Though the Defense of Marriage Act, which did not recognize same-sex marriages, was struck down five years ago, many challenges remain for those in the lesbian, gay, bisexual, transgender, and questioning (LGBTQ) community. These challenges create unique factors that must be considered when financial planning such as: decisions around marriage, fear of losing employment or housing, concerns about long-term care costs, and more.
TD Ameritrade published an article in November of 2018 highlighting statistics and planning factors that the community faces. How do you create a financial plan that accounts for these factors? Read below for key considerations to help you get started.
The decision whether or not to get married is a personal one, but your decision will have an impact on your financial life. This impact can filter into many financial planning topics, notably Social Security and taxes. Your financial planner and tax advisor or accountant can help you understand how your specific situation may be affected.
Estate planning can be complex and involves planning for when you pass away, as well as if you become incapacitated and cannot make your own financial or medical decisions. You should have a last will and testament, power of attorney, and health care proxy in place.
In 28 states, there are no laws explicitly protecting people from discrimination on the basis of sexual orientation or gender identity in employment. Possible discrimination in hiring, firing, and wages can make it more difficult for those who identify as LGBTQ to save for retirement. Ideally, you should defer the maximum amount into a tax-deferred employer-sponsored retirement plan or an Individual Retirement Account (IRA). If you are married and do not work, there are provisions allowing you to save for retirement. Your CERTIFIED FINANCIAL PLANNERTM can help you review your options to save most efficiently.
Another factor to consider is your beneficiary designation on your retirement accounts. Many in the LGBTQ community are hesitant to name their partner or spouse as beneficiaries on their accounts if they are not open about their sexual orientation or gender identity in their workplace. In states where there are no protections, the companies may choose not to honor their same sex beneficiary. This overlaps with your estate planning and should be carefully considered with your attorney and financial planner.
Long Term Care
The cost of long term care is a concern for many, especially with people living longer and the rising cost of health care. For those in the LGBTQ community, this concern can be greater if you are unmarried, do not have children, or if you moved away from your relatives or are not close with them. You should weigh the pros and cons of self-insuring versus purchasing long-term care insurance to help with some of these future costs.
Discrimination is also a risk when you apply to a nursing care facility, just as it can be for any housing decision in a state without protections. Choosing where to live is an important factor to consider. SAGE is an advocacy group for LGBT elders that provides resources and assistance in this area.
The considerations outlined here are only some of the unique factors affecting individuals who identify as LGBTQ. It’s important to ensure all factors are considered together in your overall plan. To learn more about how an advisor at Modera can help you put together a full financial plan, please contact us.
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