On the Road to Financial Bliss

Goin' to the chapel and goin' to get married? Congratulations! As you embark on this exciting new phase of your life, be sure to discuss how you plan to budget, pay bills and get rid of any debt. Keep in mind that these discussions will help you lay the foundation not only for a happy life together, but for a successful financial partnership as well. Here's our checklist of items to consider:

Tying the financial knot

1. Plan for your future. From the beginning, it's a good idea to establish your financial goals together. Total up all your assets (what you own) and list your liabilities (what you owe) in one joint family net worth statement (see "How Much Are You Really Worth?"). Next, make a list of all sources of income and expenses so you can see what your joint monthly cash flow looks like. With a good idea of where you stand today, you're ready to discuss important goals for the future, such as buying a home, putting children through school and retiring comfortably (try Learning Quest's College Costs Calculator, and if you're a client, log in to Schwab.com to try the Schwab Retirement Planner). Develop a financial plan you can both live with and implement together, and then measure your progress jointly along the way. Don't hesitate to get help if you need it.
2. Pay off debts. If one or both spouses enter the marriage with nondeductible personal debt (e.g., credit cards and auto loans), get together at the outset and make paying it down a top priority. Work together toward eliminating all such premarital debt quickly, and be sure to consult each other before taking on new debt.
3. Address spending habits. If one spouse is more of a spender and the other more of a saver, develop a fair and equitable budget that can strike a balance and satisfy both partners' needs. Don't forsake retirement savings, even while you're saving for other goals such as a down payment on a home or college for the kids. Both spouses should take advantage of available retirement savings options such as qualified employer plans and IRAs.
4. Consider whether to mingle assets. Ideally, marital assets should be viewed as "ours," not "mine and yours." But if one spouse comes into the marriage with a significantly higher net worth, a prenuptial agreement might make sense.
5. Make your new name known. If you change your name, immediately notify your employer, creditors, the Social Security Administration, all your account providers, insurance agents, etc.
6. Review benefits. In most cases, it's possible to add a spouse to your benefits coverage as of the date of marriage. When both spouses work, coordinate health insurance benefits so you're not duplicating coverage. Also, if both are earning a similar salary, then a minimal amount of life insurance is probably appropriate. Of course, if you plan on having kids, you'll need to review your insurance needs then (see Schwab.com/insurance).

Preparing for the marriage tax penalty

7. Think about taxes. Even if you get married on the last day of the year, for income tax purposes you're considered married for the whole year. In most cases, it's better to prepare your tax return as "married filing jointly," though in some instances it could make sense to elect "married filing separately" status. There are few general rules of thumb here, so you should just run the numbers both ways (try the Online Tax Projector on Schwab.com/tax), or check with your tax professional to see which filing status makes the most sense.

Thinking ahead to the golden years

8. Plan for retirement. At retirement time, don't consider only your own life expectancy - take into account the life expectancy of the spouse most likely to survive longest when deciding on such things as when to start Social Security payments, or when electing pension and annuity payout options. Generally, it makes sense to postpone Social Security as long as possible if you expect to beat the average life expectancy (i.e., break-even point at which waiting for larger payments wins out over electing an earlier, smaller benefit). But, if your lower-earning spouse is expected to live longer than you, also consider his or her life expectancy when calculating your break-even point (see "When Should You Take Social Security?"). For pensions and annuities, consider taking a lower payment initially in exchange for at least a 50% (or even 100%) survivor benefit.
9. Update beneficiaries. Don't forget to update the beneficiary designations on your retirement plans and insurance. Note: If you decide to name someone other than your spouse as beneficiary on your qualified retirement plan at work, the law requires your spouse to acknowledge your decision in writing. Nonretirement bank accounts, brokerage accounts, and real or personal property titled in both your names as joint tenants with right of survivorship will pass to the surviving spouse outside of the probate (review community-property laws if they apply in your state, and be sure to incorporate all titling decisions into your overall estate plan). Finally, if you keep separately titled accounts, to avoid probate consider a POD (payable on death - typically available for bank accounts) or TOD (transfer on death - typically available for brokerage accounts) designation naming your spouse as the beneficiary.
10. Create or update your estate plan, including wills and trusts. Talk to your attorney or CPA about the best way to title your accounts and recorded property (e.g., motor vehicles, real estate) based on your preferences and goals, taking into account your state's laws (i.e., common law versus community property). Also consider durable powers of attorney and health care so each of you can make financial and medical decisions for the other in the case of an incapacitating injury or illness (for more, see Estate Planning).

Living happily ever after

As you enter into this new stage of life, remember to review your finances together regularly. Don't assume money matters will fall into place without any planning. With a little work, you'll be building a prosperous marriage and financial partnership.

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