The New Demographics of Planning

Strengthening connections with same-sex couple families

by Deb Repya

Today’s American families are quickly evolving. More than ever, these families need financial professionals who can evolve along with them. In the recent Allianz LoveFamilyMoney Study*, more than 4,500 Americans were surveyed to gain an understanding of what today’s “modern” families look like. In addition to traditional families (those married to someone of the opposite sex with at least one child under 21 living at home), the study evaluated six distinct modern family structures including same-sex couple families, single-parent families, boomerang families (those with adult children returning home), multi-generational families, blended families and families with older parents and young children. The study not only brought to light the complicated structures of today’s families, but it also demonstrated the countless opportunities that financial professionals have as they respond to each family’s unique financial needs.

One of the most compelling and dynamic family-types identified in the study is the same-sex couple family. The number of same-sex couples in the U.S. has grown by more than 50 percent since 2000 (Same-sex Couple Household Statistics from the 2010 Census, September 2011). More than any other modern family type, LoveFamilyMoney found that same-sex couple families are the most comfortable and prepared in terms of financial planning and retirement. More Same-sex couple families (41%), both with and without kids, report feeling financially secure compared to other modern family types (27%) and more also report feeling financially competent. Four out of 10 same-sex couple families feel that their financial planning knowledge is excellent/above average compared to only 34% of other modern family types. Yet, while same-sex couple families may have more confidence, a financial professional can be an integral part in helping them seek financial success.

Unique Financial Experiences and Attitudes

The LoveFamilyMoney study identified clear differences that set same-sex couple families apart from traditional families. For example, same-sex couple families have experienced life-altering financial issues more often than traditional families. They were more likely to have collected unemployment as an adult (43%) compared to traditional families (21%) and were also more likely to have unexpectedly lost a main source of income as an adult (32%) than traditional families (23%). Although these experiences point to a potentially volatile financial situation, experience in handling a previous financial disruption may give same-sex couples a greater ability to manage their finances both now and in the future.

As same-sex couple families looked at their current situation, more than half (56%) said they feel wealthy or financially comfortable compared to 52% of traditional families and only 40% of other modern family types. As a result, same-sex families are less likely (46%) compared to traditional families (54%) to focus on covering current expenses rather than planning for the future. Same-sex couple families are also less stressed about debt – only 45% reported that getting out of debt causes them stress compared to 55% of traditional families.

Focusing on Their Financial Future

When building their financial plan, same-sex couple families are forward-thinking. The top motivation reported by same-sex couple families to create a long-term financial plan is having a comfortable retirement. This differs from traditional families who reported their top motivation to create a long-term plan is geared toward managing current expenses – namely, being debt free. Perhaps because their future financial success is top of mind, however, same-sex couple families worry more (77%) than traditional families (70%) about running out of money in retirement. This is an area where financial professionals can play a key role in helping address their concerns.

While same-sex couple families may have worries about their future income, proof of their preparedness is seen in their retirement savings and debt levels. LoveFamilyMoney revealed that same-sex couple families (both with and without kids) have more in retirement savings than any other family type, saving an average of $276,200 compared to traditional families ($251,000) and other modern families ($186,000). The number increases even more when looking at same-sex couples without kids, who have saved an average of $310,700.

When it comes to debt, more same-sex couple families reported zero in debt (24%) than any other family type – 22% of traditional families said they had no debt and 16% of other modern families reported the same. More same-sex couple families also report that they have the lowest percentage of debt in their monthly expenses. And, more than half (59%) of same-sex couple families are comfortable with the amount of debt they currently hold compared to 46% of other modern families.

Distinct Needs Create Opportunity

What does the data from the LoveFamilyMoney study ultimately reveal? Although same-sex couple families report being in a relatively strong financial position, financial professionals have a growing opportunity to help them build the financial future they seek. Same-sex couple families have assets to work with and they are open to getting help. Almost half (48%) of same-sex couple families currently have or have used a financial professional in the past, which is higher than the average of the other modern family types (44%) in the study.

It’s important for financial professionals to keep in mind that same-sex couples may seek different types of support when kids come into the picture. Those without kids look for a financial professional who is knowledgeable and sensitive to their specific needs as a same-sex couple (74%). They need someone who is well-versed in the potential complexity of their domestic situation. When kids come into the picture, the majority of same-sex couple families seek a financial professional who treats their needs no differently than any other family (51%).

Once a relationship with a financial professional is established, same-sex couple families report specific goals that they want a professional to help them meet. Top priorities for these families include finding a financial professional who can help them get a better return on investments, help them make financial decisions, and provide answers to specific questions about their financial situation. In all scenarios, financial professionals would do well to refer their clients to work with a knowledgeable local tax advisor and/or attorney familiar with same-sex couple financial issues.

In addition to specific financial goals like the ones listed above, there are important tax, estate planning and retirement considerations that can impact same-sex couples. These factors will vary depending upon marital status and state of residence. Since the Supreme Court ruling in 2013 changed federal law on the definition of marriage, same-sex couples who are considered legally married under federal law have different federal tax estate planning and retirement rules than when they were unmarried.

In many cases, the rules may benefit a married same-sex couple more than an unmarried same-sex couple – once again, a tax advisor or attorney can help. Let’s explore examples that illustrate these benefits. Looking at IRAs, the ability to rollover an IRA after a spouse’s death is only available to a surviving spouse. As same-sex couples prepare for retirement, some Social Security benefits are only available to a legally married spouse. Also, the unlimited marital deduction for gifts or bequests to a spouse is only available if the same-sex couple is legally married. Some same-sex couples will have the complication of being considered unmarried by their residence state while being considered married under federal law.

Be aware that some rules get more complicated for high net worth families, no matter their family structure, and may not always benefit a married couple. For legally married couples with high incomes, the so-called “marriage penalty” might apply, if the couple is in one of the higher federal income tax brackets. What this means is that all things being equal, a married couple filing jointly with taxable income exceeding $148,850 in 2014 will pay more in federal income taxes than two single people who each have half of that, or $74,425. Taxable income above $148,850 is taxed in the 28% bracket, while two single filers may each earn up to $89,350 and stay in the 25% bracket. The 10% and 15% brackets for those married filing jointly are exactly twice the single filer brackets.

Thus, marriage does not offer more benefits for some couples. This is another example of where a good tax advisor can be priceless in helping with their situation.

Financial professionals who take the time to understand the financial issues of same-sex couple families have a golden opportunity to build new client relationships and help with their evolving financial planning needs. It is critical to keep up with the needs of today’s families helping them address financial problems or conflicts and help build their financial landscape in retirement and the years beyond.

*The Allianz LoveFamilyMoney Study was conducted by The Futures Company via an online panel in January, 2014 with more than 4,500 panel respondents ages 35-65 with a household income of $50K+ and was commissioned by Allianz.