Is Marriage a Wise Financial Decision?

Does Marriage Actually Offer Financial Perks? 

Financial experts weigh the benefits of marriage compared to single life. 

The idea that marriage always translates to financial benefits is a pervasive one. Personally, I wouldn't have the home or career stability I do now without the support of a dual-income household. However, it wasn't necessarily the legal act of marriage that made those things possible, but rather the financial partnership with my spouse. Still, the common wisdom is that married couples enjoy tax breaks and other advantages... and that some people even marry specifically for the money! 

"In most cases, there's a financial upside to being married," confirms Brad Biren, a financial advisor based in Des Moines, Iowa. The key, however, is understanding that this applies generally, and might not hold true in every individual circumstance. I consulted with financial experts to explore whether married individuals are truly better off, and what those flying solo can do to even the odds. Let's dive into the financial aspects of marriage versus single life. 

How Does Marriage Affect Your Taxes? 

One of the most widely cited financial perks of marriage lies in the tax breaks. "Married couples often end up paying less in taxes overall than they would as separate individuals," explains Jesse Cramer, a Rochester, New York-based financial advisor. He emphasizes that this is particularly noticeable when there's a significant income difference between partners. "A sizable earning gap between spouses almost always results in a lower tax bill." On the other hand, if both partners earn roughly equal incomes, they could face a "marriage tax penalty" where the combined income pushes them into a higher bracket. This is less common if one partner doesn't work or if their income is low enough to avoid bumping the couple into a new tax bracket. 

Beyond basic income tax, there are other considerations. "A key advantage of marriage is the ability to transfer assets between spouses without tax consequences," says Biren. This allows you to give significant gifts like property to your spouse without either of you facing gift taxes (which apply to cash or items worth over $15,000). In contrast, that big gift to your platonic life partner would come with a tax bill from the government. 

Everyday Costs: Marriage vs. Single Life 

All things considered, Biren notes that married couples have the benefit of "gifting, saving, and investing nearly double what a single person can without IRS penalties." That potential to supercharge your retirement savings is significant, particularly when considering the fact that many single millennials and Gen Zers are falling short on retirement savings, according to CNBC. 

However, remaining single does come with some tax perks. If you have children, you gain the ability to claim them as dependents for tax breaks, and your overall income may be lower, explains Biren. 

Taxes are only one part of the financial equation. When my marriage ended, I discovered a hard truth: keeping my household running cost roughly the same, except I was now doing it on a single income. This drastically altered my lifestyle, and years later, I'm still catching up. Most experts agree that splitting everyday expenses is one of the biggest advantages of being partnered. 

Yet, being single also brings financial perks when it comes to everyday life. "Single people often avoid the negative financial baggage a partner might bring – things like debt, problematic credit, or overspending," notes Cramer. When married, your partner's difficulties become yours too. If they carry debt, so do you. A surprise gambling spree is a shared problem. 

"The truly liberating thing about being single is that you're accountable to just one person: yourself," asserts Cramer. "That allows you to aim for higher savings goals and carefully control your spending exactly as you wish." 

How Does Marriage Affect Healthcare Costs? 

The past few years have underscored the importance of health insurance. This, unfortunately, is a realm where married couples often hold a distinct advantage. In some situations, "only spouses and children are eligible to be added to someone's health insurance plan," reveals Beth Logan, a Massachusetts-based financial advisor. Cramer, who happens to be getting married soon, is experiencing this firsthand; he's calculated that he and his soon-to-be spouse will save upwards of $300 per month by switching to a shared health insurance policy instead of maintaining separate ones. 

Logan notes that some companies do extend the option of domestic partner benefits, but this varies greatly. It's influenced by factors like state and local laws, specific employer HR policies, and the insurance company's own stance on domestic partnerships. According to the 2021 National Survey of Employer-Sponsored Health Plans from asset management firm Mercer, 53% of large employers (500+ employees) include domestic partner benefits. However, since such benefits aren't federally protected, your state of residence plays a huge role. 

Married individuals gain even more advantages as they age and potentially require long-term care. To qualify for Medicaid coverage for long-term care in some states like Iowa, a single person might only be allowed to have $2,000 in assets. In contrast, a married couple could potentially hold up to $128,000 in assets, as long as only one spouse uses Medicaid. 

What Can Single People Do to Bridge the Gap? 

"The single most important thing a solo person can do is find a financial planner they trust," advises Biren. It's even possible to find advisors who specialize in helping non-traditional families or single clients. While this might sound self-serving, most of us sadly lack in-depth knowledge about money and taxes, so professional help can actually save you substantial amounts. 

Importantly, every financial expert I spoke with emphasized that they never advise clients to marry strictly for financial reasons. "A dysfunctional relationship isn't worth any amount of money," Logan insists. She goes on to point out that divorce itself is incredibly expensive. Ultimately, Logan says, the most advantageous scenario is the supportive partnership, with shared living costs and health insurance, regardless of official marital status. 

Marriage, Debt, & Credit: A Mixed Bag 

Intuitively, one might assume that marriage could help relieve a major debt burden, but the reality is far more complicated. Your spouse's outstanding debt merges with yours upon marriage, and a poor credit score on their part can significantly drag yours down. "This could make it harder to qualify for a mortgage or other loans," explains Biren. Of course, with two incomes, it's possible to pay down debt more quickly, but only if your partner is financially disciplined enough to contribute their share toward debt reduction. 

"It works both ways," Cramer points out. "The partner with less debt could potentially help the other improve their financial situation." This ability to help a partner get back on track can be a crucial part of long-term relationship success when one person enters with some financial baggage - a situation I've witnessed from both sides in different relationships. 

Conversely, as a single person, you only have your own credit and debt to worry about. You don't risk the fallout from a partner's financial decisions, which can be a major lifesaver if you're focused on paying down debt. 

Raising Children: Is it Cheaper as a Married Couple? 

The US Department of Agriculture puts the average cost of raising a child to adulthood at a staggering $233,610. It's easy to see how having two contributors could ease that burden. However, much hinges on individual income potential versus the cost of childcare, especially if you work irregular hours. If your income is sufficiently high, the price of childcare might overwhelm even a dual-income household, while a single parent on a moderate income could manage with some assistance from family or government programs. 

The bottom line is that while raising children can be financially easier as a married couple, that's only true if both parents earn enough to offset the considerable cost of childcare. As a single parent, it requires meticulous planning and perhaps creative solutions, but it certainly isn't impossible. 

Domestic Partnerships: Are There Financial Benefits? 

In the past, cohabitating offered unmarried couples more financial advantages than it does today. It was a way to achieve some of the benefits of marriage. Recent shifts in tax laws, however, often make living together financially indistinguishable from being single. 

There are a few exceptions to this, notes Cramer. For instance, unmarried couples might share an employer-sponsored health insurance plan if domestic partnership benefits are offered. Additionally, partners can designate each other as beneficiaries of assets like life insurance policies or retirement savings. Still, for most purposes, getting married remains the path to the greatest financial and legal benefits. 

Fairness & Policy: Considerations Beyond Individual Finances 

While the phrase "it's not fair" might not be the most nuanced analysis, it highlights a valid concern. Cramer explains that tax policies aren't designed solely around individual fairness, but rather, have broader goals. "The government's aim is to promote behaviors it sees as beneficial to the economy and society overall." In this context, those behaviors include encouraging marriage and procreation. Tax breaks for married couples are a means toward that end. 

Unfortunately, this leaves non-traditional families – whether single, unmarried, or in same-sex partnerships – facing financial obstacles that traditional couples don't. This can be particularly detrimental to those who are already economically disadvantaged. 

Long-Term Wealth: Does Marriage Offer an Edge? 

It's important to look beyond the day-to-day financial picture of marriage. A 2005 study in the journal Demography revealed that married individuals see net worth increases averaging 77% compared to singles by their 20s, 30s, and early 40s. Moreover, married couples tend to see their wealth grow by 16% for each year of marriage. Cramer acknowledges that the precise reasons behind this aren't fully understood, but a distinct wealth-building effect emerges in marriage. 

Naturally, it's important to keep correlation and causation separate. It's possible that those who marry simply tend to come from higher earning brackets or more financially stable backgrounds to begin with. However, there are tangible factors explaining why married couples might fare better in the long run. 

Inheritance rights are a crucial factor. "Spouses are able to inherit unlimited amounts tax-free," says Logan. Plus, she adds, a surviving spouse could potentially collect Social Security benefits based on their deceased partner's earning history. While a divorced person might receive benefits based on their ex's Social Security earnings, restrictions may apply. That tax-free inheritance advantage lets married couples shield more assets from the government, while unmarried partners often lack the same options. 

What if Marriage Isn't For You? 

Marriage isn't the path for everyone, and it isn't even an option for some individuals. If you've decided against marriage, there are vital steps to take to safeguard your assets and future well-being. 

Firstly, if a cohabitating relationship (or domestic partnership) is your choice, Logan emphasizes doing the legal legwork early on. Consider a cohabitation agreement. "This will clearly outline how you'll handle ownership of assets within the relationship and how they'll be divided if the relationship ends," Logan explains. Estate planning becomes paramount if you're unmarried. "If you want to leave assets to someone other than a relative, you'll need to ensure that's your explicit instruction," Logan states. Otherwise, upon your death, your assets might go to family members instead, leaving those you care about without support. 

Finally, Biren says, "It's crucial to ensure loved ones are financially protected" in the event something happens to you. Life insurance, disability insurance, and a well-crafted will go a long way toward providing for those who depend on you. 

The Bottom Line: Is Marriage A Financial Win? 

It turns out, the supposed financial benefits of marriage are multifaceted. Some advantages are undeniable, with tax breaks and the ability to accumulate wealth more easily being major draws, particularly when there's a large income disparity between partners. Yet, if those factors don't apply in your situation, the financial differences between marriage and single life can be surprisingly minor. 

Perhaps more importantly, the notion that single people are at an automatic financial disadvantage is just plain wrong. While certain societal structures might be geared towards traditional family units, responsible financial planning allows single people to protect their assets and build a comfortable future just as well. 

Important Takeaways 

Marriage offers the biggest financial advantage in terms of taxes and asset sharing – especially when there's a significant income difference between partners or when planning for the long term. 

Debt and credit are a double-edged sword in marriage. While it might aid some couples, your financial health is tied to your spouse's, potentially dragging you down. 

Being single grants you total control over your finances. You don't shoulder a partner's burdens, making it easier to focus on your own goals. 

Healthcare access remains easier for some married couples. However, domestic partner benefits are gaining ground. 

Legal protections matter – especially if you're unmarried. Estate planning and agreements for cohabitating couples are essential to shield your assets and ensure the financial security of loved ones. 

Final Thoughts 

The financial "perks" of marriage are often less about marriage itself, and more about societal structures designed to favor a certain type of family unit. If you're single by choice or by circumstance, does that automatically create a disadvantage? Absolutely not. 

Marriage may offer smoother sailing in some respects, but smart financial planning and legal tools can help single people build wealth, safeguard their future, and protect their chosen loved ones just as effectively. The notion that financial success requires marriage is, ultimately, an outdated one. Your financial well-being rests in your own hands, whether you have a spouse or not.