Keeping your finances in order as a single person is manageable. But add a spouse into the mix and it becomes a whole different enterprise. When you step into a marriage, you’re also stepping in as co-managers of your combined finances. And that can be a good thing — not just for your love life, but for financial life too.
In fact, 87% of Americans agree that nothing makes them happier or more confident than feeling like their finances are in order, according to a Northwestern Mutual 2018 Planning and Progress Study. So, is marriage actually good for your financial health?
Aside from locking in your own version of happily ever after, there are financial benefits of marriage, too. Once you tie the knot, there are a few factors to take into account that could benefit you and your significant other.
Marriage and taxes
First things first, the way you file your taxes may be different than when you filed as a single person. As a married couple, you may choose to file jointly, instead of singly, which can provide several tax breaks. For instance, the standard deduction for couples filing jointly is $24,400.
Couples who file their taxes together could also qualify for other tax credits, such as:
- Earned Income Tax Credit
- Child and Dependent Care Credit
- American Opportunity Tax Credit
Since your tax return will generally account for two incomes, you’ll most likely bump up to the next tax bracket, but don’t let that worry you too much. Even at a higher bracket, you could potentially qualify for more tax breaks.
What about a marriage penalty or bonus?
A marriage penalty happens when both of you pay more in income tax as a married couple than you would if you were to file individually. Tax marriage penalties are common with couples who make the same amount of income. That’s because it pushes both of you into higher tax brackets when you file jointly. On the other hand, if one of you earns all or most of the income, you almost always receive a marriage bonus.
Two incomes provide double benefits
Two incomes provide double financial benefits to your marriage. First, you could afford a better place by increasing the amount you put towards rent or a mortgage payment. Second, you can double down on decreasing debt and reaching other financial goals as a team.
And it’s kind of exciting to open up about your finances with your partner. Combining your bank accounts and credit history builds trust and communication. Together, you can decide how to manage your finances. Do you live off of one income and save the other? Does one income take care of bills while the other is used for normal living expenses?
Marriage can get you talking about money, and more
According to the Pew Research Center, married couples have a more positive view of their relationship than couples who just live together. This more optimistic outlook can jumpstart a pattern of open communication about money. Planning together for a debt payoff strategy or starting an emergency fund can get you to stick to your financial goals. And as you have probably been told a million times, trust and communication are key to achieving a lasting relationship, both for your money and your marriage.
Health insurance coverage
Marriage can be just the push you need to take better care of your health and the health of your spouse. Health insurance coverage for you and your spouse can be a benefit of marriage. For example, you may look into a High Deductible Health Plan (HDHP) with a Health Savings Account (HSA). Your spouse can sign you up for coverage which includes a reduced premium.
The HDHP allows medical expenses for each individual to be applied to the family deductible. Once your limit has been met, coverage kicks in for the entire family. This could be useful if you intend on starting a family.
The HSA is a savings account that is used for medical expenses. Any out-of-pocket costs, like contact lenses or a cavity filling, can be paid for by using your HSA debit card. Ask your employer if this is a covered benefit.
Retirement benefits in a marriage
What’s better than one retirement nest egg? Two retirement nest eggs. You and your spouse can work together to max out your retirement benefits. One idea could be to look at each employer-sponsored retirement plan and see which one is the most beneficial.
You’ll want to look at expense ratios, what type of funds are available, and if the employer offers a match. Once you select the better retirement package, focus on maxing out one plan. Then you can gradually start to increase the second plan.
So, is marriage good for your financial health?
Though there are plenty of money advantages to marriage, you probably won’t get hitched just because of the financial benefits of marriage. Getting married is about love, commitment, and trust. As you build loving memories, those healthy financial habits will grow as you grow together.