Retirement Planning for LGBT Couples

For many, retirement is a point on a perpetually receding horizon, some nebulous future event that may or may not ever happen. Planning for retirement in a lackluster economy can be even harder, especially for families outside the umbrella of legal protections offered to married couples.

Same-sex families in particular are notoriously susceptible to asset loss as a result of under-inclusive federal marriage and inheritance law, as well as outright discriminatory law such as the Defense of Marriage Act (DOMA). For example, under federal law, married heterosexual partners are entitled to their deceased partner's disability, pension, and social security benefits. Same-sex partners, regardless of civil unions or state marriages, enjoy none of these benefits because DOMA permits the federal government to ignore same-sex unions for legal purposes.

"Each investor has different priorities, needs, and life goals, and domestic partners and same-sex couples often have added concerns and questions about their financial situation," said Financial Adviser, Vice-President, and Investment Officer for Wells Fargo Advisors Kyle Young.

Additionally, without the federal tax shelters available to the surviving partner of a heterosexual marriage, same-sex partners often find themselves buried neck deep in taxes when their partner passes. In a fairly recent example, one widow sued the federal government after having to pay $350,000 in federal estate taxes when her female partner of 44 years passed away. Yet, in the face of all this adversity, a Wells Fargo study shows that LGBT investors seem to express confidence about their retirement goals.

What makes Wells Fargo such a good judge? For starters, Wells Fargo Wealth, Brokerage and Retirement (WBR) is one of the largest wealth managers in the United States, with $1.4 trillion dollars in client assets. Their company also includes Wells Fargo Advisors, which is the third largest brokerage firm in the U.S.

Most importantly, Wells Fargo, in partnership with the College for Financial Planning, created the Accredited Domestic Partnership Advisor (ADPA) program to teach financial advisers about the unique needs and economic considerations of domestic partners. Financial advisers that participate in the program and earn a certification are significantly better prepared to assist LGBT clients in achieving their financial objectives. Since Wells Fargo became the first industry to create this program, more than 100 financial advisers nationwide have completed and obtained certification. This may account for some of the positive results of the Wells Fargo study.

The study, created by Richard Day Research, specifically targeted LGBT adults between the ages of 25-75. The results were promising. LGBT non-retirees reported a higher level of confidence in their retirement savings compared to the general population. Notably, 61 percent of LGBT non-retirees felt confident that they would be able to save enough by the time they retired to live their ideal lifestyle throughout retirement.

In contrast, only 53 percent of the general population surveyed felt the same way. Additionally, while 36 percent of LGBT non-retirees believe that they will need to work some during retirement to handle the cost of this lifestyle, this number is lower than that of the general population (41 percent) who feel the same way.

Although the survey revealed a lot of data that showed positive attitudes about retirement, it also revealed the uphill battle that many LGBT non-retirees are fighting to meet their retirement goals. The median amount LGBT non-retirees had reportedly accumulated for retirement was only 17 percent of what they thought they would realistically need.

In general, this number was based on the idea that a minimum of $900,000 would be required before they would be able to retire. Statistics showed further that LGBT non-retirees had managed to sock away an average of $150,000. Unfortunately, three out of five non-retirees surveyed had been unable to contribute to their retirement funds during the past year.

Another section of the survey focused on the desirability of ADPA programs like Wells Fargo's, as opposed to retirement confidence or progress. About 10 percent of those surveyed replied that they had heard of ADPAs specific to LGBT investors. When subsequently hearing a description of the ADPA adviser training and designation, 60 percent of gay men and 72 percent of lesbians said that it was important to them for a financial adviser to have these credentials.

Overall, the vast proportion of LGBT investors surveyed responded that they would find value in receiving LGBT-specific investment and retirement preparation advice. Given the clear demand, there should be plenty of incentive in the financial advising industry to gain certification.

Wells Fargo's ADPA program is yet another example of how industries can tap into the particular needs of unique sub-populations to better serve consumers while growing business. The services they provide are services that all investors need to succeed financially in the long-term.

"It's especially important for LGBT investors to find financial advisers who are acutely aware of the challenges, laws, and regulations that impact their investment planning needs," said Young.

Again, his call carries beyond the financial planning industry. Other industries, as well as financial planners not yet ADPA-certified, need only answer.