Category Archives for "Retirement Planning"

Nov 23

Four Year End Financial Planning Tools

By Chris Chen CFP | Financial Planning , Investment Planning , Retirement Planning , Tax Planning

Four Year End Financial Planning Tools


Couple_sitting_at_a_kitchen_table (Rhoda Baer)As we are coming to the end of a lackluster year in the financial markets, it is time again to focus on year end financial planning before time runs out in a few weeks .

Much of year end financial planning seems to be tax related . Any tax move, however tempting, should be made with your overall long term financial and investment planning context in mind. It is important not to let the tax tail wag the financial planning dog .

Here are four key areas to focus on that will help you make the best of the rest of your year end financial planning.

you should never forget to ask why you bought that security in the first place

1) Realize your Tax Losses

At the time of this writing the Dow Jones is down 0.16% for the year and the S&P500 has been up just 1.35% for the year. There are a number of stocks and mutual funds that are down this year, some substantially, and could provide tax losses. Now may be a good time to plan tax loss harvesting. The IRS limits individual deductions due to tax losses to $3,000 . However, realized losses (i.e., stock that you sell at a loss) can be offset against realized gains (i.e. stocks that you sell at a profit), thus providing you with a great tool to rebalance your portfolio with minimal tax impact.

2) Reassess your Investment Planning

While it is important to take advantage of tax opportunities, you should never forget to ask why you bought that security in the first place . Thus tax loss harvesting opportunities can provide a great opportunity to reassess your portfolio strategy. It may have been a few years since you have set your investment strategy. Perhaps you did so when the market looked better than it does now.

As we know, it is very difficult to predict the market, especially in the short term . The last eleven months should have reminded us that bear markets happen. On average the market has been flat (so far) in 2015. Are you ready, and equally important, is your portfolio ready for a potential significant downturn? This is a good opportunity to review your portfolio’s asset allocation, and determine whether it makes sense for your situation.

3) Revisit your Retirement Planning

As you probably know retirement planning is also a little about taxes . In 2015, you may contribute  a maximum of $18,000 to a 401(k), TSP, 403(b), or 457 retirement plan . In addition, if you’re age 50 or over, you may contribute an additional $6,000 for the year. Have you contributed less than the maximum to your retirement plan? You have until December 31 to maximize your contributions to your plan , receive the benefit of reducing your 2015 taxable income, and improve your retirement planning.

The contribution limits are the same if you happen to contribute to a Roth 401(k) instead. While your contributions to the Roth 401(k) are made with after-tax income, distributions in retirement are tax-free. Consult with your Certified Financial Planner professional to determine whether a Roth plan or a traditional would work best for you.

4) Plan your charitable donations

Charitable donations can also help reduce your taxable income, as well as provide other financial planning benefits. If you have been giving cash, consider instead giving appreciated securities. You can deduct the market value of the securities at the time of donation from your current income, and legally avoid the capital gains tax that would be due if you sold the stocks and realized a gain instead. Now, who would not want an opportunity to save on taxes?

If you are retired and need to balance income with your philanthropic impulses, consider giving with a Charitable Remainder Annuity: you may be able to reduce your taxable income, secure a stream of income for the rest of your life, and do good. Check in with your Certified Financial Planner professional about opportunities that may fit your needs.  

Sep 29

Pension Division in Divorce

By Chris Chen CFP | Divorce Planning , Financial Planning , Retirement Planning

 

Pension Division in Divorce

Pension Division

Themis, Goddess of Justice

Jenni (specifics details have been changed) came to our office for post-divorce financial planning. Jenni is 60, a former stay-at-home Mom and current yoga instructor with two grown children. She never had a professional career and spent much of her adult life with a series of low-paying part-time jobs. She is thinking about retiring now and wanted to know whether she would be able to make it through retirement without running out of assets.

Jenni traded her interests in her husband’s 401(k) in exchange for the marital home, an IRA and half of a brokerage account . The lawyers agreed that the 401(k) should be discounted by 25% to take into account the fact that a 401(k) holds pretax assets.

Adjustments to the Value of a 401k

That sounds reasonable on the surface. But as a professional financial planner, I believe that it was a mistake for Jenni to agree to a 25% discount adjustment to the 401(k). After analyzing her finances, it became clear that Jenni would likely always be in a lower-than-25% federal tax bracket after retirement. Had she met a Divorce Financial Planner sooner, he or she would have likely advised against agreeing to a 25% discount to the value of the 401(k).

Jenni and Ron, her ex-husband, also agreed that she would get half of her marital interest in a defined-benefit pension from his job as a pediatrician with a large hospital.  At the time that pension division was agreed to, Ron thought that there was no value to the pension, and it was probably “not worth much anyway.” Neither lawyer disagreed.

[A Pension does] not come with a dollar balance on a statement

This underscores the importance of seeking the advice of the right divorce professional to analyze financial issues!  Working in a team with mediators and divorce lawyers, divorce financial planners usually pay for themselves .

After a little research I found that Jenni would end up receiving a little over $37,000 a year from the pension division at Ron’s retirement, assuming he is still alive then. This is far from an insignificant sum for a retiree with a projected lifestyle requirement of less than $5,000 a month!

There are also restrictions with dividing Ron’s defined-benefit pension: the ex-spouse or alternate payee (Jenni in this case) can get his or her share only when the employee takes retirement. Furthermore, the payments stop when the employee passes away. (Each defined-benefit pension has its own rules . Each defined benefit pension division should be evaluated individually ).

The Value of  Pension Division Analysis

A defined-benefit pension such as this one does not have a straightforward value in the same way as a 401(k). It does not come with a dollar balance on a statement. A pension is a promise by the employer to pay the employee a certain amount of money in retirement based on a specific formula . In order to get a value and for it to be fairly considered in the overall asset division, it needs to be valued by a professional.

In her case, Jenni’s share of the pension division was 50% of the marital portion of the defined-benefit pension. Was it the best outcome for Jenni? It is hard to re-evaluate a case after the fact. However, had she and Ron known the value of the pension, they might have decided for a different pension division that may have better served their respective interests. Jenni may have decided that she wanted more of the 401(k), and Ron may have decided that he wanted more of the pension. Or possibly Jenni may have considered taking a lump-sum buyout of her claim to Ron’s pension . In any case, they would have been able to make decisions with their eyes open, instead of taking the path of least resistance.

The news that her share in Ron’s defined benefit pension had value was serendipity for Jenni. It turned out that the addition of the pension payments in her retirement profile substantially increased her chances to make it through retirement without running out of assets. But it is possible that an earlier understanding of the pension division and other financial issues could have resulted in an even more favorable outcome for Jenni .

 

A previous version of this article was published at Kiplinger.

Sep 23

Planning for Long Term Care

By Jim Wood | Financial Planning , Retirement Planning

Planning for Long Term Care

Long Term CareLive Long.   We are, and that is the problem.

However, without early financial planning we may not” live long” in prosperity. Many of us will outlive our resources.  According to the Social Security Administration, the average 65 year old woman will live to 86. The Federal Government says that 70% of people turning age 65 will use some form of long term care” .

Do you have an integrated financial plan that takes the high likelihood that you will need Long Term Care into consideration?  

The need for long term care will affect all of us in one way or the other

If we do end up in a nursing home, the AVERAGE cost today is $76,000 for one year in a nursing home according to the American Association for Long Term Care Insurance (AALTCI).  In Massachusetts the average cost of a private room in a nursing home is $141,894 .

Long Term Care is not something that we rush to buy.  Before you delay it too long, you may want to consider how the denial rate goes up with age.  If you wait too long you may not be able to get it. Review the information at both the LongTermCare.gov and the AALTCI web site for a broader understanding of these topics.

  Age

Coverage Denial Rate

40-49 11%
50-59 16%
60-69 24%

 

In broad terms, there are four ways to fund long term care :

  1. Spend out of your own funds.  You need to make sure that there will be enough.  Consult a financial planner to make sure that this is the case
  2. Medicaid planning.  With this method you would be putting your asset in a trust that would shelter them from the government.  Medicaid would end up paying for long term are.  This is a complicated procedure that requires careful financial and legal planning.
  3. Long Term Care insurance. With this method, a senior can shift the responsibility for long term care  expenses to a third party.
  4. A combination of the above.  For instance many people end up using a combination of spending their own funds and long term care insurance.

Most Long Term Care Insurance Policies buy you a “Pool of Money” that can be used for home care, assisted living, nursing home and adult day care.  Importantly, most seniors prefer to stay home as long as possible.  Most long term care policies will pay for home care.  For example, 40% of people buying a Long Term Care Policy bought a policy with 3-year of benefits (with an inflation rider) valued at $165,000. Costs and policy benefits vary greatly from company to company and policy to policy so close attention to detail is required as is a financial soundness assessment of the insurance company under consideration.

Wealth Management often ties in different disciplines. Planning for long term care needs to ensure that all the other parts of the retirement puzzle (investments, cash flow planning, other insurance, tax planning) are tied together.

The need for funding Long Term Care will affect all of us in one way or another . Give yourself your best chance of a good outcome by starting your planning now to avoid what could become a crisis.

 

A Previous version of this post appeared in the Colonial Times of Lexington MA

Mar 03

Roth IRA or Traditional IRA?

By Chris Chen CFP | Financial Planning , Retirement Planning

stockmonkeys.comAs a Financial Planner, I often get asked if people should save money in a Traditional IRA or a Roth IRA. In a Traditional IRA, we contribute money on a pre-tax basis (i.e. we do not pay taxes on our IRA contributions), we let it grow tax-deferred, and we pay taxes when we withdraw the money in retirement. In a Roth IRA, we contribute after-tax money, we let it grow tax-free and we pay no taxes when we withdraw the money in retirement.

That last point (“we pay no taxes when we withdraw the money in retirement”) is, of course, the one that gets our attention. We don’t like paying taxes, and the thought that we could have tax-free income in retirement is really motivating, so much so, that, sometimes, it can be the only thing we focus on.

However, the Traditional IRA vs Roth IRA story is not quite that straightforward.

The reality is that we WILL pay taxes whether it is for a Roth IRA or a Traditional IRA. With the Traditional IRA tax deduction, we reduce taxes at contribution, and we pay taxes when we withdraw the money. With a Roth IRA, we pay taxes before we contribute the money. At the risk of disappointing many readers, allow me to repeat: the Roth IRA is NOT tax-free, it is taxed differently.

When you do the math you will find that if you 1) invest in the same way in a Roth IRA vs IRA, and 2) are taxed at the same rate on your Roth IRA contribution today, as on your Traditional IRA withdrawals at retirement, you will end up with the exact same amount of money to spend in retirement. Call us: we will show you the math.

So which one is best? The answer is that it depends.

In general, it makes sense to invest through a Roth IRA when we think that our tax rate in retirement will be equal to or higher than our current tax rate. If we think that our tax rate in retirement will be equal or lower than our current tax rate it makes better sense to invest through a Regular IRA.

How then should you decide?

It depends on your situation.

For instance, if you are at the peak of your earnings, and you can calculate that your income in retirement will be significantly less than it is today, a Traditional IRA calculator will tell you that you will save tax money immediately. Since you expect to be in a lower tax bracket at retirement, you will end up paying less taxes.

If you are currently a low earner, and expect to have higher income in retirement than you have now, a Roth IRA calculator will thell you that your cost in taxes will be relatively low, and you will not pay any more when you retire.

Because there are many phases in our working life, there are times when it makes better sense to invest through a Roth IRA or Roth 401(k), and other times when it makes better sense to invest through a Traditional IRA or a Traditional 401(k). Conversely, there will be times in our retired life when it will make better sense to withdraw from a Roth IRA, and others when it will make better sense to withdraw from a Traditional IRA.

There are some other constraints. For instance, the traditional IRA max contribution is significantly lower than the 401(k). In addition, if your income is above the Traditional IRA income limits or the Roth IRA limit you may not be able to contribute.

It is about balance and careful financial planning. In the right circumstances, the proper balance between Roth and Traditional IRAs could save you a significant tax bill. In my opinion, it justifies a consultation with a professional financial planner.

 

Check out out other retirement posts:

Is the new tax law an opportunity for Roth conversions

Rolling over your 401(k) to an IRA

7 IRA rules that could save you time and money

Doing the Solo 401k or SEP IRA Dance

Tax season dilemna: invest in a Traditional or a Roth IRA

Roth 401(k) or not Roth 401(k)

 

 

Sep 16

Long Term Care Considerations for Retirement Planning

By Chris Chen CFP | Financial Planning , Retirement Planning

Long Term Care Considerations for Retirement Planning

Long Term Care is no one’s favorite topic. However, most of us will require some form of long term care at some point in time, when we are no longer able to do everything for ourselves that we used to . Hence LTC should be addressed in a financial plan or a retirement plan.

For many of us LTC is the most unpredictable and least planned for expense of  retirement . We just don’t have a very good way to predict how much long term care we will need, when we will need it, and how much it will cost. Paradoxically, this is exactly why planning is needed as part of normal financial or retirement planning.

According to the Federal Government, Long Term Care is the range of services and

Long Term Care

support you will need to meet health and personal care needs over a long period of time. LTC is not medical care , but rather assistance with the basic personal tasks of everyday life.

According to Genworth, a prominent provider of Long Term Care Insurance, the median annual cost in 2013 for a semi-private room in a nursing home is $75,405 per year. Based on my experience LTC costs in Massachusetts are much higher than that.

Who Pays for Long Term Care?

People often assume that Medicare or Medigap (the supplemental coverage for Medicare), or even regular health insurance will absorb the cost of their Long Term Care expense. Unfortunately, that is not the case.

In general, most people who need Long Term Care pay for it out of their own assets. Once there is no money left, Medicaid will usually take over. Take note that Medicaid is a government welfare program . This approach works best for people who have enough assets to cover any foreseeable circumstance, or people who just don’t have enough assets worth protecting.

Long Term Care Insurance

That’s why Long Term Care insurance is an important part of a financial plan . For those who have it, long term care insurance will pay for your Long Term Care expenses, up to the limit of the policy. This is a way to preserve assets for other purposes, including for your legacy.

From a tax standpoint, it is worth noting that the premiums for most classical LTC policies available today are deductible from taxable income within the limits specified by the IRS. In addition, up to certain limits, benefits are not taxed as income. Take this favorable tax treatment as a sign that Uncle Sam would like to encourage you to be covered!

So, Long Term Care insurance helps pay for long term care expenses , LTC insurance helps preserve your assets and your legacy, and LTC insurance is potentially tax deductible. So why are so many people resistant to traditional Long Term Care insurance?

First, it is expensive. Although, we might point out that the cost of insurance is normally much less than the cost of Long Term Care itself.

Second, the possibility that the insurance policy may not be used, for instance if death happens suddenly, is enough to stop many people from acquiring Long Term Care insurance. The thought of paying premiums for years, and not collecting a benefit would make the insurance a waste. For people who feel like that, there are alternatives.

Don’t Waste the Premiums

There are LTC insurance products that allow you to “not waste the premiums” . They allow you to get Long Term Care coverage if needed, and have an opportunity to get the premium paid back in case the Long Term Care benefit is not used.

Although, the details of these products is beyond the scope of this post, suffice it to say, that these alternatives can provide a lot of flexibility in a financial plan.

These three approaches (pay out of assets, traditional long term care insurance, and “not waste the premium” alternatives) all offer different benefits and should be matched to the correct circumstance and individual preference. If you need to figure out which option works best for you, get help from your financial planner.

Aug 26

Investing in Aggressive Growth Funds

By Chris Chen CFP | Financial Planning , Retirement Planning

Investing in Aggressive Growth Funds

https://i2.wp.com/upload.wikimedia.org/wikipedia/commons/thumb/d/dd/NYSE_Building.JPG/320px-NYSE_Building.JPG?resize=288%2C216

Chances are your retirement plan offers one or more stock funds to choose from. If it is consistent with your investment objectives and your investment risk tolerance, you may want to consider investing a portion of your plan in an aggressive growth fund.

Risks and Rewards

Aggressive growth funds, as the name indicates, are stock funds that are growth-oriented. Included in aggressive growth funds are several options like “small-cap” funds, “emerging market” funds, as well as various kinds of international funds. Aggressive growth funds tend to invest in smaller, fast-moving companies in developing sectors with the potential for rapid growth (hence the name), such as high-tech or biotechnology. They may also invest in equities that have fallen out of favor on Wall Street, but appear ready for a comeback.

Because they invest in companies that are often less known and not as established as the companies that make up the Dow Jones Industrial Average (DJIA), aggressive growth funds tend to exhibit volatile behavior.  For instance, when the market goes down, an aggressive growth fund may go down more than the DJIA.  Conversely, when the market goes up, aggressive growth funds often go up more. The goal of aggressive growth funds is to achieve higher returns than other stock funds.

Aggressive growth funds are best suited  for long-term investors with the intestinal fortitude to bear the market’s worst downturns while seeking the strongest returns.  For example, an investor may want to allocate some of his or her portfolio to aggressive growth funds to potentially accumulate as much as possible over a long time horizon. These funds may be especially suitable for younger investors with 25, 30, or 35 years until retirement.

Don’t Forget Diversification

Regardless of how aggressively you would like to invest, keep in mind the crucial benefits of allocating your money across investments that behave differently.

If you invest in an aggressive growth fund, you may want to balance its inherent risk with investments that have different risk characteristics such as growth and income funds, bond funds, and money market funds.

A financial planner can help you determine the investment allocation that’s best suited for you and your goals.

Jul 17

Should you buy stocks now?

By Chris Chen CFP | Financial Planning , Retirement Planning

Should you buy stocks now?

buy stocks now or follow your long term financial plan?If you are like many investors, you may have a large chunk of your brokerage account or IRAs in money market or short term treasury, and your 401(k) in a Stable Value Fund. The DJIA and S&P500 have been reaching new highs in the past few weeks, and, naturally, investors are wondering: is it time to get back into the market, is it time to buy stocks now or stock mutual funds?
A recent Dalbar study has shown that the average investor in US stocks and stock mutual funds earned an average return of 4.25% per year over the past 20 years, while the S&P500 stock index generated an average 8.21% return over the same period. In other words the average equity investor underperforms the financial markets by almost 4%. This large difference is mostly due to people trying unsuccessfully to time the market.
A more sensible  approach is to consider the intended use of the money sitting in money market. Is it for a short term purpose, such as next September’s college tuition or buying a car? If so, the funds should probably stay in money market. Is it for a long term goal, such as retirement or saving to buy a house on the beach in 10 years? Then, buying stocks may be something to consider.
As an investor, you should have a long term plan that allocates your money to goals and to investments.  Whether to buy stocks now or not to buy stocks now should not depend upon how well the market is doing. If you need a plan, or you need to update one, speak with your Financial Planner. If you need a planner, contact us or the Financial Planning Association of Massachusetts.
Simon Abrams on Unsplash.com
Jun 13

Working into Retirement

By Chris Chen CFP | Financial Planning , Retirement Planning

Working into Retirement

The Great Recession has many older Americans considering the prospects of going back to work after retirement or staying in the workforce past their normal retirement age. But working after retirement age is not a new necessity. According to the Social Security Administration, more than 30% of individuals between the ages of 70 and 74 reported income from earnings in 2010, the latest year data are available. Among a younger age group, those between 65 and 69, nearly 49% had income from a job.

Some remain employed for personal reasons, such as a desire for stimulation and social contact; others still want a regular paycheck. Whatever the reason, the decision to continue working into your senior years could potentially have a positive impact on your financial future.

Working later in life may permit you to continue adding to your retirement savings and delay making withdrawals. For example, if you earn enough to forgo Social Security benefits until after your full retirement age, your eventual benefit will increase by between 5.5% and 8% per year for each year that you wait, depending on the year of your birth. Although you can continue working after age 70, you cannot delay social security benefits past age 70. You can determine your full retirement age at the Social Security Web site (www.ssa.gov) or by calling the Social Security Administration at 1-800-772-1213.

Adding to Your Nest Egg

Depending on the circumstances of your career, working could also enable you to continue adding to your retirement nest egg. If you have access to an employer-sponsored retirement plan, you may be able to make contributions and continue building retirement assets. If not, consider whether you can fund an IRA. Just remember that after age 70 1/2, you will be required to make withdrawals, known as required minimum distributions (RMDs), from traditional 401(k)s and traditional IRAs. RMDs are not required from Roth IRAs and Roth 401(k)s.

Even if you do not have access to a retirement account, continuing to earn income may help you to delay tapping your personal assets for living expenses, which could help your portfolio last longer in the years to come. Whatever your decision, be sure to apply for Medicare at age 65. In certain circumstances, medical insurance might cost more if you delay your application.

Work doesn’t have to be a chore. You may find opportunities to work part time, on a seasonal basis, or capitalize on a personal interest that you didn’t have time to pursue earlier in life.

© 2013 S&P Capital IQ Financial Communications. All rights reserved.

 

Steve Johnson on Unsplash.com
Jun 03

What Fees Are Associated With Your Retirement Plan?

By Chris Chen CFP | Financial Planning , Investment Planning , Retirement Planning

What Fees Are Associated With Your Retirement Plan?

There’s a little secret associated with your workplace -sponsored retirement plan.  Usually that is a 401k. However, it can also be a 403b, a 457, or a SIMPLE IRA. Most participants think their plan is free – That it doesn’t cost them anything to join, contribute, and invest.  Unfortunately, that’s not entirely true.

While employees typically aren’t charged any out-of-pocket costs to participate in their plans, participants do pay expenses, many of which are difficult to find and even more difficult to calculate. New regulations from the Department of Labor (DOL), which oversees qualified workplace retirement plans, should make it easier for participants to locate and comprehend how much they are paying for the services and benefits they receive.

Here’s a summary of the information you should receive.

  1. Investment-related information, including information on each investment’s performance, expense ratios, and fees charged directly to participant accounts. These fees and expenses are typically deducted from your investment returns before the returns (loss or gain) are posted to your account. Previously, they were not itemized on your statement.
  2. Plan administrative expenses, including an explanation of fees or expenses not included in the investment fees charged to the participant. These charges can include legal, recordkeeping, or consulting expenses.
  3. Individual participant expenses, which details fees charged for services such as loans and investment advice. The new disclosure would also alert participants to charges for any redemption or transfer fees.
  4. General plan information, including information regarding the investments in the plan and the participant’s ability to manage their investments. Most of this information is already included in a document called the Summary Plan Description (SPD). Your plan was required to send you an SPD once every five years, now they must send one annually.

These regulations have been hailed by many industry experts as a much-needed step toward helping participants better understand investing in their company-sponsored retirement plans. Why should you take the time to learn more about fees? One very important reason: Understanding expenses could save you thousands of dollars over the long term.

While fees shouldn’t be your only determinant when selecting investments, costs should be a key consideration of any potential investment opportunity. For example, consider two similar mutual funds. Fund A has an expense ratio of 0.99%, while Fund B has an expense ratio of 1.34%. At first look, a difference of 0.35% doesn’t seem like a big deal. Over time, however, that small sum can add up, as the table below demonstrates.

Expense ratio

Initial investment Annual return Balance after 20 years

Expenses paid to the fund

Fund A

0.99% $100,000 7% $317,462 $37,244
Fund B 1.34% $100,000 7% $296,001

$48,405

Over this 20-year time period, Fund B was $11,161 more expensive than Fund A. You can perform actual fund-to-fund comparisons for your investments using the FINRA Fund Analyzer.

If you have questions about the fees charged by the investments available through your workplace retirement plan, speak to your plan administrator or your financial professional.

 

Note:   Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so you may lose money. Past performance is no guarantee of future results. For more complete information about any mutual fund, including risk, charges, and expenses, please obtain a prospectus. Please read the prospectus carefully before you invest. Call the appropriate mutual fund company for the most recent month-end performance results. Current performance may be lower or higher than the hypothetical performance data quoted. The hypothetical data quoted is for illustrative purposes only and is not indicative of the performance of any actual investments. Investment return and principal value will fluctuate; and shares, when redeemed, may be worth more or less than their original cost.

 

May 12

Marriage and Building Wealth: Finding a Happy Balance

By Chris Chen CFP | Financial Planning , Retirement Planning

Marriage and Building Wealth: Finding a Happy Balance

Marriage affects your finances in many ways, including your ability to build wealth, plan for retirement, plan your estate, and capitalize on tax and insurance-related benefits. Here are some considerations to keep in mind if you are thinking of getting married or have just tied the knot.

Building wealth

If both you and your spouse are employed, two salaries can be a considerable benefit in building long-term wealth. For example, if both of you have access to employer-sponsored retirement plans, your joint contributions are double the individual maximums ($17,500 for 2013). Similarly, a working couple may be able to pay a mortgage more easily than a single person can, which may make it possible for a couple to apply a portion of their combined paychecks for family savings or investments.

Retirement benefits

Some (but not all) pensions provide benefits to widows or widowers following a pensioner’s death. When participating in an employer-sponsored retirement plan, married workers are required to name their spouse as beneficiary unless the spouse waives this right in writing. Qualifying widows or widowers may collect Social Security benefits up to a maximum of 50% of the benefit earned by a deceased spouse.

Estate planning

Married couples may transfer real estate and personal property to a surviving spouse with no federal gift or estate tax consequences until the survivor dies. But surviving spouses do not automatically inherit all assets. Couples who desire to structure their estates in such a way that each spouse is the sole beneficiary of the other need to create wills or other estate planning documents to ensure that their wishes are realized. In the absence of a will, state laws governing disposition of an estate take effect. Also, certain types of trusts, such as QTIP trusts and marital deduction trusts, are restricted to married couples.

Tax planning

When filing federal income taxes, filing jointly typically results in lower tax payments when compared with filing separately.

Debt management

In certain circumstances, creditors may be able to attach marital or community property to satisfy the debts of one spouse. Couples wishing to guard against this practice may do so with a prenuptial agreement.

The opportunity to go through life with a loving partner may be the greatest benefit of a successful marriage. That said, there are financial and legal benefits that you may want to explore with your beloved.