Retirees considering marriage should evaluate several factors.
You are in your later years.
While in retirement, you have found purpose elsewhere.
You have found love.
Should you tie the knot?
According to a recent Kiplinger article titled “Financially, Marriage Makes a Lot of Sense for Retirees,” retirees considering marriage should weight the pros and cons.
What should you consider?
If you inherit an IRA from your spouse, you can roll the IRA into your own.
When you do this, you can delay required minimum distributions until you turn 72.
This can certainly be beneficial when it comes to taxes.
What happens if you are not married?
If you leave your IRA to a non-spouse, it will be considered an inherited IRA.
Because of the new SECURE Act, the taxes will be higher.
If the survivor is not more than 10 years younger than the non-spouse partner, then taxable distributions must be taken every year starting the after the decedent passes away.
What happens if the survivor is more than ten years younger than the non-spouse partner?
All money will need to be withdrawn from the IRA within a decade of the death of the deceased non-spouse partner.
The result is lager taxable distributions with a higher tax bill.
If you have not figured it out yet, the SECURE Act was a naked tax grab by the federal government.
It killed the Stretch IRA.
Federal law requires the monthly pension benefit for a married individual to provide a survivor benefit once the plan participant dies.
This survivor benefit is typically 50 percent of the benefit of the deceased spouse.
It will be paid to the surviving spouse when the spouse has reached a specified age and will continue for the remained of his or her life.
Survivor benefits are not available if you are not married.
If married, you can claim half the Social Security amount of your spouse when you reach full retirement age.
This can be helpful if the amount is more than what you would receive through your own Social Security amount.
You can also take half of the reduced benefit amount at age 62, if this is more than your own reduced benefit.
When your spouse dies, you can claim their full Social Security benefit if it is more than your own.
Retirees considering marriage should remember this Social Security benefit only works for married couples.
If you are age 50 or older, you can contribute up to $7,000 into an IRA if you are married and have no earned income based the earned income of your spouse.
If you are younger than 50, contributions are capped at $6,000.
When you are not married and not working, you cannot make contributions based off the earnings of your partner.
This is helpful when it comes to estate taxes.
Wealth married couples can combine their individual $11.58 million federal estate tax exemption into a $23.16 million exemption.
In this way, portability can save individuals millions in estate taxes.
Although there are certainly some tax advantages to being married, retirees considering marriage should discuss their goals with an experienced estate planning attorney before tying the knot.
Reference: Kiplinger (March 9, 2020) “Financially, Marriage Makes a Lot of Sense for Retirees”