Listener Question: How Will Marriage Change My Finances? | Summary and Q&A

TL;DR

Getting married mid-year affects eligibility for Roth IRA contributions; consider contributing to a Roth 401(k) instead. Update legal documents and consider joint ownership for property and accounts.

Key Insights

• 🚕 Marital status for tax purposes is determined by your status on December 31st of a given year, meaning if you are married at that time, you are considered married for the entire year.
• ⛔ Contributions to a Roth IRA have income limits based on filing status, which can restrict eligibility for married filers with combined incomes exceeding the limit.
• ❓ Consider contributing to a Roth 401(k) if your workplace offers it as an alternative to a Roth IRA.
• 👶 Updating legal documents, such as wills and beneficiary forms, is essential when getting married to ensure they reflect your new marital status.
• 😊 Joint ownership of property and accounts may be beneficial for easier financial management, but it's important to weigh the pros and cons and consider personal preferences.
• 👶 Some couples choose to keep their finances separate initially and combine them later, especially when it comes to major financial milestones like buying a house or having a child.
• 💯 Credit scores can impact financial decisions, and combining finances may not be recommended if one spouse has a significantly lower credit score.

Transcript

next question comes from Tina she writes I currently make less than the 117,000 limit for single filers for contributing to a Roth IRA in june i will be giving married hey June bride congratulations and our combined income will exceed the 194,000 limit for married filers since this change happens midway through the year am I allowed to contribute t... Read More

Questions & Answers

Q: Can I contribute to my Roth IRA if my income exceeds the limit after getting married midway through the year?

No, according to IRS rules, your marital status for a particular tax year is determined by your status on December 31st, so if you are married, you are considered married for the entire year. Check if you can contribute to a Roth 401(k) instead.

Q: What recommendations do you have for combining finances when getting married?

Besides updating legal documents like wills and beneficiary forms, consider whether you want to have joint accounts or keep separate accounts. It depends on personal preferences and the pros and cons of each option. Joint accounts can make financial management easier, but there are alternatives like maintaining separate finances until certain milestones, such as having a child.

Q: Are there any downsides to combining finances when one spouse has a bad credit score?

One reason to keep finances separate is if one spouse has a significantly lower credit score. When applying for loans, the spouse with a better credit score can take out the loan to avoid higher interest rates. It's important to have open conversations about credit scores and financial goals.

Q: What are the implications of not updating legal documents and beneficiary forms after getting married?

Failing to update legal documents and beneficiary forms can lead to unintended consequences, such as assets being inherited by previous beneficiaries or not reflecting the current marital status. It is crucial to update these documents to ensure they align with your current wishes and circumstances.

Summary & Key Takeaways

• Getting married midway through the year affects eligibility for Roth IRA contributions.

• Consider contributing to a Roth 401(k) if available at work.

• Update legal documents and consider joint ownership for property and accounts when combining finances.