"Retire Secure for Same-Sex Couples" -- A Gem

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Taylor Larimore
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"Retire Secure for Same-Sex Couples" -- A Gem

Post by Taylor Larimore »

Bogleheads:

Jim Lange, a CPA and Attorney, has written a much-needed book reflecting recent changes in state and federal laws that affect same-sex committed couples. Mr. Lange is donating all proceeds to Freedom to Marry. These are excerpts:
"'A man has made at least a start on discovering the meaning of human life when he plants shade trees under which he knows full well he will never sit.' -- Elton Trueblood quote."

"The Windsor decision and its aftermath will have a far-reaching impact on income taxes, inheriting IRAs and retirement plans and likely Social Security for same-sex couples."

"On August 29, 2013, the U.S. Department of the Treasury and the Internal Revenue Service ruled that same-sex couples who are legally married in states and other countries that recognize their marriage, will be treated as married for federal income tax purposes."

"Same-sex couples who live in any of the 33 non-recognition states might want to consider getting married in New York or any of the recognition states, and then come back home to resume their lives."

As of right now, if you reside in any of the 33 states not recognizing same-sex marriage, you cannot get spousal benefits for Social Security.

"There is a 15% inheritance tax (in Pennsylvania) for same-sex couples whether they are legally married or not (the inheritance tax is zero for straight couples).

"Finally, you can take advantage of some of the same long-term planning strategies that have always been available to straight couples."

"Good planning could mean the difference between the surviving partner'/spouse being financially secure and living comfortably, versus living out his or her retirement years in poverty."

"I am recommending that many, if not most, 60+ year-old same-sex couples in committed relationships consider entering into a legally valid marriage in a state that recognizes same-sex marriage."

"It's better to save in IRAs and retirement plans versus saving in after-tax accounts."

"For IRA owners, pension participants, and retirement plan owners, the financial implications of getting married are enormous."

"It's generally best to spend assets in this order: 1) after-tax savings. 2) traditional IRA and retirement assets."

"Estate planning: Get married to provide maximum IRA and retirement plan assets for your partner after your death."

"Estate planning: Get married to provide maximum assets for your children or to your heirs after both you and your partner die."

"Independent of getting married, it's better to wait until 70 to take Social Security than electing to take Social Security at 62."

"It's better to 'Apply and Suspend' Social Security benefits until age 70. -- In this scenario, none of the individuals die. The unmarried couple runs of of money at age 92, while the married couple's assets are over $2,000,000 and growing."

"There are also financial reasons why you might NOT want to get married. -- This is because of the so called 'marriage penalty' that currently hurts many straight couples."

"Alimony, child support and equitable distribution of property are just as painful for same-sex as straight divorcees. We recommend considering such unpleasant, but often necessary, legal documents like prenuptial agreements and other property agreements."

"Currently the Social Security Administration is urging same-sex couples to apply regardless of the legality of their marriage in their state."

"An increasing problem for same-sex married couples who live in states that that do not recognize their marriage is the inability to obtain a divorce."

"While you are still working, you shouldn't pass up the opportunity to contribute the maximum allowable to your retirement plans."

"It must be understood that the IRS does not permit you to leave money in tax-deferred retirement plans indefinitely."

"For an Inherited IRA, under the current laws, both the RMD start date and the life expectancy values combine to force you to accelerate your income taxes and deplete your Inherited IRA more quickly than with a Spousal IRA."

"It looks like the extended tax and wealth accumulation benefits afforded by the Stretch IRA may soon go the way of the dinosaur."

"Unless absolutely essential, delay taking Social Security as long as possible."

"There are significant Social Security benefits for married couples, which are not available for two non-married partners."

"The Social Security Administration now recognizes same-sex marriages in states that also recognize same-sex marriages."

"Unfortuantely, sophisticated Social Security strategies are unfamiliar territory for same-sex couples, advisors to same-sex couples and even most financial advisors to straight couples."

"Do not use the person who works for the Social Security Administration as your Social Security Expert. -- That's like taking the advice of the teller at the bank who says you should buy an annuity."

"I hate it when people who enjoy their work retire early so that they can get a benefit earlier."

"Holding off on Social Security benefits until after you're retired -- will give you an opportunity to make larger Roth IRA conversions while you are in the lower tax brackets."

"I like to integrate everything: a Social Security plan, an IRA plan, a long-term Roth IRA conversion plan, a general tax plan, an estate plan and an investment plan."

'Most legally married same-sex couples who currently live in states that do not recognize their marriage, cannot file their state income tax returns as married."

"Attorneys love to set up trusts and they are not always appropriate."

"Love all, trust a few, do wrong to none. -- William Shakespeare quote"

"A trust is basically an agreement to have a trustee administer your asset in a way that is consistent with your wishes."

""If the underlying (trust) asset is an IRA or other retirement plan, a poorly drafted trust can trigger an avalanche of income taxes."

"Some children are spendthrifts who cannot hang on to money, and need the structure of a trust well into adulthood and beyond."

"Some attorneys name themselves as trustee when they draft wills and trust for their clients, but I believe there is an inherent conflict of interest in that scenario. I usually recommend naming sibling or other family members as trustee, not because it is the best choice, but because it is the best of the bad choices."

"Same-sex couples must remember that if they are legally married in a state that recognizes same-sex marriage, the the Affordable Care Act (Obamacare) require them to file a joint federal income tax return to be eligible to receive tax credits to lower their health care premiums."

Before the DOMA decision, same-sex spousal benefits could not be treated on a pre-tax basis. Now, a same-sex spouse is also eligible for federally tax-free reimbursements for medical expenses from an employee spouse's Health Savings Account, Flexible Spending Account or Health Reimbursement Arrangement.

"Legally married same-sex couples living in states that do not recognize their marriage might want to consider gifting strategies and co-ownership of assets to avoid transfer taxes."

"The older, richer and sicker your are, the more appropriate it is to consider gifting."

"You must trust your spouse beyond a shadow of a doubt if you are going to gift away part of your money or other property."

"Name your spouse, not your partner, as the beneficiary of your IRAs and retirement plans."

"No one key unlocks the treasure of financial security and getting the most out of what you've got; the solutions is more like a combination lock where you have to get a lot of things right to maximize your assets and financial security."
Thank you, Jim Lange.

More Investment Gems

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
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Re: "Retire Secure for Same-Sex Couples" -- A Gem

Post by LadyGeek »

I have added the book to the wiki: Taylor Larimore's Investment Gems
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Re: "Retire Secure for Same-Sex Couples" -- A Gem

Post by Artsdoctor »

Taylor,

Jonathan Clements mentioned this book in his column a week ago and a friend purchased it.

I've gone over it in detail with my friend and it is a superb book. It was incredibly interesting to me that my friend--who is extremely savvy financially and recently married in his early 60s to his long-term partner--didn't know the first thing about spousal benefits of social security, inheriting a spouse's IRA, etc., simply because he's never had to know those things. The book was extremely illuminating to him and I'd really recommend to anyone who's in a same-sex relationship (married or not).
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Re: "Retire Secure for Same-Sex Couples" -- A Gem

Post by bsteiner »

While the book is aimed at same-sex couples, it illustrates the benefits available to married couples, including in the context of retirement benefits and Social Security. The same benefits are, of course, available to opposite-sex married couples.
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Re: "Retire Secure for Same-Sex Couples" -- A Gem

Post by Artsdoctor »

^ Good point.

I think one of the best things about the book was the cogent way he looks at social security. He gets the reader out of the mindset of viewing social security as a benefit just for the recipient and tries to convey the importance of viewing it as a HOUSEHOLD benefit.

There was also a bit of information looking at inherited non-spouse IRA rules that exist now--and the possibility that that might change in the near future. While it is never wise to make moves based on legislation that hasn't occurred yet, I found it helpful knowing that consideration is being given to shortening the length of time a non-spouse has to spend the inherited IRA.

Finally, there are same-sex couples that might indeed take a tax hit now by getting married. However, there are benefits down the road that may well make up for that that very few same-sex couples are aware of. For example, inheriting a spousal IRA is completely different from inheriting a non-spousal IRA now based on actuarial calculations alone.
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Re: "Retire Secure for Same-Sex Couples" -- A Gem

Post by LK2012 »

Thank you very much. It is telling that the legal situation is changing so rapidly that Pennsylvania now has legal marriage for same-sex couples, whereas a couple weeks ago, that was not true (same for Oregon, at least right now). It is mind-boggling to go from no prospect of marriage, to suddenly having federal marriage recognition in the past year. It is frustrating to be in your late 50's, and suddenly be able to marry your partner of 30+ years, but NOT to have been able to contribute to a spousal IRA, for example, for a disabled partner. And now BOOM, time for some serious re-arranging of retirement perspective! The rights granted overnight are wonderful, but we do feel like beginners because they were never available to us!
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Re: "Retire Secure for Same-Sex Couples" -- A Gem

Post by Rubiosa »

Taylor, may I port your post to another board?
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Re: "Retire Secure for Same-Sex Couples" -- A Gem

Post by Taylor Larimore »

Rubiosa wrote:Taylor, may I port your post to another board?
Rubiosa:

I would be happy to see you put these "gems" on another board.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
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Re: "Retire Secure for Same-Sex Couples" -- A Gem

Post by Rubiosa »

Thank you very much, Taylor. I hope you're doing well.
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Re: "Retire Secure for Same-Sex Couples" -- A Gem

Post by SStone »

Retire Secure for Same Sex Couples was updated. The new edition reflects the Supreme Court decision to recognize same sex marriage in 50 states in addition to other changes. They changed the name to "Live Gay, Retire Rich"
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Re: "Retire Secure for Same-Sex Couples" -- A Gem

Post by LadyGeek »

SStone, Welcome!

Thanks, the wiki has been updated: Taylor Larimore's Investment Gems
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"Retire Secure for Same-Sex Couples" -- A Gem

Post by marklearnsbogle »

bsteiner wrote: Tue Jun 03, 2014 5:38 pm While the book is aimed at same-sex couples, it illustrates the benefits available to married couples, including in the context of retirement benefits and Social Security. The same benefits are, of course, available to opposite-sex married couples.
Been reading Lange's book, and one of the more significant aspects is his desire that we understand the impact of Social Security strategy available for married folks vs. unmarried folks. The changes to Social Security's Apply and Suspend are probably widely known at this point, but in reading this book and subsequently researching the SS website, it's important to note significant changes:

How is the law changing? Under the new law, you can still voluntarily suspend benefit payments at your full retirement age (currently 66) in order to earn higher benefits for delaying. But during a voluntary suspension, other benefits payable on your record, such as benefits to your spouse, are also suspended. And, if you have suspended your benefits, you cannot continue receiving other benefits (such as spousal benefits) on another person’s record.

There are some exceptions. If you are a divorced spouse, you can continue receiving a divorced spousal benefit even if your ex-spouse voluntarily suspends his or her retirement benefit.

If you voluntarily suspended benefits prior to April 30, 2016, you may remain in voluntary suspense status, and the new law will not affect you. Also, if you submitted your request before April 30, 2016 and your spouse or children become entitled to benefits either before or after that date, they will not be affected by the new rules and will continue to receive payment.

Example: Thomas will turn 66 in 2016, and Maria will turn 62. Thomas starts his retirement benefit at his full retirement age, 66, in June 2016, and Maria starts her spousal benefit based on his record. Thomas immediately suspends his benefit. In past years, that would have meant that Maria could continue receiving spousal benefits while Thomas could restart his own benefit at age 70 and receive an increase for each month he waited. Now, because Thomas reached his full retirement age and requested the suspension after April 30, 2016, he is subject to the new law. He can still choose to voluntarily suspend his benefit after his full retirement age, but if he does suspend his benefits, Maria’s spousal benefit will also be suspended.
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"Retire Secure for Same-Sex Couples" -- A Gem

Post by marklearnsbogle »

https://money.usnews.com/money/retireme ... d-strategy

the link above is a thorough, well written piece on changes in Social Security in addition to the change of Apply and Suspend.
"Nothing is simpler than owning the stock market and holding it forever, and that’s essentially the idea behind the index fund.” - Bogle.
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