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Secret marriage benefits: Singles, pay attention

It's not strictly the tax code or sharing expenses that enables a couple to accumulate 4% more wealth yearly than singles do.

By Smart Spending Editor Sep 24, 2013 1:28PM

This post is from Richard Satran of partner U.S. News & World Report.

MSN Money partnerThe marriage institution may be in tatters, but people who do tie the knot still stand to gain from it. Couples who collaborate on money matters can benefit from a wide range of financial rewards that, by many estimates, can double their lifetime wealth.

Image: Couple and cash (© Digital Vision Ltd./SuperStock)Do you need to be married to get the benefits? It helps, but single people can also learn to reach financial bliss by looking at how the "marriage effect" works.

"Just the act of getting married isn't going to automatically, magically make your financial life that much better than it was before. But if you go the extra length by working together as a couple, you will realize a big benefit," says Derek Gabrielsen, a wealth adviser with Strategic Wealth Partners in Seven Hills, Ohio.

To be sure, there is luck involved, and not everyone is lucky in love. More than 70% of people will be married at some point in their lives, according to the Pew Research Center. The fact that only half of Americans remain married now shows the impact of divorce, which destroys wealth nearly as much as stable marriages tend to create it.

Nonetheless, financial experts see the survival of marriage as a positive: On average, married people each generate 4% more wealth per year than singles, according to a much-cited study by researcher Jay Zagorsky at Ohio State University's Center for Human Resource Research. Over time, that means married people accumulate twice the wealth of singles, on average.

The importance of such a "marriage effect" was illustrated dramatically this year when the Supreme Court made its landmark same-sex marriage ruling. That case upheld the long-standing principle that a spouse plays a critical role in creating household wealth and has a unique claim in the handling of an estate. Widowed Edith Windsor was refunded a $360,000 estate tax that she would have received immediately if her spouse had been male.

That bedrock of common law and legal codes has long been recognized in much of the world for married couples. But couples reap the benefits of married life long before the estate goes into probate.

The stability factor

What are the biggest benefits that marriage bestows? The benefits are not, as many assume, primarily a product of the tax code. The income-tax advantage that married couples once enjoyed has disappeared, and financial advisers now talk of a "marriage penalty":

Couples can pay a higher rate in their combined filings than singles because their combined income often pushes them into a higher tax bracket. Even the aforementioned estate tax break is something that is available to single people, even though married couples simply have more flexibility in how they use it for each other when they pass away.

The benefits of marriage aren't all about sharing expenses, either. That helps, of course, especially when it comes to combining resources to buy a home, open a checking account or shopping two-for-one sales. But singles can also find ways to make expenses go further.

The most important advantages are things everyone can do. That's because the biggest marriage effect is that couples tend to stay focused on life goals more than singles.

Money grows in a stable environment. When couples start dating seriously, they begin sharing their life hopes and ambitions, which become central to the relationship. For some, those discussions start on the first date.

"You talk about building a life together -- buying a home, having children, their college education and how you will protect each other's health care and retirement," says Diane Pearson, personal chief financial officer of Legend Financial Advisors. "Financial planning might not be romantic, but there is some peace of mind in sharing the same goals."

Simply talking things over and putting those words into a plan can have a profound impact on wealth. A 2013 HSBC survey reports that people saved 49% more if they had a financial plan to save money. The survey concluded that it was "a cause-and-effect relationship." It also said the results were not simply a matter of having more resources to start with but of using them wisely.

Married couples also tend to plan more, and accumulate for the long term. The commitment of marriage usually means people are also committed to goals from the start, whether consciously or not. The Zagorsky study said the commitment of married couples added up to 4% more wealth each year from a variety of sources such as homeownership and investing their savings.

Once married, young people tend to start saving right away. (It's worth noting that singles may be catching up: Recent surveys have shown a surge in singles contributing to workplace savings plans at much higher rates, and that is likely to narrow the marriage wealth gap over time. Changes in workplace savings plan, such as the "opt-out" requirement that enrolls people automatically unless they decide otherwise, have led to a sharp rise in savings over the past two years.)

Men are from Mars . . .

Experts also note that gender differences can make married couples less likely to veer too far in either direction on the risk-taking spectrum. Men and women tend to look at money matters differently, and that makes them natural diversifiers, which is a critical component of wealth accumulation.

It's true that men tend to be more confident with investing -- often too much so -- and they take more risks. Women tend to be more conservative. A study of affluent women released this week by Wells Fargo found that women overwhelmingly define themselves as more thrifty than their spouses.

"We found that women are more likely to define success in terms of peace of mind, and men define it as achievement in their careers," says Karen Wimbich, head of retirement for Wells Fargo. Those traits have a natural balancing effect, but a solid financial plan can help anyone, single or married, learn how to diversify their holdings.

But more than gender roles, creating a stable household creates some of the largest advantages. "If you look at the history behind a lot of legislation and tax benefits, they have always been drafted to encourage marriage, and people making commitments to marriage. It's been historically that case that forming a nuclear family has been financially encouraged," says Alex Popovich, a wealth adviser at JP Morgan Private Bank and an expert on financial issues in same-sex marriages.

The bottom line: Money goes to two places. It gravitates to where it can make more money or to where there is a safe harbor. A stable married couple can provide both, but so can a single person who plans for the future.

More from U.S. News & World Report:

Sep 24, 2013 9:27PM
If you dont think its wise to stay single, if you are ever involved in a divorce, you will understand why it really is wise.
Sep 24, 2013 8:25PM
If I knew then what I know now...
I would have stuck with my Cocker Spaniel.

Sep 24, 2013 8:18PM
I'd rather have less money, and be single, happy and have a life.
Sep 25, 2013 10:14AM
Scientists discovered a food that cuts a woman's sex drive by 90 percent.

You guessed it. Wedding cake!

Sep 25, 2013 1:39AM
"Money grows in a stable environment."  Man, I'm here to tell you.  No truer words were ever spoken.
Sep 24, 2013 8:09PM
Why does a bride smile as she walks down the aisle?

"Well..... I don't have to do THAT anymore!"

Sep 25, 2013 9:31AM

Marriage is a great institution and provides tremendous stability and financial advantages for those who choose to be DINKS.  For most other people, including those who get divorced, those who have rotten children, and those who marry sociopaths, marriage STINKS. 


So, if you are contemplating marriage keep in mind that it isn't just about sex and good times.  It is about having a low stress family environment with middle class values and middle class financial rewards. 


For those of you who disdain middle class values and the bourgeois lifestyle, good luck with that.

Sep 25, 2013 10:02AM
Marriage works if you want it to. 1.) Choose wisely 2.) Treat kindly  Results, a rewarding relationship with someone who loves you and enjoys life with you. Financial decisions are thought of to benefit both parties, and the family.
Sep 24, 2013 9:18PM
It is a matter of individuals that choose to make responsible decisions, that will be money ahead of irresponsible people. Generalizing of course, I feel that some people choose not to get married because of selfish desires and for that same reason cannot or will not make good financial decisons. That of course doesn't apply to me or my wife of 28 years. We are both on the same page when it comes to probably 95% of the finacial decsions we make seperately and combined. I think I have proven my point after reading the previous seven comments to mine, selfish and single.
Sep 24, 2013 2:28PM

Just say NO to marriage!  The 4% isn't worth my FREEDOM.

Sep 25, 2013 9:04AM
What I don't understand is if you have two people working together, how you manage to only come out 4% ahead in wealth each year.  Shouldn't it be 50% or more (depending on their income)?  From what I hear/read, I'm doing better financially than a good number of married people and I only have my income to work with.
Sep 25, 2013 8:35AM

"Experts also note that gender differences can make married couples less likely to veer too far in either direction on the risk-taking spectrum. Men and women tend to look at money matters differently, and that makes them natural diversifiers, which is a critical component of wealth accumulation."


gay couples are screwed

Sep 24, 2013 5:18PM
And here I thought they were going to talk about the "sex effect", or is that the "marriage penalty" in other words? 
Sep 25, 2013 1:02PM
Secret marriage benefits? I thought secret marriages were illegal, or at the very least, frowned upon by wife # 1.
Sep 25, 2013 1:51PM

Why is it always assumed that one must be married to have commitment?  I have been in a committed relationship with my better-half for 25 years and we have shared goals, financial commitment, etc.  A piece of paper from a government office does not a relationship make!

Sep 25, 2013 11:46AM
Hey I admit it in 1986 I made a mistake and never should have gotten married.  But, If I hadn't I would never have had my son either. Divorced when he was 3 years old.  Talk about the ex from H___ things have changed now that my son is all grown up. Marriage was such a bad experience for me never again I am done and I have my freedom.
Sep 25, 2013 10:24AM
5,000 years of recorded human history and now those pimping marriage corruption are just starting to figure this stuff out?
Sep 24, 2013 8:06PM

So, these must be the older married couples.



Those older than oh, say, 44, perhaps?

Sep 25, 2013 2:12PM
The only really good reason to get married is to have children, if you want children.  I am divorced.  I'm not a hater.  My children are what made my decision to get married a generally positive move in my past.  Or at least more positive than negative.  I realize people will have different opinions.  I respect that.  I will never remarry.  Girl friends? Yes. Because when it is over, I get my toothbrush and razor out of her place.  She gets her clothes out of my closet, and her juicer out of my kitchen,  and life goes on.  No legal fees, no support obligations, no mess.   
Sep 25, 2013 4:23PM

Four per cent more  wealth per year? I'd question that, also if it is true the marriage penalty is too large to pay, I'd rather be single and live my life in peace and not have to answer to a wife. I had 3 wives and life could not have been worse had I been married to all of them at once. Having been set free 10 years ago I'm now able to enjoy my "golden years" in peace.

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