Mind the Gap(s)! Financial Planning as a LGBTQIA+ Couple

It’s June again, and along with the welcoming of the long summer months, we also can celebrate PRIDE! In the spirit of Pride month, we wanted to take some time to discuss nuances in financial planning for LGBTQIA+ couples. As with many things in our world, much of the investment advice and information out there is catered towards married heterosexual couples, which can ignore and overlook important instances that affect LGBTQ+ couples – especially where money is concerned. Without federal protections ensuring equal rights to those in the LGBTQIA+ community, a majority of states can terminate employment or refuse services based on sexuality, in addition to many other outdated laws still on the books in 2022. All of this has the capacity to interfere with an LGBTQIA+ couple’s pursuit of happiness and financial well-being over the long-term.

Family Planning

Let’s start with family planning. On average, when an LTBTQIA+ couple wants to have a child, it’s most likely going to cost more than their heterosexual counterparts.  Many states don’t cover family planning expenses like surrogacy or IVF in the average health insurance plan, so having a child through these means would be generated completely out-of-pocket. Looking to adopt? While also expensive, there’s the added risk of being turned away from an agency based on biases towards sexual orientation and/or a “non-traditional” family structure. There are even some states that prohibit same-sex couples from fostering kids! Once a child is born, a couple should investigate the legal steps to ensure both parents are equally recognized (if desired).

For LGBTQIA+ couples who don’t plan on having children, there’s a misconception that not having kids equals more money in the bank. Many childless couples splurge more on incidentals, and/or they may have godchildren, nieces and nephews, or other close family members to whom they gift money. It’s still important to understand and track spending to ensure there are funds put away for retirement, whether or not kids are part of the picture.

Workplace Planning

Then there’s the workplace. Generally speaking, job security creates better financial stability. However, for countless LGBTQIA+ adults, stability is not guaranteed. Frequently, workers in the LGBTQIA+ community experience workplace discrimination because of how they identify. Unfortunately, there are no laws at the federal level protecting anyone from being fired for their sexual orientation. These protections, if they exist, are at the state level, and not all 50 states are aligned. In fact, there are 28 states[1] (more than half) where one can be fired based on sexual orientation. Combine that with the “gay pay gap,” and queer people can be shortchanged in all directions.  On average, white LGBTQIA+ workers earn 97 cents to every dollar their heterosexual counterparts make. The numbers go down further when racial intersectionality enters the conversation.  Latinx LGBTQIA+ workers earn 90 cents, and Black LGBTQIA+ workers 80 cents, while Indigenous LGBTQIA+ workers earn about 70 cents to every dollar.[2] These discrepancies in how LGBTQ+ workers are treated in the workforce can and should impact how couples plan financially.  Individuals with job offers should research their new employers thoroughly and have a good understanding of legal rights based on the local laws where one lives and works. Depending on a couple’s situation, there may be a need for additional emergency savings or other protections to cover the gap should job security be in jeopardy.

Retirement & Estate Planning

So how can this level of discrimination impact retirement and estate planning as a whole? LGBTQIA+ couples need to understand their rights and decide together how to position themselves to protect their job, money, spouse or significant other, and family. Pension and social security protections often are only available to married spouses – so unless their union is recognized by the government, couples could lose benefits even if they’ve been together for decades. Another retirement planning obstacle, savings shortfall, is often cited as a result of the AIDS epidemic, as many men who survived the 1980s and 1990s didn’t expect to live much past 60 years old. This mindset made saving for retirement seem less important, and for this generation was often put off until much later in life. It’s important to be aware of the varying marital rights recognized by the state and federal governments, as well as these contextual historical factors, so you know how to plan best for retirement for your relationship and family.

Lastly, LGBTQIA+ individuals should pay special attention to the organization of their estates. If left to probate, the court will be the entity to interpret your wishes and the meaning of “family” for your estate. This is another area to consider specifically if spouses are not married, as taxation and assumed rights are greatly impacted by federal estate rules and protections. Drafting appropriate estate documents, being very clear how your estate should be distributed, and naming specific beneficiaries on accounts in conjunction with your financial plan can help those left behind maintain financial security over the long-term.

Our quick assessment:

• Understand your benefits as they relate to your particular situation before accepting any job
• Know your legal rights – especially state and local laws that could protect you and your partner
• Research each employer you currently work for or plan to work for
• Start saving for your retirement now
• Make sure your wills and other estate documents are up to date and the beneficiaries and legal power of attorney are clear
• Call us with questions, or to help guide you through your retirement plans!

[1] https://www.lgbtmap.org/equality-maps/non_discrimination_laws

[2] https://www.hrc.org/press-releases/human-rights-campaign-foundation-releases-new-data-on-the-lgbtq-wage-gap