Getting hitched has enormous economic impact. While the so-called "marriage penalty" you incur when you file with the IRS is very real, other economic factors work out in your favor. In short, moving from a dating couple to a married couple not only benefits you emotionally, it also benefits you financially.
When you move from filing your taxes separately to filing jointly, you will likely pay more in taxes due to the increase in your income when you tied the knot. The IRS considers you married for the year regardless of the actual date of your wedding -- so taxes are for the entire tax period, not a pro-rated period of the year. The Jobs and Growth Tax Relief Reconciliation Act of 2003 relieved some of this burden, making the first $14,000 taxable at only 10 percent and lowering the tax rates over 15 percent by two points, down to 25, 28 and 33 percent. The top bracket lowered 3.6 points to 35 percent. Your combined income may increase your marginal interest rate, but the sticking point is the hit to your standard deduction, which the 2003 law also tried to ameliorate. The standard deduction for married couples is $9,500, which is precisely double an individual standard deduction. In addition, the IRS tax code changed to allow the first $56,800 of your taxable income to be taxed at 15 percent, again double the income of a single tax payer allowed at that bracket.
When you marry, you typically move in together, if you haven't done so already. This cuts back on your rent or mortgage as well as utilities, as you share them. However, if you used to have roommates, this may not be a large cost savings. On the other hand, sharing food, a car, entertainment expenses and other living costs does add up. What is more subtle is the potential savings in health insurance costs. At your next enrollment period, review the options to see if it's cheaper to maintain your health insurance separately, cover one another or drop one person's coverage and add to your spouse's coverage.
With dual incomes and no kids yet, spend wisely and maximize your savings to ensure you can maintain a healthy lifestyle regardless of what happens in the wider economy. Whether it's a house, a new car, a baby, paying off wedding debt or planning a follow-up to your honeymoon, planning pays off. Identify your goals along three timelines; short, medium and long. Set up a spending plan that enables these goals by spending what you have, not what you hope to have, setting aside funds to reach the financial goals you've defined with your new spouse. Invest in your future, taking advantage of 401(k) matching, for example, even when retirement seems so far away. If both of you work and qualify for 401(k)s, you can effectively double the power of your individual savings and potentially make a much more comfortable retirement nest for yourselves than a single saver could.
Making More Money
One of the more puzzling economic impacts of marriage is the fact that married men earn more than their single counterparts in similar positions. It's not clear why -- more responsible, more productive, perhaps. The answer comes in an economic review of, surprisingly, professional baseball players. With the exhaustive statistics of baseball, it's easy to identify pay for married players as compared to single pros. In addition, economists chose second base, a position whose productivity is easily reviewed, to identify if married men are indeed at an advantage economically. The answer, from the study "Productivity, Wages, and Marriage: The Case of Major League Baseball" produced by the Institute for the Study of Labor, finds that married professional second base players earn 17 to 20 percent more than their single counterparts -- similar job, different wage, with little rationale beyond their married status. The authors suggest that married players may not be more productive, but they are potentially better negotiators.
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