While marriage is accepted as the societal norm, it’s not right for every couple. If you are evaluating whether or not to tie the knot, consider the unique financial incentives, opportunities, and pitfalls of wedded bliss.

Social Security Spousal Benefits 

Social Security benefits are an essential piece of many retirees’ financial plans. Most people know they are entitled to benefits based on their own record or earning history, but did you know that you are also eligible for benefits on your spouse’s earnings? If you have been married for at least one year and can collect based on the standard rules, the Social Security Administration will pay you the greater of your own or your spouse’s benefit.

The maximum spousal benefit equals 50% of your spouse’s Full Retirement Age (FRA) benefit but is reduced if you or your spouse files for benefits before your FRA. Spousal benefits are particularly important for married couples in which one partner earns significantly more than the other. With that being said, let’s review an example:

Bob is winding down his career as a surgeon, and his wife, Ann, teaches piano lessons for fun. Bob’s Full Retirement Age benefit is $2,800, and Ann’s Full Retirement Age benefit is $800. However, Ann is eligible for spousal benefits, so she is entitled to $1,400 (50% of Bob’s benefit) as long as they both wait until FRA to begin collecting benefits. In this scenario, Bob and Ann increased their monthly retirement income by $600!

Taxes and the Marriage Penalty

The IRS uses a different tax bracket for single filers than married couples filing jointly. For example, the 24% bracket begins at $95,357 for a single filer and $190,750 for a married couple filing jointly. It’s often said that there is a marriage penalty regarding taxes. Whether that is true or not will depend on the earning situation. 

Similar to Social Security spousal benefits, marriage is a plus when there is a drastic difference in earnings. For example, a lower-earning spouse, or a spouse with no earnings, may pull the higher-earning spouse into a lower bracket than they would have been if filing as a single taxpayer.  Conversely, couples with similar, high, incomes may top out at a higher rate when filing jointly.

Regarding retirement savings, you must have earned income to contribute to a Traditional or Roth IRA. However, once married, the earned income applies across the household instead of individually. In translation, a stay-at-home spouse without earned income can still contribute to an IRA based on their partner’s earnings. This is handy when one partner leaves the workforce to raise the family, take care of a loved one, or retire early.

What marriage gives, it takes away. While being married can open the door for a non-earner to contribute to an IRA, it can also eliminate a worker’s ability to contribute directly into a Roth IRA or deduct an IRA contribution. You see, the IRS phases out eligibility for those transactions based on Modified Adjusted Gross Income (MAGI). Someone who qualified while single may not necessarily qualify when filing jointly.

IRA Stretch

As of 2020, the pool of people allowed to distribute inherited retirement accounts over their life expectancy (thus providing a lifetime income stream) greatly narrowed. This benefit is available to spouses, beneficiaries less than ten years younger than the account owner, and individuals who are disabled or chronically ill. All other beneficiaries must distribute the account over a 10-year period, which in many cases, will cause an income tax nightmare.

What’s important to note here is spouses and beneficiaries less than ten years younger can still “stretch” distributions. Unmarried couples with an over-10-year age gap should understand this rule if they plan to leave retirement assets to their partner. 

Divorce: Yours, Mine, and What Was Ours

One of the greatest financial pitfalls of marriage is the potential for divorce and the financial impacts that may have. Indiana divorce courts and attorneys divide marital property fairly and equitably, not necessarily 50/50. If a prenuptial agreement exists, that may protect the assets acquired before the marriage. However, even if held individually, marital property will likely be up for grabs during proceedings. 


Deciding if and who to marry are two of the most important financial decisions you can make. Tying the knot has legal and financial impacts, and no stone should be left unturned.

Kate Arndt, CFP, is a Wealth Advisor at Bedel Financial Consulting, Inc., a wealth management firm located in Indianapolis. For more information, visit their website at www.BedelFinancial.com or email Kate at karndt@bedelfinancial.com

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