Warning: this article is not romantic. When you daydream about marriage, you might think about the dress, the venue, or who will be standing across from you. Most people don’t dream of tax returns and insurance policies.
But to be fair, our concept of marriage has changed radically in the last few decades. With almost 50% of marriages ending in divorce (the US has the highest divorce rate in the Western world), our understanding of the words "‘til death do us part" has become more nuanced. More and more people are waiting until they’re older to get married, for a variety of reasons. And when they finally do, they’re taking a more reasonable, logical approach. Fewer shotgun weddings, more careful discussions.
We’ve also seen more and more discussion about what marriage means with the increasing legality of same-sex marriages. For more information about the finances behind same-sex marriages, read our article on the Huffington Post, "In A Same-Sex Marriage? Time to Focus on Financial Equality."
Marriage will affect every aspect of your financial lives. While it might not seem romantic to think about them this way, marriages are basically interpersonal business deals. Like any business deal, you want to know every way that its going to change your finances. In this article, we’re going to break down the financial changes that marriage brings, both good and bad.
For a lot people, this is the big one. When you get married, you have the choice to hop on to your spouse’s health insurance policy. For a lot of people, this is huge. Employer-backed policies often offer more at cheaper prices than policies that you buy yourself. If both of you work, you can choose the policy that offers the best benefits.
There are ways to save money on policies that aren’t offered through your employer as well. Car insurance policies often have better rates for married couples. Why? Easy - married people are better drivers. One study found that unmarried drivers are twice as likely to get into a car accident as married drivers. Car insurance policies usually have multi-car discounts, another money saver for couples. Putting all of your pets under the same roof for the first time? Pet insurance policies have multi-pet discounts, too.
If you’re an unmarried couple that’s living together and buying property together (even something as minor as a TV or couch), there are absolutely no state-dictated rules about what happens to that property if you split up. If you’re married and you decide to split, you have a legal right to all co-owned "marital property" - one reason why divorces can get so messy.
Take this scene from When Harry Met Sally as an example:
The concept of marital property also makes it easier to inherit property after a partner has died. Even if there is no will, or just a partial will, the spouse will usually automatically inherit property that was co-owned or owned by their partner.
Economies of Scale
Speaking of co-owned property, getting married and starting a life together ends up boosting your overall financial state. Not only do you have the opportunity for double the income, but you also save money by only having one living room, one kitchen, one bedroom, etc., that needs to be furnished. Your bills are also consolidated - one electricity bill, one gas bill, one phone bill, etc. (You can get these same benefits if you move in together without getting married, but without the legal safety net of marriage.)
While there’s no hard data on how much people will save over time by getting married instead of staying single, some outlets have attempted to quantify overall savings. Lisa Arnold and Christina Campbell at The Atlantic believe that a single woman will end up paying anywhere between $500,000 and $1 million more than her married counterpart in areas like housing, health insurance, IRAs, and taxes.
Social Security will pay out a variety of survivor’s benefits to both the spouses and children of the deceased. Unmarried partners won’t receive any benefits.
Once you’re married, you get two choices when filing for taxes: Married Filing Jointly (MFJ) and Married Filing Separately (MFS). There are pros and cons to both, all of which need to be weighed when you’re preparing your taxes. While most couples will save money on taxes by filing jointly, that’s not always the case.
The biggest drawback to MFJ is something called the "marriage penalty." When you file jointly, your incomes are combined. This can have two effects. The first occurs when one partner is in a higher income bracket than the other. Because the two incomes are averaged together, the partner with the higher income will be brought down into a lower income bracket, while the partner with the lower income will be pulled up into the higher income bracket. While it might sound like it evens out, you’ll want to do the calculations and see if you save money by filing separately.
The second drawback occurs when both partners are in the same income bracket. Because of the way the tax tables are written, a married couple filing jointly can actually be pushed up an income bracket, paying hundreds or thousands of dollars more than they would if they filed separately. Again, you’ll want to do the calculations on both and see what’s best for your family.
Filing separately has its own drawbacks, however, especially when it comes to people with significant tax deductions. "95% of married people are better off filing jointly," Joseph Boyce, public accountant, told Learnvest, so take careful consideration and do the math when it comes to deciding how to file.
Loans and Credit
Getting married can greatly increase your chances of getting a loan. Why? If you’re applying together, you can count both of your incomes towards the loan. Plus, if one of you has below-average credit, your partner’s good credit can help make up the difference. If you both have good credit? Congrats, now you have awesome credit.
Of course, there are risks involved when cosigning on each other’s debt. If you get divorced, you’re still responsible for that debt. As long as your name is on the debt, you’re responsible for it, even if your partner is assigned the debt in your divorce. If your partner doesn’t pay up, debtors can come after you and ruin your credit score. (Your partner would be in violation of the divorce agreement, which means you could sue them for damages.)
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