Retirement Planning for Singles and Unmarried Couples

Retirement Planning Unmarried CouplesBy Sarah Weldman, Staff Writer

Retirement planning is crucial enough as it is for a married family, but it becomes even more critical for singles or unmarried couples considering that they are not accorded the same tax breaks and advantages which a couple gets upon marriage. Even so, statistical studies report that single women are the fastest growing group of home buyers, while the number of married families buying a house has dropped by 10% in the last ten years.

With increasing divorce rates and increased tolerance of non-traditional definitions of the concept of a family, the taxation laws have not been able to keep up with the growing purchasing power and numbers of people who fall into the definition of singles or unmarried couples, including divorcees, same sex couples and singles living in an extended family with other members. What proactive financial planning steps can people who fall under these characterizations take to ensure a secure future?

If you are living with a partner, the best thing you can do is be transparent about your personal finances and discuss all expenses and bills payable, in order to work out a satisfactory arrangement which includes a pooled fund for taking care of monthly payments and joint assets, while payments towards significant individual assets are paid for the owner(s). Remember that there will be no legal recourse in case of a split and the asset not being in your name. If you have joint ownership of assets, contact a lawyer to put in writing arrangements for distribution of assets in case of a split. A commonly availed of arrangement for partners buying a home is under a JTWROS, or joint tenants with right of survivorship. In order to avoid the gift tax which would be payable for transferring property to the surviving partner, a living trust can be setup.

Funds in 401k plans, IRAs and other retirement plan vehicles will not automatically be transferred to the survivor, as in the case of a spouse. Take special care to nominate your partner as the beneficiary and change as and when necessary, in case you are single. Write powers of attorney for each other, which would only come into effect in the event of sudden demise of one partner, or extreme disability. Note that unmarried couples do not have a right to each others’ social security benefits. IRA rollovers from one partner to the other are also taxable, unlike that for a married couple. Also, laws governing rights over assets and responsibilities for joint debts may vary depending on the state of residence and the contracts signed with financial organizations.

What all this means is that for single and unmarried live-in couples, retirement planning needs to be taken a bit further than that which is done by a married couple, in order to offset the lack of clarity in governing laws and tax benefits. Everything has to be put down in writing in clear terms. It is generally advisable to consult a financial planner and set your finances to go in the right direction before you jump into a long term live-in arrangement.