Cohabiting Couples: What Are The Challenges And Long-Term Financial Implications?
A growing number of people in America are living with their partners without getting hitched. The concept has been dubbed cohabitation. From a financial standpoint, you do get to save a lot when you don't have to maintain two separate homes and pay two sets of bills. But there are long-term implications to the arrangement.
Research has shown that those who cohabited had less wealth compared with those who never lived together with their partners before getting married. The gap in wealth grew significantly for those who cohabited multiple times, according to a study.
How Does Money Management Work In Cohabitation?
Should you combine finances or keep them separate or work out a combination? It could get a bit difficult to manage money and how you'll split expenses. You can always set up a joint account and credit card accounts which will help you track expenses in an efficient way. If one of you has a poor credit score then being added to somebody who has a better credit score will substantially improve yours. Apart from this, the money present in those accounts is always accessible for both you and your partner.
Will You Be Your Partner's Default Beneficiary?
This is an important thing to consider when it comes to couples who have decided to cohabit. You likely won't be each other's default beneficiary and won't be considered family when it comes to claiming health benefits. To counter these problems you must consider updating your wills and checking your health care directives, as per Forbes.
Will You Be A Part Of Your Partner's Employee Benefits?
You won't be eligible for employee benefits such as being on each other's employer health insurance unless you are their domestic partner. Now in this case the federal government levies a tax on the value of the benefits to the partner. Some companies are generous enough to cover these taxes while others don't.
What About The Government Benefits?
The government will not allow you and your partner to file taxes jointly which is sad as it saves most couples a lot of money.
So, Should You Consider Tying The Knot?
There may be loads and loads of financial benefits and if that's the only concern you must go ahead and get married. Having said that, there are lots of other factors that one needs to take into consideration before taking a decision as big as this. But there's one thing to consider that it costs way more if you eventually end up getting divorced. So take your time before you make a decision.
Research Says Couples Who Cohabit Have Less Money Compared To Married Couples
According to US News, two researchers from Iowa State and Kansas State universities studied the wealth gap between married couples and unmarried couples who live together. The study indicated that most of the unmarried couples are millennials and faced significant financial issues. It said that cohabiting couples are worth $26,927 less than married couples who never cohabited. Cassandra Dorius co-author and professor of human development and family studies at Iowa State said that "cohabiting couples are unstable and keep starting over every time."
Researchers also pointed out that instability and lack of legal protections can lead to differences in wealth. The study also showed that even though both married and cohabiting couples do spend money together, they spend it on different things. While married couples spend on more long-term things like houses and cars, cohabiting couples spend on things like furniture and household items. Researchers say that it's time to change our thinking. We need to acknowledge how cohabitation is affecting wealth and start dealing with it,” Dorius said.
"We have to embrace the fact that we are not going back to the days when everyone married at a young age and stayed married. We are in a new world and we need to think about what that means in practical ways."
