Marrying for Richer Rather Than Poorer


Money can't buy love, but love may bring you money -- if you're married, that is. Though marriage has evolved from a strictly businesslike arrangement to a more romantic union, an official partnership can result in decidedly pragmatic benefits: increased wealth.

A study completed in 2005 by Jay Zagorsky at Ohio State University's Center for Human Resource Research followed subjects for 15 years and found that being married increases an individual's wealth above and beyond that of two single people.

Single study subjects accumulated about $11,000 of wealth after 15 years. People who got married, and stayed married, accumulated about $43,000 in 10 years of marriage.

Two is Cheaper Than One

One reason married couples accumulate wealth more easily than their single counterparts is that they have lower overhead. It costs less to maintain one household than two.

Similarly, couples can take advantage of economies of scale that make buying for two more cost-effective than buying for one.

For instance, grocery shopping for one can be just as expensive as buying for two.

"Larger quantities are usually priced lower per unit than smaller quantities. This also usually applies to health and auto insurance. It is easier and cheaper to add another person to a policy than to take out a separate policy," says Michael Greaney, CPA, of Equity Expansion International in Washington, D.C.

Cost efficiencies are less obvious than the savings reaped by buying extra-large cans of ravioli or fruit in bulk.

"For a single person, finding the time to prepare dinner, do the laundry, iron clothes, vacuum, wash dishes is difficult. Add just one other person and the same or lesser effort tends to have more than twice the result," says Greaney.

A single person may be tempted to outsource some chores, and pay for it

Efficient Management of Financial Resources

Being accountable to another person can keep spending on the straight and narrow, particularly when working toward a mutual goal such as buying a house or financing an exotic vacation.

To keep household finances shipshape, budgets and goals should be reviewed often. In fact, running your household finances similar to a business may not be a bad idea.

"The business model of (evaluating earnings and expenses) at least four times a year would probably be good for most families. A marriage is not a business, but being businesslike is another matter. Aristotle in 'Politics' characterized the family not just as the basic political unit of society, but as the basic economic unit," Greaney says.

The U.S. government clearly agrees with that sentiment and gives married couples some breaks related to taxes and retirement.

A married couple can file their taxes jointly. With disparate incomes, a married couple pays less in taxes than they would singly.

"The way that our tax system works is that the more you make, the more you're taxed. And when you're married, the rate goes up at a slower rate than when you're single," says Noah Rosenfarb, CPA and founder of Freedom Wealth Advisors in Short Hills, N.J.

There is one possible financial disadvantage to being married: the marriage tax penalty.

Though the 2001 Bush tax cuts eased the tax burden on married couples earning close to the same amount, the marriage tax penalty lives on for couples whose earnings exceed a certain threshold.

Depending on their tax bracket, a married couple could end up paying more in taxes than they would if they were single.

Retirement Benefits

Based on the income of the working spouse, a joint-filing stay-at-home spouse can fund a spousal IRA.

"All you need is the income necessary for the IRA contributions, the max of which is $5,000 this year or $6,000 if you're over 50," says Steven Weisman, a lawyer and professor at Bentley University in Waltham, Mass.

Additionally, spouses get special treatment when it comes to inheriting their spouse's retirement assets.

For instance, an inherited Roth IRA can be rolled over into an existing Roth IRA. A spouse inheriting a Roth IRA gets the option of keeping the funds in his or her retirement account indefinitely.

Anyone else inheriting an IRA has to take withdrawals based on his or her life expectancy.

Spouses can also elect to take Social Security payments based on the other's work history if the payout is greater than the benefit based on their own earnings.

For example, if you have reached full retirement age and have been married to your spouse for more than nine months, you can receive Social Security payments equal to 50% of your new spouse's benefit as long as you are currently married.

Estate-Planning Benefits

While the government tends to automatically reward married couples with certain benefits, it pays to know a little bit about estate planning to fully reap the government's marital largesse.

If sheltering assets from possible lawsuits is a priority, Weisman recommends that married couples who own property together use "tenancy by the entirety" as opposed to "joint tenancy with right of survivorship." Tenancy by the entirety is available only to married couples.

Both types of ownership pass the assets outside of probate to the surviving spouse. "But perhaps even more importantly," says Weisman, "with tenancy by entirety, the property is out of the reach of creditors."

It's not automatic, though. Couples have to indicate that they want to title the property in this manner.

The Devil's in The Details

Finally, workers often neglect to update their beneficiary information on their retirement accounts. As that's likely the biggest pot of money most people own, slipping up on that detail can be incredibly costly.

"With retirement accounts, if they go through the estate or even if someone makes the mistake of naming their estate as their beneficiary, you get a lot less tax deferral. So it is very important to be proactive and put your spouse as the beneficiary," says Weisman.

And if marital bliss doesn't last forever, don't forget to update beneficiaries right after a divorce. Nothing will sabotage your wealth-building efforts in life more than inadvertently giving the bulk of your estate to your ex after your death.