Valentine’s Day is sort of right here, and marriage is all the craze. In accordance with the Wedding ceremony Report, there will likely be some 2.5 million weddings this 12 months — essentially the most since 1984.
As an economist, I am all for it: Marriage beats partnering long-term. I am no professional on learn how to meet the love of your life; my objective is to just be sure you barter for a partner or companion understanding the financial sources and monetary obligations that you simply every convey to the desk.
Sure, bartering for love sounds heartless, but it surely’s on full show on America’s 1,500 relationship apps and web sites.
Marrying for cash is not a nasty factor
I am not claiming that cash is the one deciding consider pairing up. For many of us, love transcends cash.
However we people have the capability to fall in love with numerous folks. And there isn’t any disgrace in concentrating on your swooning on somebody who can give you a better way of life.
Put it this fashion: If two persons are the identical in most respects, besides one earns twice as a lot as the opposite, do not flip a coin. Go for the upper earner, and sure, marry for cash. You will not be the primary to play the oldest monetary trick within the e-book.
Selecting to marry over partnering long-term could imply considerably greater web taxes, but it surely comes with an array of beneficial implicit insurance coverage preparations, which the formality and legality of marriage assist implement.
On high of short-term monetary advantages of marrying, just like the implicit becoming a member of of sources, there are long-term advantages, as properly.
First, after simply 9 months, you are eligible to gather future widow(er) Social Safety advantages. Plus, after one 12 months of marriage, you and your partner are eligible to gather future spousal advantages. And if you happen to keep married for 10 years, you are eligible for divorced spousal and divorced widow(er) advantages.
However, to be clear, with the way in which Social Safety’s advantages formulation work, the spousal profit will likely be helpful solely to spouses who earn little or no in absolute phrases and in addition earn rather a lot lower than their marital companion.
The widow(er) profit, then again, could be of large worth to the lower-earning partner (or divorced individual), supplied the higher-earning partner (or ex-spouse) dies first.
Marriage may also profit your long-term way of life, albeit to a extremely imperfect and unsure extent, if you happen to’re awarded alimony in divorce.
An estimated 41% of all first marriages will finish in divorce or separation, based on knowledge from California-based law firm Wilkinson & Finkbeiner. Some 60% of second marriages go south, while 73% of third marriages will start with “forever” and end with “sayonara.”
Yet, we all marry convinced we’ll make it. Economists call this phenomenon “irrational expectations” — when people collectively believe in something they know is collectively false.
But wishful thinking about marriage comes at an awful price. Many marriages end in exorbitantly costly divorce war, with children forced to take sides and family ties shredded forever.
Maybe it’s time to reset our idea of marriage from a lifetime partnership to a temporary arrangement that should be celebrated for lasting as long as it does, not lamented for coming apart.
Put a prenup on it
Take the case of hypothetical Sally, who wants her spouse-to-be, Sam, to stay home with the kids while she pursues her lifetime dream of being a contractor. Sally is a go-getter. Her plan is to borrow $1 million, construct and sell a dream house, and use it to showcase her talents.
The problem, from Sam’s perspective, is that fulfilling Sally’s dream means giving up his career. Plus, if they split and the house sells for $500,000, Sam will get stuck with $250,000 in “their” debt.
Moreover, Sally wants to live in Texas, which is far less generous in providing alimony than, say, Massachusetts. So, if Sally’s career takes off, but she takes off with the tile subcontractor, Sam will reap precious little from his investment.
If Sally and Sam marry without resolving this potential conflict, Sam may get cold feet and file for divorce before he co-signs the construction loan. But what if they sign a prenup that assigns, upon divorce, all construction debts to Sally, but provides Sam half the profits if Sally’s company succeeds for, say, 20 years?
This lets Sally take her shot while protecting Sam.
Despite the clear benefit of prenups, not signing one is a huge mistake that many people make. Whatever financial concerns would be addressed in a prenup will inevitably arise once you get married.
It’s far better to negotiate in advance how things will be settled than have one party feel they have, in getting married, lost bargaining power in making financial decisions that could damage them in the context of divorce.
My advice? When you kneel down and propose, take two things out of your pocket – a sparkling diamond ring and a leather-bound prenup, which will surely be worth far more than its weight in gold.
Laurence J. Kotlikoff is an economics professor and the author of “Money Magic: An Economist’s Secrets to More Money, Less Risk, and a Better Life.” He received his Ph.D. in Economics from Harvard University in 1977. His columns have appeared in The New York Times, WSJ, Bloomberg and The Financial Times. In 2014, The Economist named him one of the world’s 25 most influential economists. Follow him on Twitter @Kotlikoff.
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