Is marriage a good investment?


Amanda Hughes and Matthew Self join in holy matrimony on ice in Chicago on Valentine's Day 2002. Although the city picked up the tab, the marriage is still going to cost the couple plenty. See more investing pictures.
Tim Boyle/Getty Images

­T­he thought of marriage generally invokes images of white weddings, little houses with picket fences and driving kids to soccer practice in the family station wagon. But all of these things cost money. Have you ever wondered if marriage is perhaps a bad investment? Or, with tax breaks and the like, could it possibly be a wise investment? Let's look at the costs associated with marriage.

­Since 1990, the average price of a wedding in the United States has nearly doubled. In 2008, the price tag for nuptials reached $28,000 [source: Christian Science Monitor]. This includes everything from the engagement ring to the wedding gown and the honeymoon. But what about all of your new stuff? You're going to need a bigger place to stow all of your wedding presents. A new house sounds good, but they don't come cheap. Even in the midst of a slumping real estate market, the average cost of a new house in the United States in February 2008 was $296,400 [source: U.S. Census].

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­­­Y­ou could actually lose potential revenue through marriage, especially when you kick off your life together with a big wedding. Financial author Jeffrey Strain uses the example of a 25-year-old who chooses to invest $35,000 on an IRA that earns 9 percent annual interest rather than spend that money on a wedding. Instead of incurring a loss of revenue (or worse, entering into debt for the wedding), the person would find $1.26 million waiting for him or her on the other side of age 65 [source: The Street].

And don't forget the kids. In 2006, the U.S. Department of Agriculture estimated that a household in America with a gross average household income of $59,300 could expect to spend $197,700 per child from birth to age 18. The cost leaps to $289,380 per child for households with average incomes of $112,200 [source: USDA].

With all of the costs involved, is it more financially sound to simply stay single? Read about the pros and cons to marriage from an investment standpoint on the next page.

 

The Marriage Penalty

Indian bride Priya Sachdev and groom Vikram Chatwal before their wedding ceremony in New Delhi in February 2006.
Indian bride Priya Sachdev and groom Vikram Chatwal before their wedding ceremony in New Delhi in February 2006.
Manpreet Romana/AFP/Getty Images

­Every culture has a rite that joins a couple together. And in most cases, the role of society is to support marriage as a beneficial institution, rather than discourage it. This is why some Americans find the marriage penalty so questionable.

The marriage penalty -- or marriage tax -- is an unofficial term for a discrepancy that exists between the taxes paid by single and married people who earn the same income. For many Americans, being married means paying more taxes than single people. There doesn't appear to be any solid reason for this. It's more like a Zen approach to collecting taxes: It just is.

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The marriage penalty works like this. Say your spouse and you each make $49,000 of taxable income per year, for a combined total of $98,000. Under the 2007 U.S. tax code, your family falls into the income bracket that's subject to a tax of 25 percent. If you filed jointly, you'd pay $17,354; if you filed married but separately, you'd pay $21,948 [source: IRS]. Filing jointly and separately are the only two options available to married couples; neither person can file as single. This is the sticky part, because if each of you were single, you'd only pay $7,655 on that $49,000 you made in taxable income [source: IRS].

So, for simply being married, you and your spouse must each pay an extra $1,022 (or a combined $2,044) when filing jointly. If you filed separately, you'd each pay $3,319 (or a total of $6,638) out of your household income simply because you're married.

­H&R Block tax advisor Gregory Farino points out that 2007 was a better year for married couples in terms of taxes. Prior to 2003, the marriage penalty applied indiscriminately to all married couples. After 2003, the lower-income 10 and 15 percent tax brackets were given the same taxation whether they were married or single. And Farino also points out that within the cutoffs for income tax brackets, only the amount of taxable income that falls within the higher bracket is taxed at that level. So if the cutoff is $63,701 to be taxed at 25 percent and you made $63,702 in taxable income, only one dollar would be taxed in the higher bracket if you are married and filing jointly.

This, among other factors, indicates that the news isn't all bad for married couples. The U.S. government allows homeowners who sell their houses to keep as much as $250,000 in profit, free of the capital gains tax (a tax on profits). Married couples filing jointly can keep up to $500,000 in profit, tax-free [source: IRS].

Investment company Edward Jones representative Gerry Simon points out that simple math supports marriage as a good investment, too. Saving for retirement, for example, is easier when two people work toward the same goal. "Two people can retire for about 20 percent more than just one person," Simon says. After all, those two people need just one house and can share living expenses.

So if you're looking past the wedding reception and toward your future, the news isn't all bad.

For more information on marriage, investing and related topics, visit the links on the next page.

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More Great Links

Sources

  • Alm, James, et al. "The wedding bell blues: The income tax consequences of legalizing same-sex marriage." Georgia State University, University of Massachusetts and Georgetown University. January 2000. http://aysps.gsu.edu/publications/2000/000101_weddingbellblues.pdf
  • Farino, Gregory. H&R Block tax advisor. Personal interview. March 31, 2008.
  • Lewis, Roy. "The Marriage Penalty." The Motley Fool. 2000. http://www.fool.com/taxes/2000/taxes000519.htm
  • Simon, Gerry. Edward Jones investment representative. Personal interview. March 31, 2008.
  • Smith, Hillary. "Where the Big Borrowers Live." Money Central. http://moneycentral.msn.com/content/Banking/Yourcreditrating/ P120358.asp
  • Strain, Jeffrey. "Want $1 million? Elope." The Street. September 27, 2007. http://biz.yahoo.com/ts/070927/10381595.html?.v=4&.pf=banking-budgeting
  • "2007 Tax Table." U.S. Internal Revenue Service. http://www.irs.gov/pub/irs-pdf/i1040tt.pdf
  • "Delhi Girls Rebel over Dowries." BBC. May 19, 2003. http://news.bbc.co.uk/2/hi/south_asia/3040681.stm
  • "Expenditures by Children on Families, 2006." U.S. Department of Agriculture. April 2007. http://www.cnpp.usda.gov/Publications/CRC/crc2006.pdf
  • "Median and Average Sales Prices of New Homes Sold in the United States." U.S. Census Bureau. 2008. http://www.census.gov/const/uspricemon.pdf
  • "Publication 523: Selling Your Home." U.S. Internal Revenue Service. 2007. http://www.irs.gov/pub/irs-pdf/p523.pdf
  • "The Sound of Wedding Wells May Make the Tax Man Smile." SaveWealth.com. http://www.savewealth.com/news/9905/marriagepenalty.html
  • "The Wedding-Industrial Complex." Christian Science Monitor. June 8, 2007. http://www.csmonitor.com/2007/0608/p08s01-comv.html?page=1
  • "The Wedding Report." Bridal Association of America. 2006. http://www.bridalassociationofamerica.com/Wedding_Statistics/