This
post continues last week’s discussion of financial action steps for newlyweds. Below
are five tips to consider:
- Learn About Each Other’s Finances- Exchange tax returns with your spouse from the past 3 to 5 years prior to marriage. This will increase understanding of each other’s finances and assist in future tax planning. Other good sources of information about the financial habits and history of a spouse-to-be are their checkbook register and bank and/or brokerage firm statements.
- Consider the Timing of the Wedding- Remember that marital status on December 31 determines tax filing status for the entire year. Consider postponing the wedding a few months into the next calendar year if it will save a significant amount on income taxes.
- Determine Your Tax Filing Status- Consider the married filing separate filing status option if one spouse has high deductions for, say, medical expenses that would be limited by filing jointly. Generally speaking, however, married couples save the most on income taxes by filing a joint tax return.
- Review Employee Benefit Plans- Compare the costs and benefits of each spouse’s employee health insurance. Sometimes it is cheaper for each spouse to retain their individual employer-provided benefits, at least until family coverage is needed for a newborn child. In other situations, one spouse’s benefit plan is superior to the other and it makes sense to consolidate coverage and name the spouse with inadequate benefits as a covered dependent. Ask your respective human resources departments for assistance, if needed.
- Invest Holistically- Start thinking of each spouse’s employee retirement plans in the context of a couple’s combined investment portfolio. In other words, instead of duplicating each other’s investment selections, consider investing in different types of securities to diversify investments and reduce the risk of loss. For example, if one spouse owns all domestic stock funds, the other might purchase a global securities fund.
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