Around Valentine's Day, a personal finance site's thoughts turn to love.
Well, love and money.
We got to thinking, as we do, about the difference between being single and married ... that is, in dollars.
Currently, singles make up 49% of the American population, and 28% of all households consist of one person—the highest levels of singledom in American history.
According to sociology professor and author Eric Klinenberg, singles are supporting the United States economy through discretionary spending that far exceeds both married couples and parents.
From taxes and house-buying to paying for a wedding, marriage is either the best thing or the worst to ever happen to your finances, depending on whom you ask. And that's aside from the value judgments surrounding any discussion of relationships: "But are you happy?"
There are many factors: the little things (like sharing the cost of utilities), government policy (which changes every few years) and the psychology that makes couples spend differently than singles.
But in whose favor do the chips fall? We matched up the two scenarios, head to head.
The Little Things
When it comes to little, day-to-day expenses, it's obvious that married couples have the edge because they've sliced their basic costs in half: only one cable bill, one rent bill, one utilities bill. There are also less obvious savings, like skills-sharing. A partner who can sew a button or fix a loose doorknob saves money on paying someone to do it for you. These "discounts," of course, also apply to unmarried, cohabiting couples. A point to the marrieds on this one.
According to a Congressional Budget Office analysis, 51% of married couples paid less filing jointly than they would have filing alone as singles, saving an average of $1,300. Interestingly, the more disparate their incomes, the more they saved. Of course, the benefit decreases if you earn a very similar income to your spouse, like 40% of dual-income couples today. At any rate, we'll make that one point in honor of the marrieds. (For more information on marriage and tax brackets, read this.)
But, in favor of the singles: When a combined income pushes you into a higher tax bracket, your permitted IRA contributions don't increase proportionately, meaning that you might be better off operating with a single income. So we'll give everyone who's single a point on this, too.
Married couples in which both members work outside the home can choose between two health care plans, letting them pick the best deals or coverage. They're subject to higher auto insurance payments, too, as auto insurance companies tend to assign less risk to marrieds. (And more choice, less risk means a point for the marrieds.)
Also, singles tend to need larger individual emergency funds than marrieds, as they don't have a partner to help out in the case of a lost job or medical problem.
Another tax consideration is Social Security. MSN Money points out that when it comes time to receiving benefits, a married person can choose to receive benefits based on either her own work record or that of a spouse. While today, one-third of women currently out-earn their husbands, 62% of women over age 62 get benefits based on their husband's careers. Therefore, working women aren't benefitting from the money they contributed over the years—they're receiving the same benefits as if they hadn't worked. While this is very interesting, LearnVest Certified Financial Planner Stephany Kirkpatrick warns that Social Security is a broken system. Since the Social Security system benefits women who didn't work but penalizes those who did (and since it may not be around much longer), we assign no points.
The Legal Responsibility
Right off the bat, marrying someone makes you legally responsible for their financial missteps—you assume equal responsibility for their debt and become a part of lawsuits filed against them. (Granted, the issue of liability in the case of lawsuits is only a serious consideration for high earners in risky positions, like doctors.) In the nine community property states, any personal assets that get mixed up with shared assets are considered community property, so they're shared equally in the case of divorce ... and that includes debts. For that reason, in this category, singles come out ahead (point: singles).
The (Reverse) Transition
This LV reader and her partner combined their finances, but then ... they broke up. Help her figure out what she should do, or share your own stories.
Along with making you responsible for your spouse's debts, marriage also gives you a right to their money. Not just the cash left on the coffee table or the funds in your shared bank account—if your spouse passes away, you automatically inherit his or her assets, unless a will says otherwise. Spouses are also exempt from the estate tax, which takes a piece of large inheritances bequeathed to anyone except a spouse. (To find out more about the estate tax and other estate planning issues, read this.) Additionally, in the case of wrongful death, a surviving spouse can sue the person or organization at fault and collect damages, although permissions and amounts vary by state. Edge: Married couples.
Data has shown that singles, as a whole, spend a disproportionate amount of money on eating out, entertainment and costs such as clothing and gym memberships—basically, the things you value most when you're single. But experts speak of a shift in mindset, where those who were once spenders flip a proverbial switch at the altar, suddenly socking away savings for major expenditures such as houses or children. Suddenly, you're working toward something bigger than yourself, and taking on responsibility accordingly.
One of the most jarring stats we've come across is that while marrieds tend to start saving for retirement as soon as possible, singles postpone saving until their forties. But if that's you, it's important to contemplate what effect delaying can have on your finances. And if the delay in saving is the truly the case, marrieds get a point for this one, too.
If we were to tally the points, singles would rack up two, and "marrieds," five. But remember, this is all relative: The important thing is to remember to do what's right for your finances no matter what your relationship outlook.
A good way to start—whether there's one, two or however many of you? Create a budget in the My Money Center so you know where your money goes.
More From LearnVest
Can a woman's success affect her marriage? It's the Heidi Klum effect.
Keeping your last name? It may cause trouble at the bank. Find out why.
Our reader Carla eloped to save money ... and saved $10,000 in three years, on a $40,000 salary. How she did it.