Love and money: Financial planning for nontraditional couples

Summary

• Traditional financial planning models often don't address the unique challenges faced by nontraditional couples, including those with significant age gaps, unmarried partners and late-life newlyweds.
• Age-gap couples face distinct retirement planning challenges, potentially needing to fund 45+ years of retirement while balancing conservative spending with enough investment risk for long-term growth. Unmarried couples must be especially vigilant about legal protections through wills, healthcare proxies and beneficiary designations.
• Late-life newlyweds often maintain separate finances and face complex decisions about spending equity and inheritance planning, requiring clear documentation and careful review.

Financial planning for relationships that break the mold

This Valentine’s Day, did you consider getting your sweetheart a meeting with a financial advisor?

Granted, it may not be the most romantic Valentine’s Day present ever. (OK, definitely not.) But for couples whose relationships break the mold, the gift of financial planning could be a sign of true love.

For generations, financial planning has been built around similar-age couples with similar life trajectories. They marry in their 20s or 30s, save together, raise children together then retire together in their 60s or 70s. Thing is, not every “happily ever after” is the same, and variations in our love lives can complicate financial decisions.

Spouses with big age gaps, for example, must plan for more total years of retirement. Couples who never marry don’t get the same legal protections as married people. And all the silver foxes and platinum panthers who marry late in life can face thorny questions when it comes to inheritance: For instance, who gets the lake house—the new spouse or the adult children from a prior relationship?

Here are a few financial planning tips for couples whose relationships are outside the norm.

Age-gap couples

Hey, we’re not judging. According to the U.S. Census Bureau, 8% of opposite-sex married couples have age gaps of at least 10 years, and such double-digit age disparities are even more common among same-sex couples—20% of whom have age differences of 10 years or more.¹ Bottom line: If May-December is your thing, you’ve got plenty of company.

From a financial perspective, however, age gaps can be a challenge when retirement planning. Let’s say a 50-year-old woman is married to a 70-year-old man. They’re both retired, and their financial plan assumes she lives to 95. In this scenario, their retirement money must last 45 years—a longer span than most people’s work lives.

“A lot can happen over 45 years,” says Melody Evans, a vice president TIAA Wealth Management advisor in TIAA’s Portsmouth, N.H., office. “Policies can change. Tax rates can change. Markets can change considerably.”

Given the years and risks involved, Evans advises age-gap couples to take a more cautious approach to spending. “We want to make sure the second spouse doesn’t run out of money,” she says. When it comes to investing, however, age-gap couples shouldn’t be too cautious. While TIAA generally advises nearly retired or newly retired clients to minimize investment risk the further they get into retirement, age-gap couples are in a unique situation. Evans says, “They might need to accept a little more risk because they’re trying to maintain buying power for 45 years.”

Evans has one more tip for age-gap couples with minor children: “Don’t forget to claim their Social Security benefits.” In the example above, let’s say the couple has a 10-year-old daughter. When dad retires at 70, he can file for Social Security benefits not just for himself but for his daughter too. Until she turns 18, the daughter is eligible to collect benefits of up to half of dad’s full retirement benefits. “That money could go straight into her college savings account,” says Evans.

Unmarried couples

Unmarried couples have fewer legal rights than married ones. Consequently, it’s even more important for unmarrieds to write wills and prepare legal documents assigning each other as their healthcare proxies and powers of attorney. If they aren’t each other’s healthcare proxies, they may not be able to make medical decisions for one another should they become incapacitated. If they aren’t each other’s power of attorney, they might not be able to pay bills or cash checks in case of an emergency.

It's also critical for unmarried couples to name each other as beneficiaries on retirement accounts (assuming that’s what they want) and to have a will that clearly establishes who inherits the house, cars, etc. With a married couple, if one spouse dies without beneficiaries or a will, much or all of the estate usually goes to the other spouse. Not so for unmarried partners. The deceased’s legal next of kin might be a sibling they haven’t spoken to in years.

The risks for unmarried couples are so significant that Evans sometimes plays financial Cupid, urging her unmarried couples to finally tie the knot. A big concern involves Medicaid. For seniors, Medicaid serves as a financial safety net when it comes to paying for nursing homes and other long-term care. For Medicaid to pay for long-term care, seniors must spend down their own assets first, but there’s a carve-out for primary residences.

In other words, if grandpa gets sick and needs to go into a nursing home, Medicaid won’t make grandma sell their house to pay for grandpa’s care. However, the protection for primary residences only applies to married couples. Grandma might be forced out of their home if she and grandpa are unmarried. Says Evans, “Unmarried couples need to be aware that some of the safeguards the government has in place for married couples don’t necessarily apply to them.”

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