Why Married Couples Who Combine Finances Get Richer

Why Married Couples Who Combine Finances Get Richer
Relationships

When my wife and I first dated, I had to fly to Dallas to see her. She offered that I stay in her apartment while she goes back to work, which I accepted without hesitation. I was too cheap to get a hotel room.

A whirlwind romance followed, I proposed, and got engaged shortly after. We got hitched a year later for, believe it or not, less than $500 (more on this in the future).

What followed over the next decade or so was an effective wealth-building partnership that would not have been possible without combining our finances and sharing each other’s goals.

Married couples have four times more wealth, one study shows

According to Jay Zagorsky, a research scientist at The Ohio State University, couples who get and stay married can have as much as four times the wealth of their single or divorced peers.

The key is to stay married. Those who get divorced see a dramatic decline in wealth, leaving them in worse financial straits than those who never married.

What’s interesting is that couples in a committed relationship, but not married, don’t fare as well as married couples. Zagorsky believes it’s because they don’t fully commit to sharing their finances and expenses.

The demographics of who gets hitched also plays a role. Bradford Wilcox, director of the National Marriage Project at the University of Virginia, says “It’s more educated, more affluent and also more religious Americans that tend to get married in the first place.”

Once they are married, the couples also are able to take advantage of economies of scale – anything from buying just one dishwasher to relying on one another’s health insurance. That allows them to build wealth more quickly than their peers who are single, divorced or living together romantically.

The financial benefits of being married

Besides the health insurance benefits, there are other significant perks:

Taxes: Lower tax brackets for one-income household, ability to open a spousal IRA to save more, and could get twice the standard deduction compared to single filers.

Social Security: If one spouse dies, the surviving partner can collect up to 100% of the deceased partner’s benefit, for example. A spousal benefit can also apply if one spouse becomes disabled.

Estate planning: Unlimited marital deduction enables a spouse to give an unlimited amount of cash to the other spouse, with no taxes or tax penalties involved in the transaction.

In contrast, civil unions or domestic partnerships are recognized only at the state, county, or city level and not by the federal government.

Of course, this is not to say you cannot build wealth without getting married. But it will be more challenging.

Having separate accounts doesn’t necessarily mean you have separate finances.

I just read an article that says you don’t have to marry your finances. It says separate accounts give you more freedom and privacy as they do to your partner.

That article is full of crap. There are instances when one spouse should keep an account separate, but being “in full control of your money” or “having privacy” is not one of them. When you’re married, the two of you become one— you share one bed, same bathroom, some even use the same toothbrush for Pete’s sake!

One good reason I can think about is when one spouse is seriously in debt. If a creditor comes after your spouse, your money could be at risk. 

But every couple should have at least one joint account and there’s a couple of reasons why:

  1. Convenience: Joint bank accounts will issue a debit card to each spouse, a checkbook, and online access to the account. It allows each spouse to have access to the marital funds, regardless of where the other is
  2. Survivorship: If one spouse on the account dies, the other will have uninterrupted access to the funds, which can alleviate extra stress during a terrible time.

My wife and I do have separate accounts, but we also do the following:

  • Share passwords so we can both have a bird’s eye view of the household finances using an online tool like Personal Capital
  • Name each other as the beneficiary of the account
  • Consult each other before making big purchases

In addition, we plan for major financial goals like retirement as a couple. We review our retirement accounts like 401(k)s and IRAs as one overall account for the purpose of portfolio rebalancing, for example.

Final thoughts

When it comes to relationships, many of us focus on physical attraction, beliefs, and interests. Money is a taboo subject.

But unless there’s financial transparency, shared goals, and values, many marriages will go down the toilet. After all, money is a common source of disagreements.

It would be hard to hit your goals and build wealth if you’re living separate financial lives.

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