Tying the knot for the long haul can be a financial lifeline in retirement.
Did you know that married couples may have a better chance at a comfortable retirement than people who are single, widowed or divorced? For one thing, a married couple has the opportunity to earn two incomes, increasing the household income so more money goes towards retirement savings and paying off the mortgage before retirement.
But married couples also may enjoy several more financial advantages than those afforded single people. Turns out, all the ups and downs of marriage could be worth it after all, especially when it comes to saving for retirement and living comfortably when you retire.
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1. Married couples have a higher household income
There is a significant gap between the household income of people and those who are unmarried, allowing them to potentially contribute more towards retirement savings.
Married couples living with a spouse have an annual median household income of between $65,000 and $67,000, according to “Still Shortchanged: An Update on Women’s Retirement Preparedness,” a report by the National Institute on Retirement Security (NIRS).
For divorced men and women who live alone, however, the annual median household income drops to about $33,000. Widowers and those who never married and live alone have an annual household income ranging from $29,000 to 33,000, according to the NIRS report.
2. Married people benefit from a spouse’s Social Security
One of the biggest advantages of marriage is eligibility for spousal and survivor Social Security benefits, according to Charles Schwab & Co.
“As a married couple, you’re each eligible to collect your own Social Security benefit or up to 50 percent of your spouse’s benefit, whichever is greater,” says Schwab. “This can be a financial plus if one of you is a higher earner. In addition, a widow or widower is eligible to collect up to 100 percent of the other’s benefit.”
3. Spouses typically inherit a 401(k)
Under the Employment Retirement Income Security Act of 1974, a surviving spouse is usually the automatic beneficiary of a 401(k), since the plan is an employer-sponsored retirement plan. The exception is if the employee wishes to designate a different person as beneficiary – but the spouse must first consent to this in writing.
4. Pension survivorship benefits – for spouses only
When a married person with an employer pension, also known as a “Defined Benefit Plan” dies, the spouse may receive monthly benefits for the rest of his or her life if the plan is set up with a survivor benefit. The survivor will receive a portion of the deceased spouse’s monthly benefit, or in some cases, a lump sum payment.
However, if the deceased is unmarried – even if he or she is in a committed relationship with a partner – the surviving partner isn’t entitled to any pension benefits.
5. You don’t have to relocate alone
Plenty of people relocate in retirement, often for a more moderate climate, to be near the ocean or another region or enjoy mostly sunny days year-round. For many people, retiring to a city with a lower cost of living can stretch retirement savings further. However, relocating can be a lonely endeavor – at least initially – if you make the big move alone.
Published by Debt.com, LLC