You often hear that tying the knot leads to financial perks. While it’s true that combining households can reduce costs, you don’t need to be legally married to gain many of those savings. And although married people sometimes pay less for car insurance, federal programs frequently reward well-off married couples while imposing financial drawbacks on lower-income pairs.
If you’re low-income, don’t automatically assume that marriage will improve your finances. In reality, it can make money matters tougher until you hit a certain earnings threshold. We see substantial marriage penalties in areas like the Earned Income Tax Credit, SSI and Medicaid qualification, and even survivor benefits. Below we’ll examine how these situations can play out.
Three Situations Where Getting Married May Harm Your Finances
Remarrying Later in Life May Reduce Your Social Security Survivors Benefit
If your former spouse was a high earner and died, remarrying before a certain age can eliminate your survivor benefits — a significant loss for many.
Imagine your late spouse qualified for a $3,627 monthly benefit, while you spent much of your working years providing care and earned very little. Your own benefit would be tiny, but you could claim survivors benefits based on their record.
Depending on when you start claiming, you might receive between 71.5% and 100% of the deceased spouse’s benefit. You’re eligible even if you were divorced at the time of death — as long as your marriage lasted at least 10 years.
But if you fell in love again at 49 and remarried, that survivor benefit could disappear. Even if your new spouse had identical earnings, you’d typically receive only 50% of their benefit until they died.
There is a way to avoid this remarriage penalty: delay marriage. Disabled survivors may remarry from age 50 onward without losing survivor benefits. Others must wait until age 60 to marry without forfeiting those benefits.
Marriage Generally Favors Higher Earners
Beneath the topic of survivor benefits lies a broader reality: higher-income married people are often advantaged by the tax and Social Security systems compared with lower-income singles. Marriage is less common in lower tax brackets for many reasons, one being the net penalties low-income people face when engaging with social safety nets and the federal tax code.
“This huge widow bonus [with survivor benefits] doesn’t make a lot of sense,” said Eugene Steuerle, former Deputy Assistant Secretary of the Treasury and co-founder of the Urban-Brookings Tax Policy Center. “For much of Social Security’s history, single parents who worked paid more Social Security tax and got lower benefits compared to spouses — largely wives — who didn’t have to work because of their spouses’ incomes. They paid less tax, but got the higher benefit. The survivor benefit is a huge bonus for widowers that’s not available to low-income people who are deserving of support.”
Marriage Can Be Life-or-Death for People with Disabilities
For Americans with disabilities, the financial consequences of marriage can be profound. Some cannot work because of their disability, while others must limit earnings to remain eligible for Medicaid, which in many cases provides essential services.
“Medicaid is incredibly important because it covers things that other insurance does not,” said Ayesha Elaine Lewis, Staff Attorney and leadership team member at the Disability Rights Education & Defense Fund. “Medicaid eligibility can mean access to personal attendant care services and other supports, like durable medical equipment that keeps people alive. These are items and services not typically covered under private insurance. They allow people to live inside their community and outside of specialized institutions.”
This issue affects everyone, not just those with disabilities. It’s both a moral imperative to keep people in their homes and a pragmatic one: institutional care often costs more than supporting people within their communities.
SSI Recipients Face Marriage Penalties
Many receive Medicaid as a result of qualifying for SSI. To be eligible for SSI as an individual, monthly income must be very low — the threshold is $1,470. Benefits are reduced based on income, with the maximum individual benefit capping at $914 a month in 2023. Asset limits are strict, too: you can’t hold more than $2,000, making it hard to build an emergency fund.
When you marry, those income and benefit limits do not double. In fact, they effectively decline by about 25%. Whether or not your spouse is disabled, the maximum earnings for a married couple are only $2,460 a month, with a combined maximum benefit of $1,371 a month. That means two disabled people who wed could actually see their total SSI benefits shrink. If one partner isn’t on SSI, their income and assets still count against the disabled spouse’s eligibility — and the asset cap for married couples is a mere $3,000.
Thinking that cohabiting without marriage might solve this isn’t necessarily accurate. The government takes a strict view.
If the Social Security Administration determines you’re living together as if married, even without a legal marriage, it can still apply marriage penalties. If combined household income is too high, that could mean losing access to vital healthcare.
“Even referring to someone publicly as your partner is something many people are afraid of,” Lewis said. “Many people refer to their relationships as ‘roommates’ or ‘landlords’ because there’s a fear if someone tips off the Social Security Administration, they might decide you’re ‘holding yourself out’ as a married couple and apply the penalties.”
Medicaid Buy-In Programs May Help Those Willing to Give Up SSI to Marry
Some people truly cannot work. Others could earn more if not constrained by SSI’s strict income and asset tests.
For those who need Medicaid, a few states — like California and New Jersey — offer Medicaid buy-in programs for people with disabilities. These programs have limits, but they are generally more liberal than SSI. You’ll pay a premium for Medicaid based on income, but that cost may be worth it if it lets you avoid SSI’s marriage-related penalties.
Relocation isn’t an easy option, especially for people on fixed incomes who can’t save beyond $2,000. And having Medicaid coverage doesn’t always mean you can access care: in some places there may be coverage on paper but few providers willing to serve Medicaid patients. Research carefully before making any moves.
The Rules for Disabled Adult Child Benefits Are Both Stricter and More Lenient
If you receive Disabled Adult Child (DAC) benefits, you’re accessing Social Security benefits based on a parent’s record. Depending on your parent’s work history and earnings, your DAC benefit could exceed SSI while preserving Medicaid access.
Those on DAC can often present as married in many social ways: commitment ceremonies, wearing rings, and referring to themselves as “Mrs.” pose no risk from the SSA. Yet a formal legal marriage usually ends DAC benefits permanently, even if a later divorce or widowhood occurs.
“There are few exceptions,” Lewis noted. “You can marry another person receiving DAC. You could also marry someone on SSDI or someone who’s retired and receiving Social Security benefits, but most people in their 20s are not out to marry someone who’s 62 years old. It’s pretty limiting.”
The EITC Marriage Penalty Can Take Thousands from Your Refund
The way the United States treats people with disabilities might be among the starkest examples of marriage penalties, but you don’t need to be disabled for marriage to damage your finances. A major issue for lower- and moderate-income households is the Earned Income Tax Credit (EITC).
Created to replace Aid to Families with Dependent Children (AFDC) after that program was phased out in favor of TANF, the refundable EITC can be worth thousands and often forms a large portion of a lower-income family’s yearly budget.
“It started off to benefit families with children,” Steuerle said. “Single people were largely left out. Later on, they included a childless worker credit at low levels. Few people qualify for it, and it’s not very large. That evolution is creating a number of problems.”
Consider a heterosexual couple with two young kids in 2021 who aren’t yet married but are thinking about it. The mother earns $3,000 a month (about $36,000 per year). The father works part-time to handle more childcare and earns $8,000 a year.
Unmarried, the couple can split filing statuses: one parent claims the children and files as head of household while the other files as single. We’ll assume the mother claims the kids, which Steuerle says is often the default for unmarried couples.
In 2021, the mother’s EITC would be $2,509 and the father’s $534, for a combined $3,043 in credits. If they married, their joint EITC would drop to $1,867 — a loss of $1,176.
Marriage would also raise their initial tax liability by an extra $210 in this example, producing a total marriage-related reduction of $1,386 in federal refund dollars.
“With the EITC, the benefit goes up and then at some point it all of a sudden starts going away,” Steuerle said. “That effort to take it away or to limit its impact to a small group of people is basically like another tax rate structure. It creates all these problems.
“The biggest problem is I think we’ve gone overboard in terms of the impact on marriage penalties and bonuses. I don’t think they’re avoidable altogether, but they certainly don’t need to be as large as they are — or structured the way they are.”
Pittsburgh-based journalist Maren Doyle is the founder of the Femme Frugality blog and author of “The Feminist Financial Handbook.” She is a frequent contributor to Savinly.
