From 'I Do' to 'We Will': How Marriage Impacts Your Finances

Marriage brings about several financial changes. You’ll likely share expenses like rent or mortgage, utilities, groceries, and insurance, which can affect your budget, savings, and spending habits. Marriage also can change inheritance laws and estate taxes, so updating your will, beneficiaries, and other estate planning documents is also important. While getting married doesn’t directly impact credit scores, jointly held accounts or loans can affect both spouses’ credit histories. Becoming a couple may change your filing status, potentially affecting your tax liability, deductions, and credits.

Even if you just married a long-term partner, marriage may affect how you approach retirement planning, including eligibility for spousal benefits, survivor benefits, and how assets are managed and distributed in retirement. Most importantly, you now need to plan a retirement for two. Generally, we advise investors to start with their workplace retirement plan. Plans like 401(k)s and 403(b)s often offer an employer-matching contribution for participating in the plan. At a minimum, investors should contribute enough to receive the full match; however, the high contribution limit of $23,000 in 2024 provides ample opportunity to save meaningful amounts for retirement.

Since retirement plans are individual accounts, there is no reason that the investment approach needs to be the same. Often, couples find that they have different risk tolerances and fundamental investment philosophies and will use investment tools their own way.

However, sharing plan information and coordinating investments might help some families build wealth over time. For example, one spouse’s plan may have better Large-Cap funds, while the other’s may offer better Small-Cap funds or provide a more generous vesting schedule. With a joint strategy, a couple can take advantage of each plan’s strengths while avoiding weaknesses like high plan fees. High fees can eat into the investment return; if one spouse’s plan carries higher-than-average fees, that investor may choose to save only enough to receive the match. Additional savings can be directed to an IRA, as investing inside an IRA usually does not incur additional administrative expenses. When couples can save more, they should consider diversifying retirement assets among tax-deferred and tax-exempt accounts, such as a Roth 401(k) or Roth IRA.

One benefit couples should not overlook is the opportunity to make spousal IRA contributions. If one spouse is unable to work or chooses to stay home with children, the working spouse can fund separate IRA accounts for each spouse based on their joint income. This could be the same IRA that the spouse contributed to while working or it could be a new account. For 2024, an individual with earned income can contribute up to $7,000 annually to their IRA and up to $7,000 more to a spouse’s IRA, provided both contributions do not exceed the total taxable income reported on the couple’s joint tax return.

Once individual retirement plans are funded, a couple can begin saving in a joint account, which can simplify managing finances but also requires trust and communication, considering each individual’s investment style, risk tolerance, and long-term goals. A trusted adviser or financial planner can help couples see savings as a whole and guide wealth toward a common goal.

If you have questions on how to look at your and your spouse’s retirement as a concerted effort, the experts at Henssler Financial will be glad to help: