Have you ever thought that tying the knot may not only make you happier but wealthier as well? There are financial benefits to your current status -be it married or single.
According to the National center for Health and Statistics, about 2 million Americans get married each year. Also, a 2005 study at the Ohio State University (OSU) came up with the analysis that there was a sharp increase in wealth for people after marriage. But on the adverse side, divorce had a negative impact on the financial situation. So, there are both pros and cons to being married. There are various factors involved that play a role in your financial status post marriage, namely- your income, your lifestyle and whether you have children.
It’s impossible to say whether married or single people are financially better; instead, it’s better to examine the financial benefits and drawbacks of marriage to be prepared for now or for future.
Marriage – Costs, benefits and more
Marriage comes with a benefit of sharing not all your feelings but also your expenses and responsibilities. Married couples can enjoy the benefits such as retirement, taxes and insurance which singles do not. However, wedding cost is something that can’t be ignored. Also, tax laws can benefit some couples and adversely can be a penalty for others. One of the biggest financial setbacks in a marriage happens when it ends in a divorce. There are other factors to understand the financial pros and cons of a marriage:
Joint tax returns
The honeymoon is over and the reality comes in, to start with a new routine. Marriage changes a lot of things such as your daily routine, lifestyle and leisure time etc. One of the key tasks for newlyweds is to adjust to file a joint tax return, which in many cases comes with a marriage penalty.
The marriage penalty is because of the tax brackets that accounts for income levels at which tax rates shift aren’t exactly twice as high for couples as for singles. Hence, couples who file returns jointly pay more as they would for 2 single persons. However, not all couples pay this penalty.
If either of the two earns all or most of the income, then you get a marriage bonus of paying less in taxes for joint returns. There are tax benefits as well for married couples which singles cannot avail, such as tax deductions, home sales, gift taxes and estate taxes.
Average wedding cost in the US is nearly $30,000 and thus people go for the wedding loan. Most couples end up in debts to pay for their big day. Instead of starting a new life with debts it’s better to look for other ways to finance for the wedding or plan a budget.
Risk of divorce
The risk of divorce is perhaps the greatest financial risk of getting married. Getting married may add benefits to your financial status but a divorce can turn the tables. The study at OSU states that on an average, divorced people have 77% less wealth than single people of the same age group. The impact of divorce stays for a long period after a couple splits up.
Married couples enjoy the benefits of choosing from various health insurance plans and save money on premiums.
Among all the benefits that a married couple has, retirement benefits are the most essential. If you’re single and unemployed you can’t make contributions to IRA but, if you’re a stay-at-home spouse, you can set up a spousal IRA and make contributions from your joint income. There are various options for collecting social security benefits for married couples.
Two single people staying together can live cheaply as one, by sharing all your expenses. Married couples can spend less by sharing household expenses, rent, food and utilities, than two single people living together. Sharing responsibilities along with expenses is a better way. If you’re single and live alone, you might end up spending on restaurants more than prefer to cook for one at home. If you’re living with a partner, you have the option of sharing household chores. Fewer expenses account for more savings.
The U.S. Department of Agriculture (USDA) published the annual report “Expenditures on Children by Families,” which shows that a family with a child born in 2013 can expect to spend more than $245,000 raising that child to adulthood. Childcare costs for working parents, housing costs, tax breaks etc. can be an offset if you don’t plan things well.
It is true that marriage comes with additional benefits along with a loving partner. But it’s better to stay single than getting married to a wrong person and end up in divorce. If you’re single now but plan to get married someday, then choose a partner carefully. If you’re married, then take time to discuss your financial goals and needs with your partner for a better future.