According to the 2019 American Community Survey, same-sex married couples have a higher median household income than opposite-sex married couples — $107,200 and $96,930, respectively. Despite this, a separate study conducted by TD Ameritrade found that LGBTQ millennials were less optimistic than heterosexual millennials about reaching their financial goals, and saw themselves as lacking the expertise to invest for the future, USA Today reported. Part of this could be that members of this community may have unique financial needs and goals, such as covering the costs of adoption, surrogacy and other fertility measures if they choose to have a family.
With this in mind, GOBankingRates spoke to Ameriprise Financial private wealth advisor Betsy Billard — who has advised fellow members of the LGBTQ community since the mid-90s and is credited for helping the firm navigate the unique needs of personal wealth management in this space — to get her insights on how LGBTQ households can plan for different life stages and needs.
Last updated: June 28, 2021
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Set Aside Money for an Emergency Fund
While investing is vital, it’s important that LGBTQ households focus on building up emergency savings as a priority. These savings should cover three to six months’ worth of living expenses.
“For emergency needs, cash savings are the way to go because you will want quick access to this money,” Billard said.
Pay Down Debt
Once you have an emergency fund built up, it’s time to focus on paying down debt.
“Eliminate debt – particularly credit card debt, which is bad debt,” Billard said.
And avoid taking on any new debt: “Live within your means,” Billard added.
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Any Savings for Family Planning Should Be Held in Cash
“A great way to save for adoption, surrogacy and other similar goals would be to save into cash,” Billard said. “One would want to be able to save without the risk of market volatility.”
Aim To Save Up $150,000 for Surrogacy Costs
“Generally speaking, for surrogacy, costs are estimated to be around $150,000, not including legal fees,” Billard said.
While this may be a lofty goal, you should break it down into smaller increments to make it more achievable.
“Setting money aside monthly is a great way to save systematically for this type of goal, or if someone gets a bonus, then they can allocate a large chunk of this cash toward these costs,” Billard said.
Consider Opening a 529 Plan
For LGTBQ households with kids, parents should consider opening a 529 plan to begin saving for college sooner rather than later.
“A 529 plan is a great option for building college funds,” Billard said.
This may also come with tax benefits.
“You will want to explore whether the state you live in allows for a tax deduction if you use a 529 plan from your state,” Billard said.
Create a Plan for Covering Long-Term Care Costs
It’s never too early to start planning for the future, including how you will pay for long-term care.
“The very best way to plan for long-term care needs is to explore the purchase of long-term care insurance,” Billard said. “This coverage will not cover everything, but a strong policy will cover a considerable amount. Long-term care insurance is also a way to help preserve one’s estate.”
Create an Estate Plan
Planning for the future also entails creating an estate plan.
“Developing an estate plan is critical,” Billard said. “Without one, you leave yourself open to creditors or people challenging the estate. You also leave yourself exposed to dying intestate. You do not want the state where you live deciding how to distribute your estate.”