If you are in a same-sex relationship, here is what you should be aware of when it comes to retirement.
Although significant progress has been made in marriage equality laws, there are still disparities in financial planning and saving for the future.
Although same-sex marriage has been legalized nationwide, there are still additional considerations for LGBT investors when it comes to retirement, estate planning, and inheritance. These considerations include a potential retirement shortfall, self-funding long-term care to avoid discrimination, and having explicit estate planning documents to avoid conflicts with statutes affecting inheritance. It’s important not to let concerns of falling behind in planning affect you, as you still have the ability to take care of your financial future. While the Supreme Court’s decision on marriage equality was a momentous occasion, it doesn’t address all the other problems that LGBT individuals still face, such as workplace and housing discrimination on the basis of sexual orientation and gender identity. Your financial advisor can help guide you through these unique challenges and prepare you for a financially secure future.
Insufficient funds for retirement.
Even though marriage equality has made financial matters simpler for same-sex couples who opt to tie the knot, there are still several reasons why many LGBT investors may fall behind their heterosexual counterparts in terms of financial planning and saving for their future. A recent study showed that LGBT individuals are less likely to have a will or estate plan (19% compared to 26%), 401(k) savings (35% compared to 40%), and save a smaller percentage of their paycheck (20% compared to 25%) in retirement accounts.
The study also found an income gap between LGBT workers and the general population, which could lead to less available funds to save. Lesbian respondents reported an average annual salary of $45,606, compared to $51,461 for heterosexual women. Gay men reported earning an average of $56,936, compared to $83,469 for heterosexual men. Additionally, same-sex couples who are approaching retirement age may have less experience with milestones, such as graduations, college, and weddings, since they are less likely to have children. However, this demographic may shift as more young same-sex couples decide to have or adopt children.
If you find yourself falling short in your retirement savings, there are ways to catch up. The IRS catch-up provisions allow those aged 50 and over to contribute up to $6,500 per year in IRAs and $24,000 in 401(k)s. When you have reached the maximum contribution limits of all available retirement accounts, there are other options, such as annuities and other investments. Your financial advisor can help you understand these options, as some may have complex rules.
Assisted living facilities discrimination.
Finding LGBT-friendly long-term-care facilities continues to be a practical challenge for gay, lesbian, and bisexual couples seeking senior housing, even in a post-marriage-equality world. According to the Equal Rights Center report, these couples may face differences in availability, pricing, fees and costs, and application requirements, which could result in less favorable treatment than heterosexual couples. As a result, finding an LGBT-friendly long-term-care facility is among the top personal finance concerns for LGBT investors. To avoid potential discrimination or exclusion during this vulnerable stage, many individuals opt for at-home elder care. Traditional long-term-care insurance or hybrid products that combine long-term care funding with life insurance or an annuity can help cover these costs, and your financial advisor can discuss these options with you.
Challenges in inheritance for the LGBT community.
Regardless of your marital status, it’s essential to have an estate planning strategy in place to ensure your assets go where you want them to go after you pass away. Without a will, state laws determine where your property goes, which could result in your surviving spouse receiving only a portion of your estate, while the rest goes to other relatives. Even if you have a will, your executor must inform your next of kin, who might object to your desire to include your same-sex spouse in your estate.
To avoid any confusion, it’s recommended that you have a comprehensive estate planning strategy that includes clear language specifying who should benefit and who should not, along with a variety of other protections. Even if all your relatives are LGBT-friendly, laws regarding estate planning vary by state, so it’s best to have all your legal documents prepared.
The most important step in securing your financial future is to take a close look at your needs and how to meet them. If you haven’t taken control of your finances yet, it’s never too late to start. Remember, your past doesn’t determine your financial future. With a solid plan and the right guidance, you can change the outcome.
