Even though same-sex marriage has been legal throughout the U.S. for nearly a decade, members of the LGBTQ+ community still have some specific factors to consider when planning for their financial future.
Some may still face discrimination in the workplace or when looking for housing—and sometimes, even from their own families. The net result of this discrimination might put LGBTQ+ individuals at a significant disadvantage regarding financial planning. Here are some important goals to consider when planning for retirement as a member of the LGBTQ+ community.
Overcoming the Retirement Gap
Studies have shown that LGBTQ+ investors are less likely to have 401(k) savings than straight investors and save less from each paycheck.1 These statistics, combined with those that indicate LGBTQ+ individuals tend to earn less than their straight counterparts, paint a sobering picture.
However, it is never too late to start saving for retirement. LGBTQ+ investors who are aged 50 or more may take advantage of catch-up contributions. In 2023, this means contributing an extra amount of up to $1,000 to an individual retirement account (IRA) on top of the $6,500 maximum contribution. Additionally, up to $7,500 for a 401(k) on top of the $22,500 maximum contribution.2
If you could afford it, just a few years of these catch-up contributions might go a long way toward closing the retirement gap. Talk to your financial professional about other ways you might help shore up your retirement funds.
Planning for Long-Term Care
Housing discrimination remains a sad reality for many members of the LGBTQ+ community. And this is not limited to home purchases or apartment rentals—it may also infiltrate senior housing, including nursing homes and assisted living facilities. Many are concerned about being able to find an LGBTQ+-friendly long-term care facility when the time comes.
To help prevent potential discrimination at a time when you are most vulnerable, consider your options, which include:
- Long-term care insurance, which may help cover the cost of care at a particular facility, removing any exclusionary financial barrier, or help pay for in-home elder care
- A life insurance policy or annuity that may help fund one of these options
Although money does not prevent all forms of LGBTQ+ discrimination, having adequate funds to pay your long-term care costs might help manage the risk of becoming a victim of unlawful discrimination at the most inopportune time.
In closing, there are steps you may consider, such as significantly increasing your savings—and, therefore, your options—in the future. From retirement catch-up contributions to long-term care insurance, finding an LGBTQ+-friendly financial professional may help manage any challenges life may throw your way.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which insurance or investment(s) may be appropriate for you, consult your financial professional prior to purchasing or investing.
Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by WriterAccess.
LPL Tracking #1-05367404
1 Prudential Financial, The LGBT Financial Experience, 2016-2017
2 401(k) limit increases to $22,500 for 2023, IRA limit rises to $6,500