Article How planning for LGBT retirement differs

Despite major headway in marriage laws, all is not equal when it comes to planning and saving for later in life.

The U.S. Supreme Court’s landmark decision on same-sex marriage in 2015 made marriage equality the law of the land, giving same-sex partners spousal inheritance rights, survivor social security, tax credits, second-parent adoption rights and other benefits accrued to married couples.

Yet as momentous as that decision was, “the right to get married doesn’t fix all the other problems out there,” says David Mietty, Wealth Management Consultant at UBS. He notes, individuals may still encounter workplace and housing discrimination on the basis of sexual orientation and gender identity. And partly because of this, LGBT Americans can face unique challenges when it comes to financial issues such as retirement, long-term care and inheritance. Your financial advisor can walk you through some of these issues to help you prepare and plan for them.

Marriage equality has simplified the financial lives of same-sex couples who choose to wed, but many LGBT investors may still lag their heterosexual counterparts when it comes to planning and saving for the future, for a variety of reasons. According to a recent study, LGBT people are less likely to have a will or estate plan (19% vs. 26%); less likely to have 401(k) savings (35% vs. 40%); and are saving less of their paycheck (20% vs. 25%) in retirement accounts.¹

The survey further found an income gap between LGBT workers and the general population, which would mean less available to sock away: the average annual salary reported by lesbian respondents was $45,606, compared with $51,461 for heterosexual women, and gay men reported earning an average of $56,936 vs. heterosexual men, who earned $83,469. Another factor may be that same-sex couples currently approaching retirement were less likely to have children, and therefore less likely to have experienced the attendant milestones, such as graduations, college and weddings, that they might have had to plan for. But that demographic may change as more young same-sex couples choose to have or adopt children.¹

Whatever the reason for your retirement savings shortfall, if you have one, it may not be not too late to make up for lost ground. First, IRS catch-up provisions allow those age 50 and over to contribute up to $6,500 per year in IRAs and $24,000 in 401(k)s. Once you’ve maxed out all available retirement accounts, you have other options, such as annuities and other investments. Some options may have complex rules, so be sure you discuss whether they make sense for you with your financial advisor.

Even in a post-marriage-equality world, finding LGBT-friendly long-term-care facilities remains a huge practical challenge. Gay, lesbian and bisexual couples seeking senior housing may receive less favorable treatment than heterosexual couples, including differences in availability, changes in pricing, fees and costs, and different application requirements, according to a report from the Equal Rights Center.² It’s not surprising that being able to find an LGBT-friendly long-term-care facility tied for first place among personal finance concerns for LGBT investors, according to the UBS survey, “The LGBT Investor in a Post-DOMA World.” ³

To help safeguard against possible discrimination or exclusion at a particularly vulnerable time of life, many opt instead for at-home elder care. If you have not yet saved toward that expense, traditional long-term-care (LTC) insurance may pay benefits to cover these costs. Another option may be to purchase one of a growing array of hybrid products, which combine long-term care funding with life insurance or an annuity. There are many options, and you can start by discussing what you want with your financial advisor.

Whether you’re married or not, you still need estate planning and legal documents. Without a will, your surviving spouse may receive just half or even one-third of your estate, while the remainder goes to other relatives—even if you hadn’t intended them to benefit. “Basically, without a formal estate planning strategy (a will alone or combined with a revocable living trust), state law may determine where your property goes,” Mietty says.

Even if you do have a will, the executor must inform next of kin. “That may include siblings you haven’t spoken to in ten years,” who might oppose your desire to include a same-sex spouse in your estate, says Mietty. He recommends an estate planning strategy that includes language specifying who should benefit and who should not, along with a host of other protections. Even if all your relatives are LGBT-friendly, it’s best to have all your legal documents buttoned up because laws vary by state even in a post-marriage-equality world. Your tax Advisor can work with you to ensure you’ve thought of everything.

Most important, regardless of the financial planning you have done—or not done—taking a close look at your needs and how to meet them is the most important step. Even if you haven’t taken control of your finances previously, your past, says Mietty, does not determine your financial future. “If you get serious today, you really do have the ability to change the outcome.”

¹ Prudential Financial,The LGBT Financial Experience, 2016-2017

² http://www.equalrightscenter.org/site/DocServer/Senior_Housing_Report.pdf?docID=2361

³ UBS Investor Watch,The LGBT investor in a post-DOMA world, 4Q 2013