Romance in Retirement: Financial Considerations When Marrying Later in Life

Finding a partner whom you love and want to spend your life with is such a beautiful thing. However, for those in retirement, deciding whether to get legally married comes with unique decisions and possible ramifications, both good and bad. Before you reach out to a wedding planner, it may be wise to talk with a financial planner. To minimize your taxes, maximize your income, safeguard your assets and live happily ever after, I encourage you to review these important points before you say “I do.”

Consider how to merge your financial lives.

The first thing to discuss with your partner is your respective financial situations. Here are a few questions you may want to start with:

• Do you each understand your overall income, investments and the amount needed to fund your lifestyle?
• Are your financial goals aligned?
• Do you approach your finances and spending the same way?
• Do you have similar credit?

From there, you’ll need to talk through whether you plan to combine finances. If so, you may consider doing so partially or fully. Many couples choose to have one account for household expenses while keeping most accounts separate. This is a personal decision that each couple must make for their own partnership. A financial advisor, along with an attorney, can help you understand the implications of different options.

Taxes matter in marriage.

Taxes are often one of the first financial considerations for couples contemplating marriage. Your respective tax situations could change dramatically if you tie the knot. If your incomes are similar, filing taxes jointly may have minimal impact. However, if you have a significant difference in incomes, one of you may see a decrease in your tax rate while the other sees an increase.

An advisor can help you maximize tax benefits in the year(s) before your wedding. For example, if one partner is in a lower tax bracket, it could make sense to do a Roth conversion. With this approach, funds are moved from pre-tax retirement accounts to a Roth IRA, where future withdrawals are tax-free. This strategy could help reduce your lifetime taxes by minimizing the impact of future required minimum distributions (RMDs).

On the other hand, the partner with higher revenue may benefit from deferring income into future years while maximizing current-year deductions. It could make sense to increase charitable giving via a donor advised fund (DAF) contribution. Or if your state offers tax deduction funding, contributing to a 529 educational plan for your grandchildren may be a good option.

If you’re not yet Medicare age and on an Affordable Care Act (ACA) health insurance plan, your marriage could reduce or eliminate your premium tax credits. If you or your partner are on Medicare, your Part B and Part D premiums might be affected.

Additionally, certain tax credits may become more favorable after marriage. For example, a new electric vehicle qualifies for a $7,500 tax credit, and the income limits are doubled for a married couple compared to an individual.

Discuss joint retirement goals and income.

Your retirement goals may shift as you and your partner consider your lives together. You may wish to purchase a bigger home, an RV or spend more on travel. While combining households is typically less expensive than maintaining two separate ones, it’s essential to understand your joint financial needs.

If both of you are eligible to receive your own Social Security benefits based on your own earnings records, then getting married should not affect your gross Social Security benefits. On the other hand, if you receive or plan to receive benefits based on a late or former spouse’s record, getting remarried could impact your benefits, especially if you are under 60. Discussing your Social Security options with an advisor can help you and your partner maximize your lifetime benefits.

Similarly, if your late or former spouse served in the military, remarrying could result in losing Tricare For Life (TFL) benefits, which might be costly to replace with Medicare supplements and Part D plans. Other federal and military benefits can also be impacted by getting remarried.

Don’t overlook estate planning.

When marrying later in life with established assets, a prenuptial agreement often makes sense. This legally binding document can protect your respective financial interests as well as those of your heirs. Your estate planning attorney can help draft an agreement that makes sense for both partners. At the same time, it’s wise to review your overall estate plan. Your advisor and attorney can help talk through your wishes in what assets, if any, to leave to your new spouse. Additionally, it might make sense to name your new spouse in other documents, such as your medical power of attorney (POA), which could simplify things in a medical emergency.

If either of you have adult children, consider involving them in estate planning conversations to prevent surprises or resentments down the line.

Although it may not seem romantic to think of all the financial effects of marriage when planning your future together, understanding how this union could impact both of you is an essential part of your wealth plan. Since every situation is unique, an advisor can help you maneuver the fiscal implications of a partnership. If you’re not already working with one or would like a second opinion, we would be happy to help. I encourage you to schedule a phone call or virtual meeting with our Client Development team.

For informational and educational purposes only and should not be construed as specific investment, accounting, legal, or tax advice. Certain information is based on third party data and may become outdated or otherwise superseded without notice. Third-party information is deemed reliable, but its accuracy and completeness cannot be guaranteed. Neither the Securities and Exchange Commission (SEC) nor any other federal or state agency have approved, determined the accuracy, or confirmed the adequacy of this information. R-24-7639