Financial Planning for LGBTQ+ Families

5 minute read

There is no one-size-fits-all approach to planning for retirement. Each person or family has a different background, goals, and needs – but we all need financial security and peace of mind, and we all want the freedom to live the life we want in retirement. In celebration of Pride Month, we’re digging into the financial priorities and challenges that LGBTQ+ families face as they prepare for their next chapters. And although some roadblocks for families – particularly when it comes to smoothly passing along their assets – were cleared with the legalization of same-sex marriage in 2015, there are still challenges.

Two-thirds of LGBT Americans report feeling a high level of financial stress on an average day, according to a 2022 survey by The Motley Fool and the Debt Free Guys. 39% list not having enough money for retirement as a top financial concern, and 33% say they’re not on track to retire by the age they’d like to retire. Plus, research from Edelman Financial Engines uncovered that within the LGBTQ+ community, nearly half (46%) felt ignored by financial professionals – and were more than twice as likely as their non-LGBTQ+ counterparts to feel that way. The number is even higher – 67% – for transgender Americans, according to the Motley Fool study.

These are the problems that Jennifer Hatch, Certified Financial Planner and President of LGBTQ-friendly wealth management firm Christopher Street Financial, has spent her career working to combat. She is adamant about the fact that her work is a long way from one-size-fits-all.

“It’s crucial to understand each client’s individual values and fears,” she notes. “Plus, each person receives information differently. For some, it creates anxiety to have a conversation around numbers. For some, we need to focus on tangible steps.”

But over 20 years of having these conversations, she’s also learned a lot of helpful, more universal advice. “A lot of [what I do] asks people to look at themselves in the future and figure out, how do we take care of our future selves?”

She shared a few of those lessons with Alliance Education Fellow and HerMoney CEO Jean Chatzky on Your Money Map. Here are her top three takeaways.

WATCH Your Money Map: Financial Planning for LGBTQ+ Families

What’s So Gay About Money?

When Hatch purchased her firm in 1997, she remembers having a hard time getting people to believe the needs of LGBTQ+ individuals were different. So she launched a seminar called: “What’s so gay about money?”

“The answer to that question was nothing if you were single, but everything if you were in a committed relationship and you wanted to take care of that person and protect them,” she recalls. Following marriage equality, she found that people needed to answer a different question: “What happens when I say I do?”

“I thought our business would be over post marriage equality,” she says.  “Instead it grew because of the awareness that marriage is different.”

Marital Status Raises Issues

According to Gallup, since 2015 the marital status of same-sex couples among LGBTQ+ Americans has held steady, with 10% married to a same-sex spouse.  Simultaneously, the percentage of same-sex domestic partnerships has fallen to 6%, while those identifying as single or never married has risen to 53%. Each group has different financial considerations. For unmarried couples, Hatch notes, there is a problem when wealth is concentrated in one person’s name. Yes, for estates over a certain threshold, there may be taxes, but the real issue is the difficulty in the transfer of assets. If you have an unmarried couple where one partner is raising children and the other is a breadwinner, it’s particularly difficult, she explains. You won’t be able to divide your retirement accounts, leaving the stay-at-home parent with virtually nothing in retirement. Often, the uncomfortable solution is to get married and then divide it.  “It’s a very difficult predicament,” she says.

For couples on their way to the altar, a prenup solves a host of issues. “I think of a prenup as a way of creating your own economic vows,” she says. “[I can tell my clients that without one] this is what will happen. But if you want to have control over your relationship – a way to make the finances more equitable and more personal – it’s called a prenup.”

The misconception, she says, is that these documents are onerous things that the spouse with more money foists on the spouse with less. Instead, think of a prenup as a way to manage expectations in a relationship and create an added sense of security. You don’t have to stick around because you’re petrified of what will happen if you divorce – because you know what will happen.

Dealing With Volatility Angst

Another issue Hatch has faced often in the past two decades is a desire – in a life that has perhaps been more topsy-turvy than most – to create some stability. Particularly after 2001, when she witnessed increased anxiety about market volatility, Hatch turned to annuities, which she says have been extraordinarily helpful in getting people to envision what they will have in the future. They’ve become even more important today, given the market volatility and economic uncertainty we’ve seen the last few years, and the fact that we’re all living longer than ever before.

In the end, Hatch notes, creating a financial life that serves your particular needs is often a matter of finding a financial professional who understands you. “We still have people type “gay financial planner” into the search bar and end up at our doorstep,” she says.

“What is different about the people in this community is their life experience. There’s also a lot of wariness about life. There is probably a certain amount of resilience that comes with the package.” The commonality? “They’re all looking for someone who gets them.”

When we’re shopping for something as important as a person to trust with our finances, that’s a bar everyone should want to clear.

For more insights and strategies on how people of all backgrounds can plan ahead and make sure their income lasts a lifetime, visit the Tools and Guide section of The Alliance website.