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Financial considerations for LGBTQ+ couples

May 29, 2023 • 4 min read

What we'll cover

  • Financial benefits and protections that come with legal marriage

  • Why LGBTQ+ couples are likely to pay more to raise children

  • The pay and savings disparity for LGBTQ+ couples

In recent years, we’ve experienced great strides for equality for the LGBTQ+ community in the U.S. while simultaneously being forced to grapple with the vocal pushback that tends to accompany progress. Today, even with increased workplace protections and the legalization of same-sex marriages, LGBTQ+ couples still face several unique financial challenges and considerations. If you identify as LGBTQ+, by recognizing and planning for these circumstances, you can set yourself and your family up for a stronger financial future. 

Preparing for “I do” (or “I don’t")

While more than half of same-sex cohabiting couples are legally married, a significant percentage remain unmarried. Regardless of whether you choose to get legally married or not, it’s important to understand the financial benefits and protections legal marriage provides, including: 

  • Social Security benefits: Married couples may receive spousal and survivor benefits. However, there may be some circumstances in which these benefits may not apply.

  • Health insurance: Spouses are often eligible to receive coverage from their spouse’s employee health plan.

  • Retirement accounts: Employer-sponsored plans, like a 401(k), automatically add legal spouses as the beneficiary (unless otherwise designated). Spouses who inherit a retirement account and roll it into their own IRA can defer distributions until 72, while non-spouses are typically required to withdraw the full amount within 10 years.

Being legally married can also afford LGTBQ+ couples military benefits and protections from gift and estate taxes.

While estate planning is important for everyone, LGTBQ+ couples who are not legally married may want to consult with an estate planning attorney to ensure all of their documents are in order should an emergency occur. That’s because non-married couples will not receive “next-of-kin” status for their partners, meaning they won’t be allowed to make decisions for the other in the event of a medical emergency without a medical directive (AKA a living will or medical power of attorney). If partners aren’t legally married, they will also need to provide written consent to list each other as beneficiaries for retirement accounts. Similarly, unmarried couples who want to leave assets to their partner should ensure this is specified in their Will.  

Planning for the family

No matter the parent’s relationship, gender identity or sexual orientation, there’s no denying that children are expensive for any family. 

It’s estimated the cost of raising one child, in a family with two children, is more than $300,000, due to inflation — though that number tends to rise significantly for LGBTQ+ couples depending on their chosen method to pursue parenthood. For example, adoption, artificial insemination and surrogacy can cost anywhere from about $300 to upward of $150,000. 

Less costly methods families might consider include fostering-to- dopt or working with a sperm donor/intrauterine insemination, both of which may be possible for a few hundred to a few thousand dollars.

Many LGBTQ+ families also have to factor in legal costs when family planning, as often times one or both of the parents may not be a biological parent to the child. In this case, seeking to establish legal parentage through adoption can typically add anywhere from $500 to $4,500. 

The earlier couples can begin saving for their future families, the better. And using  interest-earning  savings products, like a Savings Account  or  High-Yield CD  from Ally Bank, can help families reach their goals faster.

Many LGBTQ+ couples and individuals that don’t have children fall into the role of caring for aging family members. “Members of the LGBTQ+ community are often caregivers for family members, and account for 9% of all caregivers in the U.S. Caregivers often face financial risks such as lost income, minimized career opportunities and savings and decreased Social Security and retirement benefits.     

Taking care of yourself and each other

LGBTQ+ individuals and couples can face several unique challenges when it comes to health care. Many in the LGBTQ+ community continue to feel the impacts of the HIV/AIDS epidemic and the discriminatory and harmful medical policies that arose during that time. Not only did many older members of this community experience mental, emotional and financial ramifications, but The American Psychiatric Association estimates that LGBTQ+ individuals are more than twice as likely to suffer a mental health disorder over their lifetimes. 

While more employer's than ever before offer transgender-inclusive healthcare benefits, hundreds of thousands of transgender individuals still aren’t able to receive gender-affirming care due to financial restrictions. The process of transitioning comes with two barriers — access and cost. More than half of patients who undergo gender-affirming surgery travel out-of-state to receive it and also have higher out-of-pocket expenses.

Growing into those golden years together

Marriage equality was a major step for the LGBTQ+ community, but discrimination and disparities are still apparent. Studies show that LGBTQ+ individuals continue to earn less, a wage gap some call the “Gay Pay Gap.” In fact, LGBTQ+ men make 4% less than their straight peers, while LGBTQ+ women make 13% less. Transgender employees earn even less. With the largest gap of all, trans women earn about 60 cents for every dollar the typical worker makes.     

These salary discrepancies factor into retirement planning and saving: Same-sex couples are less likely to have one member who qualifies for retirement when compared to heterosexual couples. 

For LGBTQ+ couples, saving and investing early and often for retirement is essential, whether through an employer-sponsored 401(k) or an individual retirement account (IRA)  or both. Currently, members of the LGBTQ+ community are slightly more likely to have an employee-sponsored retirement account than straight Americans (76% vs. 65%).

These types of accounts allow you to take greater advantage of the effects of tax-advantaged saving and compound interest — a  financial phenomenon that knows no gender or orientation bounds and is one of keys to building long-term wealth. Opening an IRA is easy and can be done in just a few minutes with Ally Invest or Ally Bank IRA and is a simple step to take your retirement savings into your own hands.

LGBTQ+ Americans are simultaneously less financially confident and underserved in the financial industry. Working with a financial planner can be a smart way for individuals and couples to navigate and prepare for the unique challenges or circumstances you might face. When seeking a wealth management professional, someone who specializes in finance for or is a part of the LGBTQ+ community can be especially effective in ensuring you feel represented and understood. Take the time to find a financial professional you can trust, feel confident working with and who understands your wants and needs. 

Financial planning with pride

Prepping for and maneuvering through life’s biggest moments isn’t always easy and those in the LGBTQ+ community often face increased obstacles and considerations. The earlier you can begin to save and invest for your objectives and with an LGBTQ+ friendly advisor or bank by your side, the more you can feel supported in reaching your goals. 

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