At a glance
- You and your partner should decide how to manage your finances—including debt and retirement savings—together.
- When it comes to retirement, you and your spouse are on the same team—just be sure you’re working toward compatible goals.
Love is patient; love is kind. Money is complicated; money isn’t always easy. Read the tips below for guidance on getting your financial union off to a healthy start.
Don’t let this four-letter word dim a bright future. You have to be honest about your own financial history and current circumstances before you can expect the same transparency from your spouse. Understanding the relationship between marriage and debt can help you make an informed decision about how you want to safeguard yourself, your spouse, and your future.
- Your home state may dictate how spousal debt is handled. In community-property states—Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin—you’re not responsible for any debt incurred before marriage, but you’re jointly responsible for debt incurred by either you or your spouse after marriage.
- In common-law states, you’re not liable for any debt incurred before marriage, and you can usually avoid responsibility for any debt your spouse incurs after marriage, as long as it wasn’t used for joint expenses.
- You can inadvertently take responsibility for your spouse’s premarriage debt if you become a joint owner on an existing account, such as a credit card with an outstanding balance, or if you refinance debt under both of your names.
- Joint accounts are just that—joint. But that doesn’t mean 50/50: If you have $5,000 in a joint bank account, you can legally withdraw all $5,000. Similarly, if you have a $5,000 balance on a joint credit card, you’re legally responsible to pay the entire $5,000 balance. Both spouses are 100% responsible for every joint debt.
- Your credit history (and your credit report) are yours alone. But if your spouse has a negative credit history and you apply for a loan, mortgage, or credit card in both of your names, you may be denied or have to pay a higher interest rate. If you have a joint account, it appears on both of your credit reports—and to potential lenders, it looks no different than an individually owned account.
About 30% of women and 20% of men say they won’t marry a person with a low credit score, according to a survey from FreeCreditScore.com, which polled 1,000 adults.
“Joint ownership can open the floodgate to your better half’s debt, so proceed with caution,” said Chris Wright, a senior financial advisor in Vanguard Personal Advisor Services®. “The decisions you make today can impact your financial future for better or for worse. So if you have questions or need more guidance, don’t hesitate to get help from a financial advisor.”
Agree on an approach
Two hearts, one love. Two financial histories, one financial future? The answer may depend on the extent to which you commingle accounts with your spouse.
“There’s no ‘right way’ to manage your money once you get married,” said Wright. “Whether you share everything, something, or nothing, the most important thing is that both you and your partner support the approach.”
Finding the best approach for managing your money when you’re married may require some trial and error. A recent Money survey reported that 70% of couples argued about money—unnecessary purchases, budgeting, and credit card debt—more than any other topic, so you’re not alone if you don’t have it all figured out before the ink dries on your marriage certificate.
“For many couples, a hybrid approach works best: Pay bills from a joint account and earmark a certain amount to go into separate accounts each month,” Wright said. “Experiment, communicate, and find the approach that works for you.”
Take responsibility for your own retirement
You’re responsible for your own retirement, but you’re also part of a team when you’re married. “Some people view their retirement savings and goals in relation to their total household income, while others look at their individual income. The most important thing is saving for retirement—and factoring the future needs of both spouses into the equation,” said Wright.
Here are some things to consider:
- If you have an opportunity to contribute to an employer-sponsored retirement plan, take it. (The same goes for your spouse.) Save at least enough to take advantage of any employer match (if one is offered), and work your way up from there. “I also encourage investors to consider contributing to a Roth 401(k), if their employer offers it. Just like a Roth IRA, a Roth 401(k) allows you to save after-tax money that can be withdrawn tax-free in retirement,” Wright added.
- Update your beneficiary designations shortly after getting married. Your spouse is the default beneficiary of any employer-sponsored retirement plan, including a 401(k) or pension plan. Your spouse is also the beneficiary of your Social Security benefits (and may eventually qualify to receive spousal Social Security benefits too). But beneficiary designations on other accounts, including IRAs, need to be updated manually.
- If you don’t have your own earned income, you may still be able to contribute to a spousal IRA. The IRA will be yours alone, but you must be married and filing a joint tax return to qualify to make contributions.
All investing is subject to risk, including the possible loss of the money you invest.
We recommend that you consult a tax or financial advisor about your individual situation.