The High Cost of Marriage

Please don’t think I’m questioning my relationship or my life partner.  Mr. Ms. Liz is truly my best friend; he makes me a better person.  There’s no one I’d rather have along side me in this adventure of life.  We’ve created a life, together, I could not have created without him by my side.

But that doesn’t mean I won’t examine what marriage has cost us . . . financially speaking.

First, some history.  I was married at 24–crazy and amazing that I found the person who would make me happy over these last 28 years at such a tender age.

When I married, I changed my name.  Mr. thought it was unnecessary to do so but I wanted to be MARRIED and changing my name made me feel MARRIED.

In fact, Mr. wasn’t all fired up to be married, he was perfectly happy to cohabitate.  Smart guy.  But, I wanted to be MARRIED and he wanted me to be happy so we were married.   And we’ve been quite happy.

My frequent readers know we keep our money completely separate.  I never thought we needed to combine finances in order to feel MARRIED.

For the first 25 years of marriage, we split our house related bills based on our incomes.  When Mr. made twice what I did, he paid 2/3 and I paid 1/3 toward these bills.  As my income grew, I paid more.  This allowed us to live at a blended lifestyle rather than at the lower earner’s (mine) lifestyle.  Over the last few years, we have split our house related bills based upon our relative net worth.  Again, he pays more than I do because his net worth is higher.  This has always worked well for us.  We’ve always split groceries and other joint purchases evenly.

Because we keep our money separate, I’ve always split our income tax bill based on what we would have paid if we were single.

You see, the U.S. tax code is set up for a family where there is a high wage earner and a low or no wage earner.  The tax code penalizes families where both partners have similar or high earnings.  This additional tax cost is referred to as the “marriage penalty”.

The penalty exists because the upper earnings limits for the married filing joint tax tables are not two times the limits in the single tax tables.

Then, at higher income levels, an alternate minimum tax kicks in which makes the marriage penalty even worse.  Oh and Obamacare added some pesky charges when your income is quite high and we hit that.

And because I am a strange money nerd who looks at this stuff, I can tell you how much marriage penalty we’ve paid over the last 22 years.

In the highest year, our marriage penalty was over $7,100.  Yep, $590 a month not for a car payment or a fancy trip but for the privilege of being married.

And this wasn’t a year where we had some crazy investment windfall.  It was just the year when we made the highest bonuses and salaries.

There were a few years when we benefited slightly from the stupid tax structure.  These were years when Mr. Ms. Liz was engaged in entrepreneurial endeavors and we had one high earner (Me!) and one low earner.

But our net marriage penalty over 22 years totals $44,000.  If we had invested that money at 5%, we would have over $65,000.  I’ll pause for a moment for you to absorb that. . . $2,000 bucks a year just for the privilege of being married.

And the reason this is top of mind for me this morning?  Because it is only going to get worse.

My careful readers know Mr. Ms. Liz is converting his traditional IRA’s to Roth IRA’s during these years when we have a (intentionally) low income.  He can convert them with little or no federal tax.  He also incurs no state tax because of a $20,000 exemption for retirement income once you are over 60.

Perfect world, I would do the same once I reach 60.  But Mr. Ms. Liz will be 68 by then and will likely be collecting Social Security.  Which will raise our income and virtually eliminate the benefit of conversion.  Even if he delays Social Security until he turns 70, I’ll only have a two year window for my conversions.

Then there’s Social Security.  The benefits are taxable if your combined income exceeds $25,000 for SINGLE taxpayers or $32,000 for MARRIED taxpayers.  So, again, we’ll be paying tax on income that would go untaxed for single folks.

Oh, and then there are the earnings limits for the health insurance subsidy.  IF we have subsidized healthcare and earnings limits are still in place when Mr. collects Social Security, his Social Security benefits may cause me to lose the subsidy.  He’ll happily be on Medicare and I’ll be searching for a health insurance premium that doesn’t force me back to work.  You know I think this subsidy is absurd for high net worth individuals but that doesn’t mean I’m not enjoying the benefit.

Now, I know these are all first world problems.  I am incredibly grateful for the opportunities my parents and this country have provided me.  All of these penalties are the result of our ability to earn high incomes and live astonishingly abundant lives.

I just wish it didn’t cost so much to be married.

Knowing everything I do now, would I marry Mr. Ms. Liz again?  Absolutely, no question one of the best decisions I’ve made.

But if my partner and I were conflicted?  Or if we were ambivalent?  Here’s one more bit of information to weigh.

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Author: Ms. Liz

A CPA, I retired at 51 and I am helping people create their fantastic futures!

5 thoughts on “The High Cost of Marriage”

  1. Dear Ms. Liz,
    Just wanted you to know how much I LOVE your blog! Special thanks for the investment info a few weeks ago about CD and money market rates at 2.35%. Today I was thinking about the marriage penalty. (No, I’m not thinking divorce!) While you might have over $65,000, when you take into account the $44,000 you would have saved, wouldn’t you actually be nearly $100,000 better off today? Hmm, maybe math isn’t my strong point … Keep blogging!

    1. Thanks for your kind words Jenny!

      The marriage penalty cost us $44,000 over 22 years. If we had invested that $44,000 and earned 5% we would have $65,000 today including the $44,000. We could have the new, cheap Tesla! I should have titled the article, would you rather be married or drive a Tesla 🙂

      Do let me know if there are topics that would be of interest to you and I’ll keep on blogging!

  2. Like you, Mrs. 39 Months married at 24 – but I was only 22 (she robbed the cradle!)

    We’ve had a long marriage (31+ years) and have enjoyed the trip. Mrs 39 Months isn’t as high a money earner, so we haven’t been penalized as much, but we do feel that the US doesn’t do much to encourage marriage. Is it a wonder that the marriage rate has been dropping since the 60s?

    I believe the benefits outweigh the costs, just like you. Congrats and keep it up!

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