Marriage, that blessed arrangement, that dream within a dream… it’s truly something to aspire to. Well, in addition to all the beauty of starting your life with someone you truly love, there are actually some pretty sweet financial perks. In all the swooning affection, the exciting honeymoon plans, and the great promise of building a life together, it’s easy to see why few people may have finance on their minds. However, if you do plan on saying “I do” in the near future, or if you recently have already, it’s a good idea to look into the financial benefits of marriage that come along with your vows.
In this post, we’ll cover some of the truly awesome money perks that come with combining finances as newlyweds. You may have heard of joint filing, but there are more than just tax breaks to look forward to when you get hitched. Everything from your credit score to your retirement funds stand to benefit from marriage, so be sure to read through this guide to better understand the perks. You can also click on one of the links below to jump straight to the benefits you want to read about.
- Tax breaks
- Credit-building opportunities
- Insurance rates drop
- Retirement benefits
- Banking & planning perks
Let’s get started by taking a look at marriage tax benefits.
When you think about the financial benefits of marriage, one of the first things that might come to your mind is the tax benefits. And it’s true: marriage really does come with benefits when you pay your taxes — though it may sometimes also depend on the state you live in.
Before you get too excited, though, it’s important to know that in some states, there’s what’s known as a marriage penalty. This happens when a tax bracket for a given income level is less than twice the amount for individual filers. What does that mean? Think of it this way: if you make $50,000 per year and your spouse makes $50,000 per year, a marriage penalty state may have higher taxes for joint filers who make $100,000 than the taxes you’d each pay individually added together.
Luckily, the majority of states don’t have marriage penalties. In fact, a handful don’t even have an income tax. At the federal level, there is no penalty for tax brackets, as the brackets for joint filers are exactly double the single filer brackets. (Note: there are still tax penalties, but they may come in the form of lesser deductions.) This could result in a tax benefit in the case where there’s a sizable wage gap between spouses. Here’s how.
Let’s imagine a married couple who plans to file jointly. Say, for example, that one husband earns $100,000 a year, and the other husband stays at home to take care of the kids. If husband #1 were to file as a single person, his top rate would be 24%. However, filing jointly, his top rate is only taxed at 22%. The benefit may seem slight, but it adds up over time. Plus, if you do have kids, there are helpful tax credits that you can benefit from as well. It’s a good idea to talk to a tax professional to find out whether you should file jointly or separately to maximize your tax savings.
Your credit score: it’s pretty much the pulse on your overall financial health. When potential lenders, like banks or credit card companies, want to know how trustworthy you are, that’s often what they look to first. So, as you make big moves in life, like buying a new car, a house, or taking out a loan to renovate for the new baby, your credit score is going to be pretty essential.
Luckily, that’s another place where the financial benefits of marriage can help you out. If your credit score is a bit rough around the edges, but your soulmate has a stellar record, they can actually give you a helping hand in improving your credit score. Here’s how. There are two important ways that this can happen.
- Apply for joint credit cards. Rather than just using your own credit card, which you may have some trouble paying down by yourself, your spouse could help you out a bit by being an authorized user on a shared card. This is especially handy if they make more than you. By having a joint credit card, you may access a few big benefits. Your spouse will probably remind you when it’s time to pay and hold you accountable for keeping up with what you owe. You’ll also have another person on the account who can help pay off the balance when it’s more than you can handle alone.
- Co-sign loans together. When it is time to take out that mortgage, purchase a new car, or borrow money for a life event, your spouse’s next-level credit score will likely secure you a much lower rate than if you’d taken out the loan by yourself. And, if you’re consistent about paying down the loan, your credit score is in a better position to improve over time.
Basically, having your spouse work with you to pay down your monthly credit card expenses, or make regular loan payments, could boost your score. Of course, when you put your finances together this way, there can be risks. You’ll need to make sure you have some serious money talks before agreeing to this, but if everyone is comfortable and sure of it, this can be a great way to help one spouse out of a credit hole. Take a look at the pros and cons of having a joint credit card:
Insurance rates drop
Insurance rates are partly decided based on actuarial data. What’s that? Basically, crazy amounts of info about how likely certain people are to get into accidents, burn down their houses, get sick and need hospital care, etc. And, as it happens, married people tend to be safer bets for insurance companies than single people. Maybe it’s something about settling down and having a family that makes people less likely to engage in risky behavior.
Whatever the reason, tying the knot is likely to lower those monthly rates. In fact, the average married couple in the US pays 11% less per person than their single counterparts. That’s a pretty big savings, especially over the long term.
That may seem like awesome savings on its own, but the good news is that there’s more. If you pay home or renter’s insurance policies and you live apart, you each have to fork over a portion of your paycheck to pay insurance. When you’re married, assuming you do move in together, you’ll be able to consolidate and save money by cutting that insurance payment in half.
Another benefit is that many employer-provided health insurance plans allow you to add a spouse. If that’s true of your plan and your spouse’s, you’ll be able to choose whichever plan offers the best quality and price, and both join that plan. Given how expensive health insurance is, every little break can make a huge difference.
Another benefit of getting hitched is that you can plan your retirement together: imagine the two of you sitting back in rocking chairs on the porch, sipping sweet tea, watching the world go by as you reminisce on a lovely life together sounds great.
And while that sounds like a dream, there are actually some concrete, practical benefits, too. By getting married, you’re able to take advantage of each other’s retirement-planning abilities. For instance, depending on your specific circumstances, it’s possible to use your spouse’s Social Security benefits. This is especially helpful when one spouse passes away; the other may be able to continue to collect benefits. Bear in mind that these benefits may no longer be available if the surviving spouse remarries, though.
In fact, many retirement plans also allow you to list a beneficiary, so even if you’re funding your retirement with a private IRA or an employer-provided 401k, you’ll be able to rest assured that, should you pass before your spouse, they will be able to benefit from your lifetime of savings. Being able to share this is one of the many legal benefits of marriage.
Banking & planning perks
The last financial benefit of marriage to consider is a pretty general one: the benefit of planning out your banking and other finances with a partner. Going it alone can be scary; getting married means that you don’t have to face some of life’s biggest challenges by yourself, and financial planning is definitely one of them.
Plus, working together to plan your finances can have a positive impact on the happiness and health of your relationship. Recent research suggests that having a joint bank account, for instance, can actually make couples happier. What’s more, the tests show that it’s not just that happier couples tend to feel more comfortable banking together. There actually seems to be a positive influence on the relationship when couples intentionally plan their finances together. Sadly, a little more than a quarter of millennials keep their bank accounts separate. While there may be good reasons for this in some cases, you may miss out on some of the perks of doing finances together — both financially and relationship-wise.
One of the biggest perks about being in a married couple is that you have more money to work with when you plan together. If you are planning on investing, for instance, pooling your funds can mean that you have more to invest — especially when you also factor in those marriage tax benefits and other benefits of getting married discussed earlier. Investing more could mean bigger returns on your investments, which is ideal for your financial future.
As you plan your post-nuptial finances, it’s important not to overlook these budget-boosting benefits of marriage. Remember, the five big areas where you could look for financial perks include:
- Marriage tax benefits
- Raising personal credit
- Lower insurance rates
- Retirement benefits
- Banking and planning
Be sure that you don’t leave any opportunity for savings on the table, and take advantage of these financial benefits of marriage today!