Gay Retirees Face Extra Challenges

Same-sex couples struggle with additional planning and estate tax dilemmas.

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Gay couples headed towards retirement face a double-whammy: First, according to a new study, they are less likely to be financially prepared to stop working compared to members of the general population.

[See Gay Couples Face Extra Financial Challenges]

Second, since most states don’t allow gay couples to marry, they are unable to access tax benefits such as inheriting their partners’ estates tax-free upon death (a problem relevant only to wealthy couples). They are also unable to grant their partners Social Security survivor benefits. That can leave surviving partners in a financial tight spot if the primary earner and asset-owner dies first.

The MetLife Mature Market Institute reports that lesbian, gay, bisexual and transgender baby boomers are less likely to feel financially prepared for retirement than their heterosexual counterparts, with 31 percent saying they are prepared versus 39 percent of the generation population. As a result, almost half of LGBT baby boomers say they don’t expect to retire until they are at least 70. (Just four in ten respondents in the general population say the same.) Members of the LGBT community are also more likely to fear outliving their income (29 versus 26 percent).

[See 2010: Cheapest Year to Die?]

But that doesn’t mean LGBT baby boomers need to resign themselves to a cash-poor retirement. MetLife makes the following recommendations to members of the community:

  • Focus on estate planning. Wills and trusts can help gay couples navigate their unique tax situation.
    • Consider your health. A priority of visitation document can guarantee that your partner, or whomever you consider to be family, will have access to you if you’re hospitalized. A living will can also specify your health care preferences.
      • Review assets. If you have a partner, check whose name appears on which assets, including bank accounts, investment accounts, and homes.
        • Check up on employee benefits. Employers treat same-sex partners in various ways; make sure you know whether yours offers domestic partner benefits, including life insurance and long-term care insurance. Also check to see if your partner can be named the beneficiary of your pension in the event of your death.
        • What about the popular stereotype that gay retirees are wealthier, since they’re less likely to have had kids sucking away their income for the previous 30 years? The MetLife study suggests that’s just a myth, and that any financial benefit of being gay doesn’t outweigh the extra challenges LGBT individuals and couples face.

          For more information, check out the full MetLife report and suggestions.