retirement

The cost of being gay and married

Editor’s note: A key provision of DOMA was struck down June 26, 2013. In a 5-4 ruling, the Supreme Court said “DOMA is unconstitutional as a deprivation of the equal liberty of persons that is protected by the Fifth Amendment.” As a result of this ruling, marriages between gay couples will now be recognized by the federal government. This will allow same-sex married couples access to joint federal benefits such as Social Security and Medicare, as well as the ability to file jointly on their federal taxes. However, for those states that do not recognize same-sex marriage, couples in those states will still need to file state taxes separately.

More than 130,000 same-sex married couples would see many financial disadvantages evaporate if the Supreme Court strikes down the Defense of Marriage Act, or DOMA, this week.

That includes Ron Haislip-Hansberry, who as a stay-at-home parent, was unable to contribute to a Roth individual retirement account because his same-sex marriage isn't recognized by the federal government. It also includes Jude Higdon-Topaz, who paid taxes on health premiums his employer covered for his husband, Chad Higdon-Topaz.

DOMA, which defines marriage as between a man and woman, disqualifies gay couples from tax and Medicare incentives currently offered to straight couples. They also are unable to claim certain Social Security benefits and face certain restrictions with Roth IRAs.

"Unequal," Ron Haislip-Hansberry says. "(We're) unfairly treated."

For the six years Ron Haislip-Hansberry stayed home to care full time for his three small children, his husband, Phillip Haislip-Hansberry, wasn't legally allowed to contribute to a Roth IRA on Ron's behalf. This financial incentive offered to nonworking spouses in straight marriages allows up to $5,000 a year to be placed in an account.

"I had to get a job to earn the minimal requirement to contribute (to my Roth IRA)," says Ron Haislip-Hansberry, who now sells books, baby products and toys online.

The retirement disadvantage

That's not the only difficulty same-sex couples face with retirement planning. Ron Haislip-Hansberry also can't depend on certain Social Security benefits if Phillip Haislip-Hansberry dies before him. The pair could likewise end up paying more in Medicare premiums than a straight married couple because of DOMA's restrictions.

"I don't know if enough same-sex couples are aware of the disparity and how it will affect their retirement," says Ineke Mushovic, executive director of the Movement Advancement Project, a think tank that focuses on advancing gay rights.

The lack of Social Security payments can be costly for gay spouses when their partner dies. For a gay couple earning $100,000 a year, that could be as much as $25,000 a year that the surviving spouse is unable to collect. They also aren't eligible to receive a spouse's retirement benefits.

Social Security benefits

Heterosexual married coupleSame-sex married coupleDifference
Yearly benefits$25,344$0$25,344

This illustrates the difference in Social Security benefits same-sex married couples would receive if one spouse doesn't work and the other makes $100,000. Source: SocialSecurity.gov.

"All workers are required to pay into Social Security. It's not a choice," Mushovic says. "But same-sex workers and their families don't receive the full benefits."

Medicare premiums also can cost same-sex married couples in two ways. First, married straight spouses can delay enrolling in Medicare if they are on their spouse's employer health insurance, which can sometimes be a cheaper option. Same-sex spouses cannot.

Second, Medicare premiums are determined by income as it appears on federal tax returns. Depending on the how the income is split up, joint filers could pay less on premium costs. Same-sex married couples are unable to qualify because they can't legally file their federal taxes jointly.

Medicare premiums

Heterosexual married coupleSame-sex married coupleDifference
Yearly premiums paid to Medicare$2,518$3,022$504

This illustrates the difference paid by same-sex married couples for Medicare premiums if one spouse doesn't work and the other makes $100,000. Source: Medicare.gov.

For instance, a same-sex married couple with one working spouse making $100,000 a year will pay $504 more in yearly Medicare premiums than a straight married couple, according to calculations based on Medicare's Part B premiums. The disparity widens if the working spouse's income increases. If the working gay spouse makes $170,000 a year, the same-sex couple ends up paying around $2,013 more than a straight married couple.

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