenarios gets complicated — and quickly. It’s important to get up in a metaphorical helicopter so you can see 360 degrees and see the bigger financial picture when it comes to these types of decisions. And if you’d like help running these scenarios and understanding your specific financial circumstances hit us up, we can help with that!