Author Topic: The massive income/wealth gap of married vs non-married  (Read 9365 times)

rob in cal

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The massive income/wealth gap of married vs non-married
« on: September 28, 2016, 10:07:17 AM »
   There is a huge gap of income, and I believe assets as well, between married and non-married people.  Some of this might be because among wealthier people marriage is  often an expected social norm , and further down the income/class ladder it is less so.  However, what I'm interested in is the idea that the mere fact of being married makes, or encourages people, by the very fact that they are married, to make different long-term financial/career and lifestyle choices that will lead to a much different  financial future than non-marrieds.
    Personally, I can't say that I would have behaved much different as a saver had I always been single and not having a family to support.  The biggest difference for me might have been our decision to leave the HCOL SF Bay area and buy a much cheaper house in the Sacramento area.  Had I not been married I don't see that as happening. And home ownership has worked well for us, inspiring us to pay the darn thing off, first, and then using the lower monthly living costs afterward to go on a further savings campaign.
  Having children to support also encourages long-term thinking about savings/career choices.  One nice thing about a big nest egg is the ability to help the kids as they navigate college expenses and choices.  Our daughter will likely end up graduating college with little or no college debt.  (our son isn't interested in college right now, he's 16, junior in high school)
   Anyway, I'd like to hear people's experiences of whether getting married had a role or impetus in their financial moves forward, or also, for some people has pushed them backwards financially.

2buttons

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Re: The massive income/wealth gap of married vs non-married
« Reply #1 on: September 28, 2016, 10:13:05 AM »
Definitely was a driver in getting financial house in order. I was a disaster pre-marriage, and once I got married the added pressure of supporting a wife, and eventually kids has pushed me to get out of debt, and build a strong financial position.

tonysemail

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Re: The massive income/wealth gap of married vs non-married
« Reply #2 on: September 28, 2016, 10:17:47 AM »
marriage can be a blessing or a curse, if you consider how many people get divorced.
staying married is highly correlated with education level and income.
Maybe the causality runs the other way?

In my case, marriage did impact one financial choice, which was financially enabling my parents.
With a new family unit to consider, I made the choice to cut them off.
And having kids was the catalyst which brought me to MMM, so that has certainly made a huge difference to me!

Jrr85

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Re: The massive income/wealth gap of married vs non-married
« Reply #3 on: September 28, 2016, 10:19:37 AM »
   There is a huge gap of income, and I believe assets as well, between married and non-married people.  Some of this might be because among wealthier people marriage is  often an expected social norm , and further down the income/class ladder it is less so.  However, what I'm interested in is the idea that the mere fact of being married makes, or encourages people, by the very fact that they are married, to make different long-term financial/career and lifestyle choices that will lead to a much different  financial future than non-marrieds.
    Personally, I can't say that I would have behaved much different as a saver had I always been single and not having a family to support.  The biggest difference for me might have been our decision to leave the HCOL SF Bay area and buy a much cheaper house in the Sacramento area.  Had I not been married I don't see that as happening. And home ownership has worked well for us, inspiring us to pay the darn thing off, first, and then using the lower monthly living costs afterward to go on a further savings campaign.
  Having children to support also encourages long-term thinking about savings/career choices.  One nice thing about a big nest egg is the ability to help the kids as they navigate college expenses and choices.  Our daughter will likely end up graduating college with little or no college debt.  (our son isn't interested in college right now, he's 16, junior in high school)
   Anyway, I'd like to hear people's experiences of whether getting married had a role or impetus in their financial moves forward, or also, for some people has pushed them backwards financially.

I think mainly it is just self-selection.  The type of people that get and stay married will, on average, be more conscientious than the people that don't get or don't stay married.  There are definitely some changes.  You have accountability to somebody else for your spending, so maybe you spend less on frivolous things.  You also have concern for somebody else that may drive you to be more responsible.  On the flip side, you are also more likely to get in a keep up with the Jones's mindset, especially when kids come along.  Although you may end up with two incomes, you also may not be able to max out your career, either because of responsibilities at home or the inability to relocate because of a spouse's job.  I think all in all, the net effect is still positive on income and wealth building, but I'm not sure it is as big of a deal as the self-selection. 

FIRE Artist

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Re: The massive income/wealth gap of married vs non-married
« Reply #4 on: September 28, 2016, 10:36:00 AM »
Is it really just being married, or is it being in a double income family unit that is important?  I am not sure how being married to a partner who does not work would help one's financial situation per se.  I guess if you live somewhere that allows you to put a spouse as an income tax deduction, or do income splitting that might help. 

As a SINK, I pay the highest amount of tax, and get the lowest in return of benefits from the government.  I also don't get to double up on things like health insurance which would eliminate personal deductibles, offset half of my expenses on a partner's income etc. so in relation to my married peers, I am at a disadvantage. 

I don't think it has to do with level of financial responsibility per se. 

Dancing Fool

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Re: The massive income/wealth gap of married vs non-married
« Reply #5 on: September 28, 2016, 10:37:29 AM »
I think like others have said, there's too strong a selection bias in getting / staying married to draw too much inference on marriage being a cause of those things. Especially given that money fights are often cited as a cause of divorce (and anecdotally, the cause of a broken engagement in my past).

Also second what FIRE artist said about double income family units. Tons of economies of scale there.

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Re: The massive income/wealth gap of married vs non-married
« Reply #6 on: September 28, 2016, 10:49:29 AM »
I think most of the massive gap is due to selection bias and economies of scale; however, in my own case, marriage has helped increase our household wealth.  My husband is a spender.  If he has money, he spends it.  He doesn't do it consciously; he just doesn't pay attention.  I'm, obviously, the saver, and I hold my husband accountable and (mostly) to a budget.  Because I have gained control of his income as well as my own, my savings rate in terms of dollars (not so much %) has gone up.  I think you find that sort of balancing act in a lot of marriages

englishteacheralex

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Re: The massive income/wealth gap of married vs non-married
« Reply #7 on: September 28, 2016, 10:56:55 AM »
Can only speak anecdotally, but three years of marriage has transformed my finances significantly for the better. I was always Mustachian, but I didn't ever make enough money to accumulate a big net worth. That was always fine with me because I love my job and don't want to retire early (I'll probably keep teaching until I physically can't). But I had so many things I wanted to try investing in and just not enough money to do so.

I married a fellow Mustachian and things started to take off like crazy. One great thing is that I now have a person with a second skill set in the mix. My husband does a lot of DIY home/car maintenance that I found intimidating and would always just pay someone for back when I was single. My ancient cars cost me a lot less money to keep up now. And as for him, he ate out too much because cooking wasn't his forte. Whereas now we almost never eat out.

We've gone from around a 30k net worth to about a 140k net worth in the last three years. And that's with having a kid before our first anniversary. And donating 15-20% of our income.

I should mention that my husband makes almost double what I do, and as a federal employee has some pretty sweet benefits.  That doesn't hurt.


DA

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Re: The massive income/wealth gap of married vs non-married
« Reply #8 on: September 28, 2016, 11:28:33 AM »
There is good evidence that higher-income (and presumably higher-wealth, though these are used as synonyms far too often) individuals are much more likely to marry, and much less likely to have children out of wedlock, than their lower-class counterparts.  Charles Murray's excellent book "Coming Apart" details this and many other emerging differences between the classes in the U.S.

Anecdotally, I think the act of getting married changes individuals' consumption patterns over time in ways that make them more prone to saving and investing more.  Some have already mentioned children and the impetus they have on increased saving (though notice the middle/upper middle class assumption of marriage and children being inseparable).  There is also the fact that single people spend a lot of money trying to attract others.  In many cases they are overspending, but nonetheless, maximizing your attractiveness is generally not compatible with maximizing your wealth (unless your "play" is that you're a wealthy guy, but even then, you're not attractive until you're wealthy, and the attraction isn't really to you so much as your money).  At least from the male's point of view, being a frumpy miser who rides his bike everywhere is not the best way to get laid.  When MMM (rightfully) makes fun of people with tricked out cars, he's ignoring the fact that maybe the guy with fancy jeep is able to cultivate a "badass" aura that gets him lots of women, and maybe that's worth delaying retirement for, especially in your 20's.  But then again, maybe it's not. 

MrsPete

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Re: The massive income/wealth gap of married vs non-married
« Reply #9 on: September 28, 2016, 12:38:52 PM »
My daughter, who's about to be married, and I have talked about this recently:  Two people can live together more economically than two singles -- rent/mortgage, utilities, and some other costs are the same no matter how many people share. 

I don't think anyone mentioned this, but being married is cheaper than dating.  No, it doesn't have to be that way, but it usually is.  Dating usually entails going out, dressing nicely, etc. -- things that cost. 

And, yes, I do think the mindset changes when you're married.  You think long-term.  You think about investments and a home in which you'll have your children and retire.  Though it's crazy in this day and age, women often still have the mindset "It's okay to spend frivolously on clothes and going out while I'm young, and once I have a husband, he will handle the investment stuff." 


Playing with Fire UK

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Re: The massive income/wealth gap of married vs non-married
« Reply #10 on: September 28, 2016, 01:21:36 PM »
In terms of wealth; I think that time is a bigger issue.

More 30 somethings are married than 20 somethings and most people earn more at 30 than they do at 20.

In terms of spending patterns, I think cohabitation or having children has a bigger impact than being married (obviously these are correlated).

The biggest single change in my/our disposable income was when SO and I moved in together. We went from two households to one and the costs fell significantly. Getting married had a negligible effect on our wealth and if it's changed my outlook it's been too subtle for me to notice.

Jack

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Re: The massive income/wealth gap of married vs non-married
« Reply #11 on: September 28, 2016, 01:36:25 PM »
My daughter, who's about to be married, and I have talked about this recently:  Two people can live together more economically than two singles -- rent/mortgage, utilities, and some other costs are the same no matter how many people share.

The biggest single change in my/our disposable income was when SO and I moved in together. We went from two households to one and the costs fell significantly. Getting married had a negligible effect on our wealth and if it's changed my outlook it's been too subtle for me to notice.

It isn't just hard costs, either. It's also about efficiency in terms of time and division of labor. A married couple has half as many chores per capita as two single people. More time to make dinner or cut the grass means lower likelihood of paying to eat out or hire a lawn service instead. Moving things like furniture and appliances is easier with two people, whereas a single person might have to call for paid help. Having your spouse drop you off at the airport for a business trip can be cheaper than taking transit or a taxi (let alone actually resorting to parking there). Etc.

Clearly, some of this benefit can also be gained by having roommates. However, roommates feel less of an obligation to work together than people in a "domestic partnership" do (as implied by the term itself, even).

scantee

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Re: The massive income/wealth gap of married vs non-married
« Reply #12 on: September 28, 2016, 01:38:17 PM »
Economies of scale and the rise of dual income families are likely much bigger drivers of faster wealth accumulation among marrieds than unmarrieds rather than marriage status itself. It's simply more efficient to share living expenses and household duties with another able-bodied adult than it is to go it alone. Add in that many modern married couples are bringing in two full-time incomes and society begins to have an almost uber upper middle-class of people who are able to accumulate wealth pretty quickly even with average incomes and savings rates. I suspect that partnered but not married couples with similar household incomes are able to accumulate wealth at a similar rate.

Gin1984

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Re: The massive income/wealth gap of married vs non-married
« Reply #13 on: September 28, 2016, 01:51:47 PM »
There is good evidence that higher-income (and presumably higher-wealth, though these are used as synonyms far too often) individuals are much more likely to marry, and much less likely to have children out of wedlock, than their lower-class counterparts.  Charles Murray's excellent book "Coming Apart" details this and many other emerging differences between the classes in the U.S.

Anecdotally, I think the act of getting married changes individuals' consumption patterns over time in ways that make them more prone to saving and investing more.  Some have already mentioned children and the impetus they have on increased saving (though notice the middle/upper middle class assumption of marriage and children being inseparable).  There is also the fact that single people spend a lot of money trying to attract others.  In many cases they are overspending, but nonetheless, maximizing your attractiveness is generally not compatible with maximizing your wealth (unless your "play" is that you're a wealthy guy, but even then, you're not attractive until you're wealthy, and the attraction isn't really to you so much as your money).  At least from the male's point of view, being a frumpy miser who rides his bike everywhere is not the best way to get laid.  When MMM (rightfully) makes fun of people with tricked out cars, he's ignoring the fact that maybe the guy with fancy jeep is able to cultivate a "badass" aura that gets him lots of women, and maybe that's worth delaying retirement for, especially in your 20's.  But then again, maybe it's not.
Murray is not someone I would cite when he is used in psychology classes as an example of bias screwing the results of research.

Vilgan

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Re: The massive income/wealth gap of married vs non-married
« Reply #14 on: September 28, 2016, 01:53:33 PM »
As a SINK, I pay the highest amount of tax, and get the lowest in return of benefits from the government.

SINK pays way less tax than DINK with about the same amount of benefit...

Marriage tax blows, I wish they would just let married people file as single if they desired.

caracarn

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Re: The massive income/wealth gap of married vs non-married
« Reply #15 on: September 28, 2016, 02:00:55 PM »
In my case I do not feel that being single would have changed my mindset on finances.  Certainly the costs are less for the shared expenses being married, but my desire to pay as little as possible for what I need has been something in my DNA since I earned my first penny.

DA

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Re: The massive income/wealth gap of married vs non-married
« Reply #16 on: September 28, 2016, 02:09:19 PM »
Quote
Murray is not someone I would cite when he is used in psychology classes as an example of bias screwing the results of research.

Murray was vilified for being politically incorrect.  Murray's book "The Bell Curve," written with Harvard psychologist (Richard Herrnstein) focused on how the analytical ability measured by IQ is a lot more valuable in the modern world, and how the population is segregating based on IQ in a way that it previously had not.  The controversial part of the book--and it was only one part of the book--was that it reported what decades of data have continuously shown, that races as a group show differences in IQ.  Here's a quote from the book: 

"If the reader is now convinced that either the genetic or environmental explanation has won out to the exclusion of the other, we have not done a sufficiently good job of presenting one side or the other. It seems highly likely to us that both genes and the environment have something to do with racial differences. What might the mix be? We are resolutely agnostic on that issue; as far as we can determine, the evidence does not justify an estimate."

Do those strike you as the words of a dangerously-biased researcher? 

Due to the controversy surrounding the book, the APA put together a task force to study it and the result was the publication of "Intelligence: Knowns and Unknowns" American Psychologist. 51 (2): 77–101.  You can find this online.  This report mostly confirmed Murray & Herrnstein's findings, but did not believe that genetics could explain racial differences in IQ (though it admitted those difference exist and must be due to other factors).  There have been scholars who have criticized The Bell Curve's statistical methodology, but there is nothing so egregiously wrong with The Bell Curve to merit the vilification that Murray received.  And no one seriously contests that IQ is associated with life outcomes, and that there are group differences in IQ.  The witch hunt was politics, plain and simple.   

DA

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Re: The massive income/wealth gap of married vs non-married
« Reply #17 on: September 28, 2016, 02:18:15 PM »
As a SINK, I pay the highest amount of tax, and get the lowest in return of benefits from the government.

SINK pays way less tax than DINK with about the same amount of benefit...

Marriage tax blows, I wish they would just let married people file as single if they desired.

That's not exactly true.  For married couples with similar incomes, there is a "marriage penalty" such that you pay more tax then you would otherwise earn.  But for married couples where there is a low-earning spouse and a high-earning spouse, they usually receive a "marriage bonus" in the form of lower taxes.  The point being that getting married doesn't always raise your taxes relative to single status--it might even lower them. 

The reason for the existence of marriage penalties/bonuses, by the way, are the conflicting goals of (i) progressive tax rates, (ii) equal taxes on equal-income married couples, and (iii) a marriage-neutral tax burden.  See here if you're interested:  http://digitalcommons.law.yale.edu/fss_papers/2291/

Gin1984

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Re: The massive income/wealth gap of married vs non-married
« Reply #18 on: September 28, 2016, 02:24:40 PM »
Quote
Murray is not someone I would cite when he is used in psychology classes as an example of bias screwing the results of research.

Murray was vilified for being politically incorrect.  Murray's book "The Bell Curve," written with Harvard psychologist (Richard Herrnstein) focused on how the analytical ability measured by IQ is a lot more valuable in the modern world, and how the population is segregating based on IQ in a way that it previously had not.  The controversial part of the book--and it was only one part of the book--was that it reported what decades of data have continuously shown, that races as a group show differences in IQ.  Here's a quote from the book: 

"If the reader is now convinced that either the genetic or environmental explanation has won out to the exclusion of the other, we have not done a sufficiently good job of presenting one side or the other. It seems highly likely to us that both genes and the environment have something to do with racial differences. What might the mix be? We are resolutely agnostic on that issue; as far as we can determine, the evidence does not justify an estimate."

Do those strike you as the words of a dangerously-biased researcher? 

Due to the controversy surrounding the book, the APA put together a task force to study it and the result was the publication of "Intelligence: Knowns and Unknowns" American Psychologist. 51 (2): 77–101.  You can find this online.  This report mostly confirmed Murray & Herrnstein's findings, but did not believe that genetics could explain racial differences in IQ (though it admitted those difference exist and must be due to other factors).  There have been scholars who have criticized The Bell Curve's statistical methodology, but there is nothing so egregiously wrong with The Bell Curve to merit the vilification that Murray received.  And no one seriously contests that IQ is associated with life outcomes, and that there are group differences in IQ.  The witch hunt was politics, plain and simple.
Actually I read both, they were required reading for my honors in psychology capstone class.  And those his research was done correctly his bias made him make conclusions that could not be supported by his actual research.  I disagree with you that he was a victim of witch hunt, given that most of us did not even know him prior to our readings and most of us disagreed with his leaps.  It was not just his methodology that was the problem and if you think it was, maybe you need to reread it.

Vilgan

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Re: The massive income/wealth gap of married vs non-married
« Reply #19 on: September 28, 2016, 02:27:27 PM »
As a SINK, I pay the highest amount of tax, and get the lowest in return of benefits from the government.

SINK pays way less tax than DINK with about the same amount of benefit...

Marriage tax blows, I wish they would just let married people file as single if they desired.

That's not exactly true.  For married couples with similar incomes, there is a "marriage penalty" such that you pay more tax then you would otherwise earn.  But for married couples where there is a low-earning spouse and a high-earning spouse, they usually receive a "marriage bonus" in the form of lower taxes.  The point being that getting married doesn't always raise your taxes relative to single status--it might even lower them. 

The reason for the existence of marriage penalties/bonuses, by the way, are the conflicting goals of (i) progressive tax rates, (ii) equal taxes on equal-income married couples, and (iii) a marriage-neutral tax burden.  See here if you're interested:  http://digitalcommons.law.yale.edu/fss_papers/2291/

Only a marriage bonus w/ significant earnings difference, so I'd call that like 1.5INK or something. True double income no kids (aka 2x the same same income of single) is pretty much always a marriage penalty.

SomedayStache

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Re: The massive income/wealth gap of married vs non-married
« Reply #20 on: September 28, 2016, 02:37:41 PM »
Interesting convo to follow.  In my case I would have FAR more money as a non-married single engineer.   Instead I'm the single income earner for a family of five...but I'll take the hit and be glad for the life!

Jrr85

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Re: The massive income/wealth gap of married vs non-married
« Reply #21 on: September 28, 2016, 02:39:37 PM »
Quote
Murray is not someone I would cite when he is used in psychology classes as an example of bias screwing the results of research.

Murray was vilified for being politically incorrect. Murray's book "The Bell Curve," written with Harvard psychologist (Richard Herrnstein) focused on how the analytical ability measured by IQ is a lot more valuable in the modern world, and how the population is segregating based on IQ in a way that it previously had not.  The controversial part of the book--and it was only one part of the book--was that it reported what decades of data have continuously shown, that races as a group show differences in IQ.  Here's a quote from the book: 

"If the reader is now convinced that either the genetic or environmental explanation has won out to the exclusion of the other, we have not done a sufficiently good job of presenting one side or the other. It seems highly likely to us that both genes and the environment have something to do with racial differences. What might the mix be? We are resolutely agnostic on that issue; as far as we can determine, the evidence does not justify an estimate."

Do those strike you as the words of a dangerously-biased researcher? 

Due to the controversy surrounding the book, the APA put together a task force to study it and the result was the publication of "Intelligence: Knowns and Unknowns" American Psychologist. 51 (2): 77–101.  You can find this online.  This report mostly confirmed Murray & Herrnstein's findings, but did not believe that genetics could explain racial differences in IQ (though it admitted those difference exist and must be due to other factors).  There have been scholars who have criticized The Bell Curve's statistical methodology, but there is nothing so egregiously wrong with The Bell Curve to merit the vilification that Murray received.  And no one seriously contests that IQ is associated with life outcomes, and that there are group differences in IQ.  The witch hunt was politics, plain and simple.

Murray wasn't even vilified for being politically incorrect.  He was vilified for publishing solid research that might be used by politically incorrect people to support their politically incorrect views. 

If you actually read the bell curve, it's pretty clear that they were well aware of how touchy that one part of the book was and as shown in the provision you quoted, went out of their way to stress that their research was not sufficient to provide even a guess as to what role genetics play in intelligence.  They probably naively thought presenting their fellow academics would not tar them as racists simply for producing facts, especially when the facts to not dictate any conclusions with respect to genetics and intelligence, but they obviously gave their academic colleagues way, way too much credit. 

CheapskateWife

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Re: The massive income/wealth gap of married vs non-married
« Reply #22 on: September 28, 2016, 02:53:30 PM »
The flaw in your premise is that any chosen spouse would be equal in earnings power, spending habits, sanity, health needs etc. thus increasing to a massive gap going from SINK to DINK. 

Life is simply just not that simple.  My first husband and I survived on a single income (mine).  He was not a benefit to me, nor did his presence create an income/wealth gap.  Harsh but true.  He is the ex.

My DH is equal to me in earnings, but not spending or health needs.  Sometimes he needs to spend more than I would like, sometimes I have a project I'd like to invest in that he finds little value in.  Its all very fluid.  Thankfully, we are more together than we would be apart, but not every marriage works like this.

scantee

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Re: The massive income/wealth gap of married vs non-married
« Reply #23 on: September 28, 2016, 03:34:45 PM »
Quote
Life is simply just not that simple.  My first husband and I survived on a single income (mine).  He was not a benefit to me, nor did his presence create an income/wealth gap.

Good point. That wealth on average greater for all married people doesn't tell you much about whether it is good for any individual married person. I think in marriages where one person is a spender and one a saver, the saver is often better off single.

My parents are a good example of this. Mom's a frugal saver, Dad and unrepentant spendthrift. They divorced when I was five and neither remarried. On paper, they were both worse off after the divorce. Two households to support, each with one income. But after many years it became clear the split was definitely the best financial move for my Mom. She got to be her frugal self without the burden of my father's spending habits and she retired comfortably on her teacher's pension in her early sixties. My father is penniless even though he went through a decade of being an extremely high earner. With even the tiniest bit of restraint he could have retired early a very wealthy man, but he pissed it all away on useless things. Had he and my mom stayed married I strongly suspect that he would have spent all of the money and they'd both be penniless.

lightmyfire

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Re: The massive income/wealth gap of married vs non-married
« Reply #24 on: September 28, 2016, 03:37:11 PM »
There is good evidence that higher-income (and presumably higher-wealth, though these are used as synonyms far too often) individuals are much more likely to marry, and much less likely to have children out of wedlock, than their lower-class counterparts.  Charles Murray's excellent book "Coming Apart" details this and many other emerging differences between the classes in the U.S.

Anecdotally, I think the act of getting married changes individuals' consumption patterns over time in ways that make them more prone to saving and investing more.  Some have already mentioned children and the impetus they have on increased saving (though notice the middle/upper middle class assumption of marriage and children being inseparable).  There is also the fact that single people spend a lot of money trying to attract others.  In many cases they are overspending, but nonetheless, maximizing your attractiveness is generally not compatible with maximizing your wealth (unless your "play" is that you're a wealthy guy, but even then, you're not attractive until you're wealthy, and the attraction isn't really to you so much as your money).  At least from the male's point of view, being a frumpy miser who rides his bike everywhere is not the best way to get laid.  When MMM (rightfully) makes fun of people with tricked out cars, he's ignoring the fact that maybe the guy with fancy jeep is able to cultivate a "badass" aura that gets him lots of women, and maybe that's worth delaying retirement for, especially in your 20's.  But then again, maybe it's not.

Where do I find one of these frumpy bike-riding misers?? All I can find are the fancy jeep guys, which is why I'm still single.

FIRE Artist

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Re: The massive income/wealth gap of married vs non-married
« Reply #25 on: September 28, 2016, 03:49:32 PM »
As a SINK, I pay the highest amount of tax, and get the lowest in return of benefits from the government.

SINK pays way less tax than DINK with about the same amount of benefit...

Marriage tax blows, I wish they would just let married people file as single if they desired.

In Canada married couples can file separately, that sucks if you can't in the US.  The new government has just abolished the income splitting tax advantage for married couples, sucks for the married folks that got it, but that made me happy actually. 
« Last Edit: September 28, 2016, 03:53:03 PM by FIRE Artist »

Paul der Krake

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Re: The massive income/wealth gap of married vs non-married
« Reply #26 on: September 28, 2016, 04:14:04 PM »
The federal income tax penalty is one thing, and there's also the extra flexibility afforded to high earners by the fact that Social Security contributions top out at 118k/year. It's much better to have, say, spouse 1 make 160k and spouse 2 make 40k rather than 100k each.

I have out-earned my spouse by a factor of about 2.5-3 for a couple years now. After tying the knot, tax season has become a second Christmas.

But by far my favorite non-emotional perk is being able to treat all of our affairs as one unit and make decisions for the household instead of our individual selves.

MrsPete

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Re: The massive income/wealth gap of married vs non-married
« Reply #27 on: September 28, 2016, 04:14:49 PM »
It isn't just hard costs, either. It's also about efficiency in terms of time and division of labor. A married couple has half as many chores per capita as two single people. More time to make dinner or cut the grass means lower likelihood of paying to eat out or hire a lawn service instead. Moving things like furniture and appliances is easier with two people, whereas a single person might have to call for paid help. Having your spouse drop you off at the airport for a business trip can be cheaper than taking transit or a taxi (let alone actually resorting to parking there). Etc.

Clearly, some of this benefit can also be gained by having roommates. However, roommates feel less of an obligation to work together than people in a "domestic partnership" do (as implied by the term itself, even).
Very good point.  Expanding upon it, a spouse potentially doubles the skill set in the household. 

The flaw in your premise is that any chosen spouse would be equal in earnings power, spending habits, sanity, health needs etc. thus increasing to a massive gap going from SINK to DINK. 
A good reason to choose carefully. 

Things may change, of course.  For example, when we married, my husband and I were equal in terms of health needs, but now he has some special needs -- that's where the commitment part comes into play. 



BlueHouse

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Re: The massive income/wealth gap of married vs non-married
« Reply #28 on: September 28, 2016, 04:22:41 PM »
Is it really just being married, or is it being in a double income family unit that is important?  I am not sure how being married to a partner who does not work would help one's financial situation per se.  I guess if you live somewhere that allows you to put a spouse as an income tax deduction, or do income splitting that might help. 

As a SINK, I pay the highest amount of tax, and get the lowest in return of benefits from the government.  I also don't get to double up on things like health insurance which would eliminate personal deductibles, offset half of my expenses on a partner's income etc. so in relation to my married peers, I am at a disadvantage. 

I don't think it has to do with level of financial responsibility per se.

+1000

I'm single and I do not halve my living expenses by shacking up with someone else.  I don't get to share retirement, SS or health benefits, and as a childless person, I don't have the security to know that someone will look out for me when I get old and get dementia.  Instead, I'm convinced the only way to make sure I'm not warehoused in some insane asylum, wheeled into a closet for 8 hours a day, sitting in a dirty diaper and eating cat food, is to save enough money to pay a stranger to be caretaker. So I'm not exactly free-wheeling it, thinking I have no responsibilities. 

kite

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Re: The massive income/wealth gap of married vs non-married
« Reply #29 on: September 28, 2016, 04:51:32 PM »
Some of the gap in income & wealth is a function of age.  The dirty little secret of the wealth gap is age. The average boomer household is loaded.  The average millenial is on a boomer's couch.  And older folks tend to be married.  Younger tend not to be married, seeing mostly risks and little or no reward, what with the stigma of shacking up and having sex and even babies outside of marriage having been obliterated.
But....
Here's what you don't grasp fully unless or until it happens to you:  marriage protects the weaker partner.  You might know which one you are today.  But you don't know which one you'll be tomorrow or 10, 15 or 30 years from now.. 
A case study of my own marriage would show a hard worker, 2 full time job working stiff who fell for a work part time, school part time, idealist with an itch to travel and have all the finer things.  Yes, it was saver (him) and lover of luxury (me).  We married.  Eventually, he became disabled. 30 years after promising forever, I now out earn him by something north of 50:1.  There is no crystal ball.  If we had not married, I'd have zero obligation to take care of him.  He'd be the government's problem and a pauper.  My personal networth right now could be higher.  But 25 years ago, it looked like it tilted the other direction.  It seemed like he'd have been Mr. Success and I was just along for the ride. 
The fact that I have someone dependent upon me does make me work harder to provide.  There are economies of scale, a balance of temperaments and a complementary skill set in the home, all of which make us richer, not just in dollars but definitely in those, too, in our case. 

OT: regarding Murray's research about racial differences in IQ scores, don't draw the wrong conclusion.  IQ tests themselves are biased.  IQ is only one measure and it is suggestive of something the way that BMI is suggestive.  By itself it means little. 

 

Iplawyer

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Re: The massive income/wealth gap of married vs non-married
« Reply #30 on: September 28, 2016, 05:01:14 PM »
I know you are wrong about paying the highest amount of tax.  My husband and I both make enough money that we pay a marriage penalty and would pay MUCH LESS federal tax if we were single.  And you have to pay for two insurance policies to "double up" as you put it - and even then it doesn't eliminate the deductible - but even if it did - the offset in paying for two policies would wipe that benefit out.  The only advantage I see is that you can save money living together in one house - but of course you don't have to be married for that.

Is it really just being married, or is it being in a double income family unit that is important?  I am not sure how being married to a partner who does not work would help one's financial situation per se.  I guess if you live somewhere that allows you to put a spouse as an income tax deduction, or do income splitting that might help. 

As a SINK, I pay the highest amount of tax, and get the lowest in return of benefits from the government.  I also don't get to double up on things like health insurance which would eliminate personal deductibles, offset half of my expenses on a partner's income etc. so in relation to my married peers, I am at a disadvantage. 

I don't think it has to do with level of financial responsibility per se.

DA

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Re: The massive income/wealth gap of married vs non-married
« Reply #31 on: September 28, 2016, 05:53:13 PM »

OT: regarding Murray's research about racial differences in IQ scores, don't draw the wrong conclusion.  IQ tests themselves are biased.  IQ is only one measure and it is suggestive of something the way that BMI is suggestive.  By itself it means little.

It was never my intention to make this a discussion about Charles Murray or IQ, but people keep chiming in.  Yes, IQ tests are biased in favor of people who have a high analytical intelligence—because that is what they are meant to measure.  Here's what the APA task force had to say about bias in IQ testing:

"The differential between the mean intelligence test scores of Blacks and Whites (about one standard deviation, although it may be diminishing) does not result from any obvious biases in test construction and administration, nor does it simply reflect differences in socio-economic status."

The task force also found that:  "IQ scores have high predictive validity for individual differences in school achievement. . . . IQ scores have predictive validity for adult occupational status, even when variables such as education and family background have been statistically controlled."

I don't think these findings should have any effect on the way you live your day-to-day lives.  And obviously there's more to life than being really good at logic puzzles.  But just because a fact is unpleasant doesn't make it false.

Undecided

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Re: The massive income/wealth gap of married vs non-married
« Reply #32 on: September 28, 2016, 05:58:26 PM »
Is it really just being married, or is it being in a double income family unit that is important?  I am not sure how being married to a partner who does not work would help one's financial situation per se. 

Apparently having been transported here from the 1950s, I stick it out in my well-paid job because it is great for my wife and our kids (it really is, it's not just the money), rather than quitting every couple of years to goof off. I'm just an anecdote.

DA

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Re: The massive income/wealth gap of married vs non-married
« Reply #33 on: September 28, 2016, 06:30:50 PM »
Yes, to undecided's point, having one spouse maintain a high-paying job while the other tends to domestic matters can make high-paying jobs sustainable, such that you earn more with that set up in the long run (relative to burning out after a few years).

Zikoris

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Re: The massive income/wealth gap of married vs non-married
« Reply #34 on: September 28, 2016, 06:36:07 PM »
As far as assets go, I think a good chunk of that probably comes from the fact that married couples are more likely to be able to buy property, which is a fairly effective "forced savings" system. It's a whole lot easier to save up a down payment on dual incomes.

Cathy

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Re: The massive income/wealth gap of married vs non-married
« Reply #35 on: September 28, 2016, 07:15:01 PM »
I've observed in past posts that romantic partnership is the single largest privilege that a prospective early retiree can enjoy, as such a dyadic relationship very easily allows for reaching retirement 3 or more times as fast as a single person could. A partnership can even admit more than two people, which theoretically allows for even faster retirement. To be sure, there are certain risks associated with such joint enterprises (especially for people who profess to like sex), but those risks can be largely mitigated through a carefully-drawn agreement (and I say without irony that I can scarcely imagine anything more romantic than mutually agreeing on a written expression of the principles that will govern your journey to freedom).

That said, if you don't enjoy the privilege of romantic partnership, I don't want to hear any excuses about the difficulty of retiring early as a single person, because the vast majority of couples (and larger-order groupings) -- including the vast majority of posters to this forum -- squander their advantage. By simply turning the level of hardcoreness up a notch, you can easily retire years earlier than the large majority of posters here, even those with privileges you do not enjoy.
« Last Edit: September 28, 2016, 07:42:56 PM by Cathy »

Playing with Fire UK

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Re: The massive income/wealth gap of married vs non-married
« Reply #36 on: September 29, 2016, 12:17:04 AM »
We married.  Eventually, he became disabled. 30 years after promising forever, I now out earn him by something north of 50:1.  There is no crystal ball.  If we had not married, I'd have zero obligation to take care of him.  He'd be the government's problem and a pauper. 

But was a piece of paper (or a promise to your God) saying you were married really make the difference between you staying and walking out?

I totally agree that their are efficiencies for one household with more than one earner, but fail to see how being married has any impact.

Kyle Schuant

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Re: The massive income/wealth gap of married vs non-married
« Reply #37 on: September 29, 2016, 12:52:34 AM »
A friend of mine gives investment advice, he printed out one of the emails this week,

"My fiancee is pregnant and we have a wedding coming up, all booked in. We then have less than five months to the birth of our child, plus a large mortgage that we cannot afford on only one income. Is my bank required to freeze my repayments while my fiancee is on maternity leave? I will be asking them either way, but please set my mind at ease. It is almost worth having her fired otherwise!"

So no, not everyone gets smarter just because they get married - remember, this was someone who was at least asking for advice, most don't. My friend says: about 1/4 of people will never have their financial shit together, however much money and advice and help you give them. Warren Buffet could give them $10 million and meet them weekly to advise them about it, they'd still be broke in 3 months.

Now, I think that since he gives investment advice he's overestimating the proportion, it's more like 1/6. But by the same token, about 1/6 will be alright even if they get no help at all. The other 2/3 are those for whom help will make a big difference. I think this forum attracts those of in the middle 2/3.

DA

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Re: The massive income/wealth gap of married vs non-married
« Reply #38 on: September 29, 2016, 08:32:40 AM »
We married.  Eventually, he became disabled. 30 years after promising forever, I now out earn him by something north of 50:1.  There is no crystal ball.  If we had not married, I'd have zero obligation to take care of him.  He'd be the government's problem and a pauper. 

But was a piece of paper (or a promise to your God) saying you were married really make the difference between you staying and walking out?

I totally agree that their are efficiencies for one household with more than one earner, but fail to see how being married has any impact.

Yes, that's the whole point of marriage.  Obviously people get divorced, but if you were going to high-tail it the minute things went south, you shouldn't have been married in the first place. Brava to Kite for keeping her vows. 

rob in cal

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Re: The massive income/wealth gap of married vs non-married
« Reply #39 on: September 29, 2016, 09:05:07 AM »
  Enjoyable and interesting discussion.  One good test would be to track batches of couples,  in which each make the same income over, say a 10 or 15 year period, one unmarried, one married, both with the same amount of kids, and see if the married couple on average would come out ahead of the unmarried couple.
 I like the visual of the single, very mustachian, very wealthy single guy who has a bike or a beater car attracting all of the mustachian single women who appreciate his financial qualities.
« Last Edit: September 29, 2016, 09:06:54 AM by rob in cal »

FIRE Artist

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Re: The massive income/wealth gap of married vs non-married
« Reply #40 on: September 29, 2016, 09:08:26 AM »
"My fiancee is pregnant and we have a wedding coming up, all booked in. We then have less than five months to the birth of our child, plus a large mortgage that we cannot afford on only one income. Is my bank required to freeze my repayments while my fiancee is on maternity leave? I will be asking them either way, but please set my mind at ease. It is almost worth having her fired otherwise!"

OMG this one should be in the hall of fame.

ketchup

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Re: The massive income/wealth gap of married vs non-married
« Reply #41 on: September 29, 2016, 09:51:42 AM »
I like the visual of the single, very mustachian, very wealthy single guy who has a bike or a beater car attracting all of the mustachian single women who appreciate his financial qualities.
I like that too.  If I was single, I definitely wouldn't want a flashy house/car/lifestyle of any sort because it would attract the kind of person that wants a flashy lifestyle...

One other advantage apart from the obvious that a Mustachian couple has over a single person (especially younger and with non-ridiculous earning power) is more tolerance for error/experimentation.  My GF's business had a bit of a rocky start years ago before it took off, and she might have had to go back to her day job there if she had been single.  Now she's on track to make more than me this year, and self-employed doing what she loves.

Wexler

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Re: The massive income/wealth gap of married vs non-married
« Reply #42 on: September 29, 2016, 10:36:25 AM »
Good discussion! These replies (Charles Murray citations aside) are very interesting.  I read this today:

http://www.vox.com/first-person/2016/9/29/12941348/homeless-over-50-statistic

about a former NPR manager who is homeless in her 60s.  I couldn't quite figure out what happened, until I saw this

Then in my mid-40s, my life slowly started to unravel. I divorced my husband, and three remaining family members who were very dear to me all passed away, shrinking my safety net.

I suspect the divorce was the major contributing factor to her economic insecurity.  Now, that divorce could have been a great idea for her mental and physical safety and totally justified, but divorce can also be very economically risky.  Also, she developed health problems in her 50s. That 1-2 punch probably did her in. 


tonysemail

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Re: The massive income/wealth gap of married vs non-married
« Reply #43 on: September 29, 2016, 10:55:54 AM »
thanks for sharing.  a sad and poignant story of poverty.
I read it to check whether alcohol was involved and my suspicion was confirmed.
her abusive roommate was an alcoholic...somehow, alcohol seems to be involved more often than not.

anyway, my biggest take away from stories like this is how irrational people are.
it's easy for me to ask in my comfy position:
Why is she living on the coast?  one of the most expensive locations to live.
just 1-2 hours away, you can find much cheaper accomodations in central CA.
geographical arbitrage could have stretched those SS checks so much farther.
but I think the answer is that we're all irrational, whether we choose to believe it or not.
we fall victim to fear and make very bad choices and I don't think there's an easy solution to that.

Anyway, back on topic, the spectre of divorce is just one of the ways marriage can harm financial wealth.
As many people can attest, not all spouses come in MMM variety.
Negotiating a compromise on how much to save vs spend can amount to decreasing your savings rate and intentionally allowing lifestyle inflation.
There are also in-laws to consider, sometimes they help and sometimes they hurt.
Other financial downsides include Kids, travel, expensive hobbies, etc.

mbl

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Re: The massive income/wealth gap of married vs non-married
« Reply #44 on: September 29, 2016, 10:57:49 AM »

And, yes, I do think the mindset changes when you're married.  You think long-term.  You think about investments and a home in which you'll have your children and retire.  Though it's crazy in this day and age, women often still have the mindset "It's okay to spend frivolously on clothes and going out while I'm young, and once I have a husband, he will handle the investment stuff."

Wow...really?   Not many of the educated 20 and 30 somethings that I know.
A few of whom I raised myself...just to be specific.

Though they have needed to learn about finances and how to be a good steward and live within one's means, the level of responsibility seems to be something they see as starting with themselves.    The young women I know aren't looking for a guy to take care of them or take over responsibility.   If anything they are the ones who want to be in control.  I think many have been raised to see themselves as capable of living on their own and making responsible fiscal decisions without depending on a SO.

moof

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Re: The massive income/wealth gap of married vs non-married
« Reply #45 on: September 29, 2016, 10:59:30 AM »
In our case marriage was good for both of us both personally and on the wealth front.

While I have some frugal tendencies, it was not a muscle I had flexed much.  Income increases kept exceeding spending habits, but not by much.  I shoved money into 401k's, but only had the crudest of plans for retirement and such.  She came to things with some credit card debt and a lack of critical thinking when it came to money.  Neither of us really had long term goals as such, but having a nice family situation became that goal.  Having a kid focused the goal further.

I can deal with consequences I bring upon myself, but it would tear my insides up to have my wife and kid unduly suffer from mistakes of my making.  I also realized how much I like spending time with my kid, which greatly raised the priority of becoming FIRE instead of just retired someday, and dramatically lowered the value I place on workplace success.  My wife has been stay at home since the kid arrived, and I am immensely grateful we have been in the position to be able to do that while still ramping up savings.  I only wish I had gotten things in order years earlier, but compared to most US people we are pretty far ahead on on track to be FIRE at 47.

MrsPete

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Re: The massive income/wealth gap of married vs non-married
« Reply #46 on: September 29, 2016, 05:01:03 PM »
Here's what you don't grasp fully unless or until it happens to you:  marriage protects the weaker partner.  You might know which one you are today.  But you don't know which one you'll be tomorrow or 10, 15 or 30 years from now.. 
Good point -- but I'd add two thoughts:  We take turns being the weaker partner, and when you add children to the mix you (hopefully) have protection for both partners as they grow older and weaker. 

If you looked at us when we were first married, I was the weaker partner.  I went back to school for a second degree, and I've always earned less.  I've taken time off for two children.  He's always made more money, put more into our investments.  However, as we grow older, I'm the one who has a solid pension and will be paying our bills in retirement (though we have savings for fun stuff).  He's older and has some health problems, so it's fairly certain I'll be caring for him in his old age.  Who's the weaker partner?  Honestly, we've both held that role. 

SwordGuy

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Re: The massive income/wealth gap of married vs non-married
« Reply #47 on: September 29, 2016, 05:18:21 PM »

I'll start with an assumption, that the married people actually love and care about one another, and thus want to protect each other.  Ditto about loving any children they have.

That gives a motivation to change one's behavior from "what can I do for me?" to "what can I do for my spouse and kids?"

That alone should produce more savings in any rational, unselfish person.

Given a 50% divorce rate in US marriages, obviously, there's no shortage of selfish and or irrational spouses...

Second, of course, are the economies of scale.  It's not uncommon for folks just starting out to have a roommate, but once they get older and "more successful", most singles choose not to have a roommate any more.  Some things are cheaper for a married couple than two singles (I suspect insurance being the most prominent).   But two singles rooming together would still get economies of scale on lodging, utilities, and possibly meals. 


Playing with Fire UK

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Re: The massive income/wealth gap of married vs non-married
« Reply #48 on: September 30, 2016, 12:03:38 AM »
We married.  Eventually, he became disabled. 30 years after promising forever, I now out earn him by something north of 50:1.  There is no crystal ball.  If we had not married, I'd have zero obligation to take care of him.  He'd be the government's problem and a pauper. 

But was a piece of paper (or a promise to your God) saying you were married really make the difference between you staying and walking out?

I totally agree that their are efficiencies for one household with more than one earner, but fail to see how being married has any impact.

Yes, that's the whole point of marriage.  Obviously people get divorced, but if you were going to high-tail it the minute things went south, you shouldn't have been married in the first place. Brava to Kite for keeping her vows.

That is not the point of my marriage. Each to their own.

Johnny Aloha

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