Marital Status and Your Finances

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Single, Domestic Partnership, Married, Divorced?

Whether you're married, single, widowed or divorced, your marital status has a considerable impact on your financial picture. Although it may seem that married couples or domestic partners have the upper hand – especially when there are two incomes involved – there is no reason that educators of every marital status cannot take control and make the most of their finances.

If You Are Single …

 Being single has plenty of potential advantages when it comes to your finances. You can make your own spending and saving decisions and identify goals that meet your lifestyle. As a savvy single, you can create the financial future you desire, but you need to have a budget or spending plan so you know where your money is going.

You'll also want to make sure you are on track for a comfortable retirement. Check out your estimated retirement pension benefits at CalSTRS or CalPERS. Learn about 403(b) and 457 plans that can help you supplement your pension benefit and view the video, "Why Participate in a 403(b) or 457 Plan?" You can also learn more about investing, buying your own home and purchasing essential  insurance such as disability coverage to protect your income should you become disabled.

Remember that it is particularly important for singles to make sure their beneficiary designations on retirement plans, 403(b) and 457 plans, and insurance policies are updated. If you want to leave assets to a favorite family member, a charity or friend, you need to have a basic estate plan to make sure your wishes are followed.

Marriage or Domestic Partnership

Whether you’ve been together for two months or 20 years, finances are going to play an outsized role in your life. You may find that dealing with money is one of your biggest challenges, especially if you have different financial personalities. Some people tend to be careful savers, goal-setters and list-makers. Others make money to enjoy life and spend it. They may buy impulsively, ask to borrow money or get themselves into debt. Most people are somewhere in between.

You and your partner need to sit down and discuss money issues. For example:

  • How do you plan to cover household expenses? . If you both have an income, is it 50-50? Prorated by income? Who is responsible for what?
  • What about discretionary money? You should both have some money each month that you can spend without consulting the other. (Major expenses should always be discussed first.)
  • What are your joint plans for retirement? Discuss what your goals are and how to reach them. Understand your CalSTRS and CalPERS pension benefits and learn about 403(b) and 457 plans [link to section]. If your spouse also has a voluntary retirement plan available to him or her, be sure you are both practicing strategic asset allocation.
  • Have you checked your beneficiary designations and created an estate plan? This is especially important if you have remarried, have children from a previous marriage and want to make sure they receive an inheritance.

You'll both find more helpful tips in "Women: Declare Your Financial Independence".

Divorce and Widowhood

When times are good, the thought of facing a divorce or the death of a spouse seems improbable.  Each year educators encounter major life changes  when they become “suddenly single.” One of the biggest challenges they face is re-evaluating their long-term investment strategies to meet their new financial needs and goals.

If you find yourself unexpectedly single, it’s important to take time to cope with the emotional stress brought on by the situation before you tackle financial issues. When you’re ready to re-evaluate your financial situation, the first step is to organize your records and paperwork as you start down the road to a new financial strategy. You’ll likely need to find and review joint tax returns, retirement account records, insurance policies, brokerage and bank account statements, trust documents and your will.

Depending on your stage in life, the money you’ve been saving for retirement might have been earmarked to fulfill your dreams of traveling with your partner or buying a vacation home. Now that you’re single, it’s time to re-examine your long-term goals for retirement, as well as your family’s needs. Some of the most important factors affecting your financial future include the cost of retirement, health care and long-term care, as well as your children’s education. Money you receive from a divorce settlement or life insurance policy could also affect your savings strategy.

Don’t forget to make changes to beneficiary designations of important financial assets, such as your CalSTRS or CalPERS  pension and your 403(b) and/or 457 accounts. These assets are usually transferred directly to the named beneficiary, bypassing probate. So even if you have updated your will, you will need to change the previous beneficiary designations on these accounts.