Money and Marriage: How Getting Married Changes Your Finances
It's not just the cost of the wedding or the cards filled with cash and checks that pile up at the reception. The legal act of getting married, as opposed to just living together, can have some immediate impacts on your financial situation — for better or worse. Take a look at this rundown of financial considerations you'll be facing after the altar.
How marriage affects insurance
Calling insurance companies may not feel like the most romantic activity for a newlywed couple, but it could free up some cash to help pay off the honeymoon. Both auto and homeowners insurance companies may offer lower rates to married couples, because statistics show they're more cautious and file fewer claims.
Auto insurance
For auto insurance, the impact is greatest for very young people. A young twentysomething could pay 20% to 26% less for car insurance once they're married. However, that difference is smaller the older you are, so a 30-year-old might only get a 2% decrease in rates after saying, "I do." This favorable treatment is automatically applied whenever you get an auto insurance quote as a couple.
Home insurance
Home insurance companies might use marital status as a factor in determining your rate or just offer a flat discount, such as 5% off, when you get married. It's worth it to call and ask for a better deal once you're hitched.
Long-term care insurance
Married couples also get big discounts on long-term care insurance — up to 40%. That's because spouses are likely to care for each other at home whenever possible, while a single person might not have that option.
Health insurance
Your nuptials are also a good time to revisit your health insurance plans. Marriage is one of the qualifying life events that allows you to change your plan or add your spouse. Most companies require you to make these changes within 60 days of the walk down the aisle. If you miss that deadline, you'll have to wait until the next open enrollment period to make changes.
If either (or both) of your employers offers health insurance benefits to spouses, do a side-by-side comparison of your plans and consider three scenarios:
- You each keep your current plan.
- Your spouse joins your plan.
- You join your spouse's plan.
Some things to consider: How will your monthly premiums change? And what about your deductible and possible out-of-pocket costs? Does your employer offer an incentive for declining coverage and joining your spouse's plan? Also, have you (or your spouse) already met your deductible or paid significant out-of-pocket costs in your current plan year? If so, you might not want to start a new plan with new limits, especially if you anticipate more health care bills.
If you don't have employer-sponsored health insurance, you can apply for coverage on your state's or the federal exchange or change your current coverage within 60 days after getting married. If you and your spouse will get coverage through an exchange, you must enroll together, but you can opt for different plans.
Subsidies
Marriage changes how you qualify for health insurance subsidies under the Affordable Care Act. Once you're married, your combined income determines if you get help.
As a couple, you can earn a joint income of up to 400% of the federal poverty level , or $69,680, to qualify for premium subsidies. If you earn more than that, you might qualify for an extended subsidy that limits your insurance cost to no more than 8.5% of your household income. The extended subsidy is in effect through 2025.
Deductibles
If you and your new spouse opt for a family plan, one seemingly minor detail could make a huge difference in your out-of-pocket costs if one of you requires medical care. It relates to how the deductibles and out-of-pocket costs are applied and whether they are "embedded" or "aggregate."
Here's how that works: Family deductibles (and out-of-pocket costs) tend to be about twice as much as those for individuals. For example, say an individual deductible is $3,000 and a family deductible is $6,000.
In the embedded scenario, once any family member reaches the individual deductible limit ($3,000), the insurance company will start covering their costs. In the aggregate scenario, the sick person's bills can go as high as the family deductible ($6,000) before the company starts paying. It works the same way for out-of-pocket limits.
Embedded deductibles are more protective against high out-of-pocket costs if a family member needs extensive medical care. But these plans might have higher premiums.
It's not always obvious if the deductibles for a family plan are embedded or aggregate, even if you read the Summary of Benefits and Coverage. Call the insurance company and ask. You can try these questions:
- Are the deductibles and out-of-pocket limits for the family plan embedded or aggregate?
- If one person in the family gets sick or pregnant, what deductible and out-of-pocket limits must they meet before the plan starts paying?
As of 2016, all insurance plans have embedded deductibles in family plans.
How getting married affects taxes
When filing your taxes, you must file as a married couple if you wed before Dec. 31 of the previous year. Most married couples should file jointly, with few exceptions, such as if your spouse refuses to file. Your filing status can have a big impact on your tax liability, especially when it comes to big-ticket items such as housing.
Despite what you may have heard about the marriage tax penalty, only certain couples get hit with it. For those without children, penalties occur at the very low and very high ends of the income spectrum when both spouses have earnings. They could end up paying 4% more in federal taxes than they would have if they had remained single.
Childless couples who earn $37,000 to $171,000 per year and take the standard deduction generally face no penalty. In fact, they may even get a marriage tax benefit as high as 6%, compared to if they had stayed single.
Tax penalties become more common for couples with children, except for those earning very little or with a very uneven income split.
Marriage and retirement, IRAs and Social Security
Single people who earn less than $150,000 a year can contribute the maximum amount ($7,000 in 2025, or $8,000 if you are 50 or older) to a traditional or Roth IRA. A married couple can contribute the maximum per person (for a total of $14,000 to $16,000, depending on their ages) if they earn less than $236,000 combined.
That could leave two high-earning singles worse off after marriage in terms of retirement savings. A low- or no-earning spouse is better off than a low- or no-earning single person, because the spouse can contribute to a Roth IRA or other type of spousal IRA based on their combined income. A single person could be out of luck, because their eligibility is based on their own income.
But married couples have more flexibility when it comes to some other types of retirement savings. If both have access to a 401(k) through employers, they can optimize their contributions based on any employer match.
Married couples can also access many different Social Security options. While single people only earn benefits based on their own income over their working years, spouses can claim some benefits based on their partner's earnings.
For example, a wife can get 50% of her husband's benefit, which makes sense if it's more than her own. If a higher-earning spouse dies, the widow or widower can opt to get their partner's Social Security benefit instead of their own.
There's one not-so-small Social Security consolation for people who remain single into retirement. They can earn much more before their Social Security benefits are taxed. For example, a married couple is subject to tax on their benefits once their income exceeds $32,000. Two single people could each earn $25,000 (or $50,000 combined) before they have to pay tax on their Social Security benefits.
As much as 85% of Social Security benefits are taxed for couples who earn more than $44,000 and single people who earn more than $34,000. That means two cohabitating singles could earn up to $68,000 combined before paying a similar tax rate on their Social Security benefits.
How marriage affects debt and liability
One more important consideration when you tie the knot is liability. If your spouse declares bankruptcy, cheats on your joint tax return, hurts someone in a car accident or bar fight or loses a lawsuit, your joint assets could be at risk. And if they rack up certain kinds of debt, creditors might be able to come after you to pay it off.
But before you file for divorce or an annulment based on the complicated information above, keep this in mind: Besides its personal and social benefits, marriage can offer other big financial protections in the future, such as no federal tax obligations if your spouse dies. And if you're married, you'll automatically inherit your spouse's assets, even if there's no legal will. You can count on your spouse's assets till death (or divorce) do you part.
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