Till Death Do Us Part... Or Not: Financial Planning for Unmarried Couples
July 26, 2024
Jennifer and David had been together for eight years. They owned a house, shared a dog, and were talking about starting a family. To all their friends and family, they were as good as married. But legally? They were just two individuals sharing a life.
One day, David was in a severe car accident. As he lay unconscious in the hospital, Jennifer was shocked to discover she had no legal right to make medical decisions for him. Their shared house? It was in David’s name only. Many of their utilities and credit cards were also in David’s name, so the companies wouldn't speak with Jennifer when she called them about their bills.
These are just a few examples of the unique challenges unmarried couples face. While love may not need a marriage certificate, your finances might appreciate one. You're not alone if you're in a committed relationship without plans to tie the knot. According to the Pew Research Center, the number of U.S. adults in cohabiting relationships has steadily increased in recent years.
Without the automatic legal benefits that come with marriage, unmarried couples need to be proactive in protecting their financial interests and ensuring their future together is secure.
The "What If" Conversation: Preparing for the Unexpected
It's not the most romantic topic, but it's crucial. Sit down with your partner and discuss what would happen if one of you became incapacitated or passed away. Who would make medical decisions? Who would inherit your assets? Without legal protections, your partner could be left out in the cold.
Being prepared for the unexpected starts with:
- Creating a durable power of attorney for healthcare decisions.
- Drafting a living will outlining your end-of-life care preferences.
- Determining a regular power of attorney for financial decisions.
- Signing HIPAA authorization forms to allow the release of medical information to your partner.
Joint Finances: Financial Planning for Unmarried Couples
Navigating financial life as an unmarried couple presents unique challenges and opportunities. From buying a home together to planning for retirement, every decision requires careful consideration and clear communication.
Below are some tips on how to protect your assets, increase your communication, manage your estate, plan for retirement, and understand the implications of taxes and insurance.
Protect Your Home Sweet Home
If you're buying a home together, think carefully about how you'll hold the title. Options include:
- Tenants in Common: You each own a specific percentage of the property. If one partner dies, their share goes to their estate, not automatically to the other partner.
- Joint Tenants with Right of Survivorship: You both own the entire property. If one partner dies, the other automatically inherits their share.
Consider a cohabitation agreement that outlines how you'll handle the property if you split up. It's like a prenup but for unmarried couples.
Have the Money Talk
How will you handle your finances? Some couples keep everything separate, while others combine everything. Many find a middle ground works best. You might consider:
- A joint account for shared expenses, with individual accounts for personal spending.
- A detailed budget outlining who pays for what.
- Regular "money dates" to discuss your financial goals and progress.
Remember, without the legal protections of marriage, it's crucial to keep clear records of who contributes what to shared assets.
Plan for Retirement
Unmarried couples miss out on some of the retirement perks that come with marriage. For example, you cannot claim Social Security benefits based on your partner's work record. But there are still ways to plan for a comfortable retirement together:
- Max out your individual retirement accounts.
- If one partner earns significantly more, consider gifting money to the other to invest (up to the annual gift tax exclusion limit).
- Look into domestic partner benefits offered by your employers.
Review Insurance Matters
Review your insurance policies to make sure your partner is protected:
- Health insurance: Explore options for domestic partner health insurance coverage, which some employers offer.
- Life insurance: Name your partner as the beneficiary to provide financial protection if something happens to you.
- Disability insurance: This can replace a portion of your income if you're unable to work due to illness or injury.
Plan Your Estate
You might think estate planning is just for the wealthy, but it's crucial for unmarried couples. Without a will, your assets will be distributed according to state law, which often favors blood relatives over unmarried partners.
Consider creating:
- A will that clearly outlines your wishes.
- A living trust to avoid probate and provide more control over asset distribution.
- Beneficiary designations on retirement accounts and life insurance policies.
Explore Tax Implications
When it comes to taxes, unmarried couples face a different landscape than their married counterparts. While you might miss out on some benefits, there can also be advantages. Let's break it down:
- Filing Status: As an unmarried couple, you'll each file as single or, if you have dependents, possibly as head of household. This means you can't take advantage of the married filing jointly status, which often results in a lower tax bill.
- Income Thresholds: On the flip side, staying single for tax purposes can be beneficial if you both have high incomes. Married couples sometimes face a "marriage penalty" where their combined income pushes them into a higher tax bracket.
- Deductions and Credits: You cannot both claim the same child as a dependent, but you might alternate years if you're co-parenting. Only one can claim mortgage interest and property tax deductions if you own a home together. Education credits, like the American Opportunity Credit, can only be claimed by one person for each student.
- Gift Tax Considerations: Unmarried couples must be aware of the annual gift tax exclusion (currently $18,000 in 2024) when transferring money between partners. Exceeding this amount could require filing a gift tax return.
- Health Insurance: If one partner covers the other on their employer-provided health insurance, the value of that coverage is often taxable income for the covered partner. Married couples don't face this issue.
- Selling a Home: If you sell your primary residence, each unmarried partner can exclude up to $250,000 of gain, potentially allowing for a $500,000 exclusion — the same as a married couple.
- Retirement Account Contributions: You can't contribute to an IRA for your partner like married couples can. However, this also means you're not limited by a non-working spouse's income regarding Roth IRA contributions.
- Estate Taxes: Unmarried partners can't take advantage of the unlimited marital deduction for estate taxes. However, with proper planning, you can still transfer significant assets to your partner tax-free.
- State Taxes: Remember to consider state taxes, which can vary significantly. Some states recognize domestic partnerships or civil unions, which might affect your state tax situation.
Remember, tax laws are complex and change frequently. Working with a qualified tax professional who can help you find the most advantageous approach for your situation is crucial. They can help you identify opportunities to minimize your tax burden while ensuring you're fully compliant with all relevant laws.
At Five Pine Wealth Management, we work to ensure our clients' financial plans are tax-efficient. We can help you understand the tax implications of your financial decisions and develop strategies to optimize your tax situation as an unmarried couple.
Protect Your Business
Written agreements are crucial if you and your partner run a business together. Consider creating:
- A partnership agreement outlining roles, responsibilities, and profit-sharing.
- Buy-sell agreements in case one partner wants to leave the business.
- Succession plans for what happens to the business if one partner dies or becomes incapacitated.
Take the Next Step Together With Five Pine Wealth Management
Remember Jennifer and David from our opening story? After David’s accident, they realized how unprepared they were. They worked with a financial advisor to create a comprehensive plan that protected them both. Now, they know that they're financially prepared no matter what life throws their way.
Financial planning requires careful consideration and proactive steps for unmarried couples. You can build a secure and prosperous future together by addressing the unique challenges and leveraging the opportunities.
If you and your partner are navigating financial planning without the legal framework of marriage, we’re here to help. At Five Pine Wealth Management, we specialize in helping couples — married or not — build strong financial foundations for their future together. We understand that every relationship is unique, and we're here to help you create a plan that works for you.
Ready to take the next step in securing your financial future together? We'd love to chat. Visit us at Five Pine Wealth Management, call 877.333.1015, or email us at info@fivepinewealth.com.
Remember, love may not need a piece of paper, but your finances might appreciate some documentation. Let's work together to ensure your partnership is emotionally and financially protected.
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Key Takeaways Maxing out your employer match provides an immediate 50-100% return and is the easiest way to accelerate your 401(k) growth. Reaching $1 million in your 401(k) depends more on consistent contributions over time than on being the highest earner or picking winning investments. High earners can potentially contribute up to $70,000 annually through a mega backdoor Roth conversion if their employer plan allows after-tax contributions. Hitting seven figures in your 401(k) might sound like a pipe dream, but it's more achievable than you think. With the right 401(k) investment strategies and a disciplined approach, becoming a 401(k) millionaire is within reach for many mid-career professionals. Let's walk through exactly how you can get there. The Math Behind Becoming a 401(k) Millionaire Before we discuss strategies, let's look at the numbers. Understanding the math helps you see that reaching $1 million isn't about getting lucky — it's about time, consistency, and thoughtful planning. Starting Age Annual Contribution Balance at 65* 30 $15,000 $1.5 million 30 $20,000 $2 million 40 $25,000 $1.3 million *Assumes 7% average annual return Time matters, but it's never too late to build substantial wealth if you're willing to prioritize your retirement savings. 7 Steps to Build Your 401(k) to Seven Figures Now that you understand the math, let's break down the specific strategies that will get you there. Step 1: Max Out Your Employer Match (The Easiest Money You'll Ever Make) If your employer offers a 401(k) match, contributing enough to capture it fully is the absolute first step: it’s free money that provides an immediate 50-100% return on your investment. Let's say your employer matches 50% of your contributions up to 6% of your salary. If you earn $150,000 and contribute $9,000 (6% of your salary), your employer adds $4,500. That's a guaranteed 50% return before your money even hits the market. Not taking full advantage of an employer match is like turning down a raise. Make sure you're contributing at least enough to capture every dollar your employer offers. Step 2: Gradually Increase Your Contribution Rate Once you've secured your employer match, the next step is increasing your personal contribution rate over time. For 2025, the 401(k) contribution limit is $23,500 (or $31,000 if you're 50 or older with catch-up contributions). Here's a practical approach: Every time you get a raise or bonus, direct at least half toward your 401(k). If you get a 4% raise, bump your contribution by 2%. Many plans now offer automatic annual increases. If yours does, set it to increase your contribution by 1-2% annually until you hit the maximum. You'll barely notice the change, but your future self will thank you. Step 3: Master Tax-Advantaged Retirement Accounts Through Strategic Contributions Traditional 401(k) contributions reduce your taxable income now, which is ideal if you're in a high tax bracket today. Roth 401(k) contributions don't reduce current taxes, but withdrawals in retirement are tax-free — valuable if you're earlier in your career or expect a higher income later. A hybrid approach works for many of our clients. Step 4: Optimize Your 401(k) Investment Strategies Your contribution rate matters, but so does what you're investing in. We regularly see clients who contribute aggressively but choose overly conservative investments that don't provide enough growth. Keep costs low . Target-date funds and index funds typically offer the lowest expense ratios. Every 0.5% in fees you avoid can add tens of thousands to your retirement balance over 30 years. Rebalance annually . Market movements throw your allocation off balance. Set a reminder once a year to review and rebalance your portfolio back to your target allocation. Avoid the temptation to chase performance . Last year's top-performing fund is rarely this year's winner. Stick with broadly diversified, low-cost options. Step 5: Consider a Mega Backdoor Roth Conversion If you're a high earner who's already maxing out regular 401(k) contributions, a mega backdoor Roth conversion can accelerate your retirement savings. Here's how it works: Some employer plans allow after-tax contributions beyond the standard $23,500 limit. The total contribution limit for 2025 (including employer contributions and after-tax contributions) is $70,000 ($77,500 if you're 50+). If your plan permits, you can make after-tax contributions up to that limit, then immediately convert those contributions to a Roth 401(k) or roll them into a Roth IRA. This gives you tax-free growth on substantially more money than the regular contribution limits allow. Not all plans offer this option, and the rules can be complex. Check with your HR department to see if your plan allows after-tax contributions and in-plan Roth conversions or rollovers. Step 6: Avoid These Common 401(k) Mistakes Even with great 401(k) investment strategies, mistakes can derail your progress toward seven figures. Avoid: Taking loans from your 401(k) . While it might seem convenient, you're robbing yourself of compound growth. The money you borrow stops working for you, and you're paying yourself back with after-tax dollars. Cashing out when changing jobs . Rolling over your 401(k) to your new employer's plan or an IRA allows your money to continue growing tax-deferred. Cashing out triggers taxes and penalties that can set you back years. Panic selling during market downturns . Market volatility is normal. The clients who reach $1 million are those who stay invested through ups and downs, not those who try to time the market. Step 7: Stay Consistent (Even When It's Boring) The path to becoming a 401(k) millionaire isn't exciting (and that’s a good thing!). The most successful savers aren't those who constantly tweak their strategy or chase the latest investment trend. They're the ones who set up automatic contributions, review their allocation once a year, and otherwise leave their 401(k) alone. Let Five Pine Help You Build Your Million-Dollar Plan Reaching $1 million in your 401(k) is absolutely achievable with the right strategy and discipline. Whether you're just starting your career or playing catch-up in your 40s and 50s, the steps remain the same: maximize contributions, optimize your investments, take advantage of tax-advantaged retirement accounts, and stay consistent. At Five Pine Wealth Management , we help clients build comprehensive retirement strategies that go beyond just their 401(k). We can analyze your current contributions, recommend optimal allocation strategies, and help you coordinate your employer plan with other retirement accounts. Want to see what your path to seven figures looks like? We help clients build these roadmaps every day. Email us at info@fivepinewealth.com or give us a call at 877.333.1015. Let's talk about your specific situation. Frequently Asked Questions (FAQs) Q: Should I prioritize maxing out my 401(k) or paying off debt first? A: Start by contributing enough to capture your full employer match — that's an immediate 50-100% return you can't get anywhere else. Beyond that, prioritize high-interest debt (credit cards, personal loans) since those interest rates typically exceed investment returns. Q: Should I stop contributing during market downturns to avoid losses? A: No — continuing to contribute during downturns is actually one of the best strategies for building wealth. When prices are lower, your contributions buy more shares, setting you up for greater gains when the market recovers. Q: I'm 55 with only $300K saved. Is it too late to reach $1 million? A : While reaching exactly $1 million by 65 might be challenging, you can still build substantial wealth. Maxing out contributions, including catch-up ($31,000/year), could get you to $750K-$850K depending on returns. Disclaimer: This is not tax or investment advice. Individuals should consult with a qualified professional for recommendations appropriate to their specific situation.
Key Takeaways Both spouses should understand the family’s finances, even if only one manages them, to prevent confusion or stress during life’s unexpected events. Regular money check-ins, shared account access, and attending financial planning meetings together help couples build confidence and clarity. Partnering with a fiduciary advisor ensures both spouses have support, education, and guidance for comprehensive wealth management and long-term peace of mind. Money is one of the most common sources of stress in relationships. Some couples argue about spending habits, while others quietly hand off all financial responsibilities to one spouse and never revisit the arrangement. At first glance, this setup can feel efficient: one partner pays the bills, manages investments, and handles taxes while the other takes care of different responsibilities. However, there is a risk to this method. If something unexpected happens, the spouse who hasn’t been involved in financial decisions can feel completely lost. Even highly capable, intelligent people often tell us they don’t know where accounts are located, how much income is coming in, or what investments they own. When life throws a curveball, like illness, death, or divorce, that lack of knowledge creates unnecessary anxiety during an already difficult time. The solution is not to necessarily make both partners money managers, but to ensure both understand the big picture. Let’s walk through why this matters, what it looks like in practice, and how you can start today. Financial Planning for Couples Effective financial planning for couples goes beyond having the right investment mix or adequate insurance coverage. It requires both spouses to understand the big picture of their financial life, even if only one manages the day-to-day details. This doesn't mean both partners need to become financial experts. Instead, it means creating transparency and basic literacy that protects your family's financial security regardless of what life throws at you. Here are a few essentials: Regular check-ins : Schedule monthly or quarterly “money talks” where you review accounts, upcoming expenses, and investment performance. This keeps both partners informed. Shared access : Make sure both spouses have login information for bank, investment, and retirement accounts. A secure password manager can help keep things organized. Big-picture clarity : Even if one spouse handles the details, both should know where you stand with assets, liabilities, income, and goals. Think of it as insurance against uncertainty. If one spouse suddenly has to take the reins, they aren’t starting from zero. Couples Money Management Couples' money management doesn’t have to mean “50/50 responsibility for every financial task.” Instead, think about it as defining roles while keeping communication open. Many households operate on a “primary manager” system. One person writes the checks, monitors the accounts, and interacts with financial advisors. That’s perfectly fine, as long as the other spouse has visibility. Problems arise when the "non-manager" is completely shut out. Some practical ways to stay connected: Attend meetings together : Whether it’s with your accountant, attorney, or financial planner, both spouses should be present. Hearing the same information firsthand helps prevent misunderstandings. Document everything : Create a simple household financial binder (digital or physical) that includes account numbers, insurance policies, estate documents, and contact info for professionals you work with. Ask questions : No question is too small. If you don’t understand how an investment works or why you own it, speak up. Practice decision-making together: Involve both partners in financial decisions, even small ones. This builds confidence and familiarity with your financial priorities and decision-making process. Fiduciary Financial Planning: The Professional Partnership Advantage Working with a fiduciary financial advisor creates an additional layer of protection for couples navigating financial planning together. Fiduciary advisors are legally required to act in your best interest, providing objective guidance that supports both partners' financial security. A good fiduciary advisor will insist on meeting with both spouses regularly, ensuring that financial strategies are understood and agreed upon by both partners. They can also provide education and support to help less financially-inclined spouses build confidence and understanding over time. This professional relationship becomes especially valuable during transitions. When one spouse dies or becomes incapacitated, having an advisor who knows both partners and understands the family's complete financial picture provides stability during chaos. Comprehensive Wealth Management Comprehensive wealth management goes beyond investments. It covers cash flow, taxes, estate planning, insurance, and long-term care strategies. For couples, it also means creating contingency plans. What happens if one spouse passes away? Will the survivor know how to access accounts? What if the “financial spouse” faces cognitive decline later in life? Will the other partner have the confidence to step in? These are not fun scenarios to imagine, but planning for them is an act of love. Comprehensive wealth management ensures: Estate documents are in place and up to date (wills, powers of attorney, trusts). Beneficiaries are correct on retirement accounts, insurance, and other assets. Tax planning strategies are understood by both spouses, so surprises don’t derail long-term goals. Cash flow is sustainable even if income sources shift (such as after retirement or the loss of a business owner’s salary). When couples approach wealth management together, they reduce the risk of financial upheaval during life’s transitions. When Life Changes Everything: Rebuilding Financial Confidence After Loss Despite the best preparation, losing a spouse creates emotional and financial challenges that feel overwhelming. If you find yourself suddenly managing finances alone, remember that feeling lost is normal and temporary. Start by taking inventory of your immediate needs. Focus on essential expenses and cash flow first. Most other financial decisions can wait while you process your grief and adjust to your new reality. Don't make significant financial changes immediately. Grief affects judgment, and rushed decisions often create problems later. Give yourself time to understand your new situation before making significant moves. Lean on your professional team. This is exactly when having existing relationships with financial advisors, attorneys, and accountants becomes invaluable. They can provide stability and guidance during an unstable time. Consider working with a counselor who specializes in financial therapy or grief counseling. Processing the emotional aspects of sudden financial responsibility is just as important as understanding the technical details. Taking the Next Step Together If you and your spouse have fallen into the habit of letting one person manage all the finances, it’s not too late to shift. Schedule a money talk this week. Write down your accounts. Ask questions. Set a reminder to attend your next financial planning meeting together. At Five Pine Wealth Management , we can guide couples through these conversations. Whether you’re in the wealth accumulation phase, approaching retirement, or already enjoying it, we help both partners feel equally confident in their financial picture. Don't wait until a crisis forces financial literacy upon you. Call (877.333.1015) or send us an email today at info@fivepinewealth.com to schedule a consultation and start building the financial transparency and security your family deserves. Frequently Asked Questions (FAQs) Q: What if one spouse has no interest in learning about finances? A: Start small and focus on the essentials. Your spouse doesn't need to become a financial expert, but they should know where important documents are located, understand your basic monthly expenses, and know how to contact your financial advisor. Q: How often should we review our finances together if only one person manages them day-to-day? A: Quarterly check-ins work well for most couples. Schedule a regular 30-minute conversation to review your progress toward goals, discuss any major upcoming expenses, and ensure both partners stay informed about your overall financial picture. Q: What's the most important thing for the non-financial spouse to understand first? A: Cash flow and immediate needs. Know where your checking accounts are, how much you typically spend each month, what bills are on autopay, and how to access emergency funds. This knowledge provides immediate stability if they suddenly need to take over financial management.
