Same-sex couples face many complex financial challenges due to the current laws and regulations. The fact that these rules vary from state to state makes things even more difficult. Gay and lesbian couples and individuals are falling behind heterosexuals when it comes to their retirement preparation, according to an exclusive analysis by The Associated Press-NORC Center for Public Affairs Research.
While there is no silver bullet to help, gay and lesbian adults should keep the following in mind to help them prepare better for retirement.
Research Laws Where You Live and May Live in the Future
The legal landscape is constantly changing with regards to gay and lesbian marriage, depending in which state you currently reside. How you plan for your retirement greatly depends on whether or not your marriage is recognized by your state.
If your marriage is legally recognized, you may qualify for many benefits, such as Social Security survivor benefits, that you would not otherwise qualify for if your marriage was not accepted by law. However, if in the future you decide to move to a different state that does not recognize your marriage, you may lose those benefits.
It is extremely important to be aware of all local and federal laws that could affect your financial future. Unfortunately, that means more planning than is required by a heterosexual couple.
Fill out All Beneficiary Forms and Re-check Them Often
Beneficiary forms are extremely important for all couples, but they are even more important for gay and lesbian couples. In most cases, no restrictions exist regarding whom you can designate as your beneficiary for things like retirement accounts and life insurance policies.
Heterosexual couples often fill out their beneficiary forms by picking the "spouse at time of death" option rather than filling out their actual spouse's information. This could be a mistake for gay and lesbian couples, depending on the state laws.
Instead, actually write out the name of your partner rather than check the easy "spouse at time of death" box. As with all decisions, you will need to make sure that you understand the tax consequences that this choice may have, as it may vary depending on many factors.
Build a Financial Plan with Multiple Scenarios
It is smart to have more than one financial plan due to the enormous amount of legal and tax variables a gay or lesbian couple may face, both now and in the future. We hope that you will be able to follow your best-case financial plan. However, if the landscape changes either positively or negatively, it is good to know how you could adapt.
Your best-case financial plan should assume things stay the same as they are today. A worst-case scenario could forecast additional savings and insurance if you have to move to a state with more restrictions, while a best-case scenario may allow you to save less and still live the same life in retirement. Be sure to make adjustments to all three plans as circumstances change and new laws are passed.
Be proactive with your financial planning today, no matter what barriers and challenges you may currently face. Action will get you closer to any goal than doing nothing would. You can always adjust in the future should things change.
The current laws make financial planning extremely frustrating for gay and lesbian couples. Do not allow this frustration to derail your future retirement. It will take more effort to reach the same result as a heterosexual couple would, but the effort is worth it when you know you have a great plan to reach financial independence and retirement together with your partner.
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