Benefits

Same-Sex Couples Revisiting Retirement Planning Decisions

By Kevin McGuinness editors@plansponsor.com | November 27, 2013
Page 1 of 2 View Full Article

November 27, 2013 (PLANSPONSOR.com) – A new study reveals that many same-sex couples are revisiting retirement planning decisions in light of the U.S. Supreme Court’s ruling in the case of United States v. Windsor.

“Post-Windsor: Retirement Planning for Same-Sex Couples,” from the Insured Retirement Institute (IRI), examines the impact of the ruling in the Windsor case, which declared unconstitutional a portion of the Defense of Marriage Act (DOMA) and expanded the definition of “spouse” to include same-sex couples (see “Benefit Changes Ahead After DOMA Ruling”). The study surveyed same-sex couples residing in states (and the District of Columbia) that allow same-sex marriage, gauging their views on the Supreme Court’s decision as well as to gather information on their retirement and financial planning behaviors and attitudes.

As a result of the Windsor decision, same-sex marriages recognized under state law also must be recognized for federal law purposes. The study finds that the ruling, combined with guidance issued by the Internal Revenue Service (IRS) and the Department of Labor (DOL), “paves the way for massive changes to employee benefits, as well as tax, estate and retirement planning for same-sex couples.”

According to the study, these changes will lead many same-sex couples to revisit their retirement and estate planning decisions. Since the Windsor decision, nearly half of unmarried same-sex couples are planning to change their relationship status to married, and six out of 10 couples currently in civil partnerships plan to marry. More than half believe that many areas of their finances will be affected, namely tax, estate, and retirement planning as well as insurance coverage. Consequently, at least 40% of married same-sex couples replied that they have been motivated to financially plan.

The study’s authors point to an opportunity for financial professionals to serve a rapidly changing market in the same-sex couple community, since four out of 10 have more than $250,000 saved for retirement and that nearly nine out of 10 (87%) say they invest. About two-thirds do not have a financial planner, but those that do work with them for an extended period. Findings also show that while this community is highly educated and expects to be treated accordingly, a significant number lack confidence that they will have enough money for retirement and in their ability to prepare financially for retirement.

The study also finds that since the Windsor decision:

  • Fifty-three percent of those queried have either been added/plan to be added by their spouse or have added/plan to add their spouse as a beneficiary to their defined benefit plan;
  • Thirty-eight percent of same-sex couples have made, or plan to make, changes to a will;
  • Twenty-three percent have added, or were added, to their spouse’s health plan;
  • Eighteen percent have filed amended taxes on prior year tax filings;
  • Those same-sex couples who have a financial planner cultivate lasting relationships, with 61% working with the same planner for five years or longer;
  • Eighty-seven percent have money saved for retirement, with 40% having saved $250,000 or more, though this is largely skewed towards those ages 55 and over;
  • The majority of same-sex couples (78%) have added to their retirement savings in the past year, though 40% have not calculated the amount needed to live comfortably in retirement and 24% do not know when they will retire;
  • Most respondents (83%) say that the tax deferral is an important characteristic of a retirement investment, with rate of return and past performance noted as important;
  • About half (48%) of respondents indicated that they believe they will have the same or less financial security in retirement than their parents. This is driven by those under age 55 (53%);
  • Seven out of 10 respondents are not fully confident that they will have enough money to live comfortably in retirement; and
  • Most respondents (86%) admit they require help in at least one financial area, with retirement planning noted as the primary area where such help is needed (49%). Other areas where help is needed are investing, tax planning, estate planning and general financial management.