Financial Planning: Financial Opportunities for the Married Couple
Question:
I recently got married, and I want to make sure my spouse and I are taking advantage of all the financial opportunities available to married couples. What should we consider when planning our financial future?
Answer:
Congratulations on your marriage! Married life brings many changes, including a number of additional considerations from a financial planning and estate planning perspective. Here are key opportunities to consider for a secure financial future:
1. Filing Taxes Jointly May Lower Your Tax Bracket
Filing your taxes jointly can often reduce your tax bracket, particularly if one partner earns significantly more. For instance, if your spouse makes $75,000 and you earn $200,000, your combined income of $275,000 might put you in the 24% tax bracket for married couples filing jointly, rather than the 22% and 32% brackets individually.
2. Spousal IRA Contributions
Your spouse can contribute to an IRA even if they aren’t working, provided you file taxes jointly. Spousal IRAs offer higher income limits for tax-deductible contributions compared to IRAs owned by workers with employer retirement plans. In 2024, a non-working spouse can contribute tax-deductible amounts if the household income is $230,000 or less. Spousal IRAs can be traditional or Roth.
3. Social Security Benefits
Consider whether your spouse will take a spousal benefit from Social Security. Typically, a spouse with lower earnings might choose a benefit equal to 50% of the higher-earning spouse's full retirement age benefit. Note that spousal benefits don’t increase if claimed after full retirement age and are only paid once the higher-earning spouse claims their benefit.
4. Joint Health Insurance Plans
You might access health insurance through your spouse’s employer. Compare each of your workplace health plans to determine eligibility for better coverage or lower premiums. In some cases, both partners might benefit from remaining on their respective employer’s plans.
5. Minimizing Estate Taxes
Married couples can use strategies like the marital deduction to transfer assets without estate or gift taxes. These can occur any time, including on death. The surviving spouse can also claim any unused portion of the deceased spouse's estate tax exemption.
There are several financial changes to consider both before and after tying the knot. Consult your financial advisor to navigate the complexities of combining finances and planning your future together.
