From
Your Perspective:
Financial planning for nontraditional couples
Retirement planning
for nontraditional couples
One of the benefits of marriage is that married people have help
from the government and sometimes from their employers in supporting
each other during retirement and after death. Employers who provide
traditional defined benefit
pensions,
for example, must pay surviving spouses at least 50% of the deceased
employee’s benefit over their own lifetimes. Non-spouses often don’t
qualify for that payment. That may be true even if the employer
provides healthcare and other benefits to domestic partners, especially
if the employee dies before beginning to collect the pension.
When you retire, if you have the option of taking your pension as a
lump sum distribution,
you might want to consider a
rollover IRA,
so you can maintain the
tax-deferred
status of your assets but invest in a way that will provide your
partner with a source of income in case you’re the first to die.
The situation is different with most
defined contribution plans,
including
401(k)s.
In that case, you own the assets in your retirement plan and can name the
beneficiary
who will inherit them. The only limitation on who the beneficiary is
actually affects married couples. That’s because an employee must name
his or her spouse unless that person agrees in writing to give up that
right.
Not such social security
Currently, the Social Security Administration provides no benefits for
dependent domestic partners — so if the partner who qualifies to
receive income dies, the surviving partner won’t receive any payments
based on the deceased partner’s earnings record.
There is a silver lining to being unmarried
partners: You won’t have to worry about whether your significant
other’s income will affect your eligibility to deduct your traditional
IRA contributions, contribute to a
Roth IRA,
or
roll over
your traditional IRA to a Roth IRA. All of those opportunities have salary caps.
Over 62
Sometimes opposite-sex couples over the age of 62 choose
not to marry because their marriage would mean a reduction
in their Social Security or pension benefits. That could
happen if a widow received more income based on the earnings
of her deceased first husband than she would as the dependent
wife of the second husband.
