The wedding dress has been altered, the tuxes are pressed, and the rings are tucked safely in velvet boxes. Chefs are preparing an elaborate meal, bartenders are ready to fill Champagne flutes, and a DJ is putting the final touches on his playlist. The venue is decorated with flowers and candles, and the hotel is packed with happy guests.
The only question is: Who’s paying for all this?
Weddings are notoriously expensive. But they are also an important and romantic day in a couple’s life. Who foots the bill for this party has changed over the years. Below, we’ll break down who pays for which wedding expenses in 2023 — and who traditionally paid in previous generations.
Who Pays for the Wedding in 2023?
In the past, it’s been the tradition for the bride’s family to pay for nearly the entire wedding, and the groom’s family to pick up smaller expenses such as the rehearsal dinner. In some cases, families still follow these traditions, but increasingly people are embracing new ways of covering these costs.
Nowadays, wedding expenses can be split any number of ways, and couples are exploring many different ways to pay for their big day:
• Independent couples may decline help from parents and instead pay out of pocket or borrow money to cover the wedding costs.
• Both families and the bride and groom may decide to split the costs. Sometimes grandparents or other extended family members will offer to pay for a portion of the wedding.
• If the groom comes from a wealthier family, his parents may chip in beyond their traditional requirements.
• Since the legalization of same-sex marriage in the United States, LGBTQ+ couples are creating their own traditions since there’s not a single bride or single groom at the altar.
That’s the beauty of your wedding day: It’s yours. Many brides and grooms are embracing the fact that they no longer have to follow outdated customs if they don’t want to.
For others, however, tradition matters — and that’s OK, too. If you’re planning to follow cultural traditions to a T when funding your wedding, how do you split the bill?
Let’s break down who traditionally pays for the wedding and other related expenses.
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The Bride’s Family
Historically, the bride’s family pays for most of the wedding expenses. Depending on the size and extravagance of the wedding, it can add up.
If you’re the parents of the bride who plan to foot the bill, but you don’t have enough money in savings, it might be worth taking out a personal loan to cover the wedding expenses. In the long run, it’s typically a cheaper option than putting everything on a credit card.
While the bride’s family traditionally takes care of many of the wedding expenses they don’t pay for everything. And every wedding is a little different. You may choose to skip certain items or events (and you may find yourself adding, too). Here’s what the bride’s family typically covers:
Expenses the Bride’s Family Is Traditionally Responsible For
• Engagement announcements
• Engagement party
• Wedding planner
• Invitations, save-the-dates, and wedding programs
• Venue for the ceremony
• Venue for the reception
• Flowers and decorations
• Wedding photographer and videographer
• Wedding dress
• Transportation and lodging for the bridesmaids
• Transportation and lodging for the officiant
• Food at the reception
• Wedding cake
• Brunch the morning after the wedding
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The Groom’s Family
If you have only sons and think you’re off the hook, don’t get too excited. You still have to cover some costs at the wedding as the parents of the groom.
Though less extensive, the groom’s family’s financial burdens can add up. Personal loans are also an option for the groom’s family; in fact, weddings are one of the most common uses for personal loans.
Here’s everything the groom’s family traditionally pays for at a wedding.
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Expenses the Groom’s Family Is Traditionally Responsible For
• Rehearsal dinner
• Marriage license
• Officiant’s fee
• Boutonnieres for the groom, his groomsmen, and family members
• Bouquets for the bride and bridesmaids
• DJ or band
• Transportation and lodging for the groomsmen
• Alcohol at the reception
• Honeymoon (in some cases)
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The Bride
Many women have dreamed of their wedding days since childhood. But as little girls, they probably didn’t think much about the actual wedding costs they’d have to pay themselves — and there are quite a few.
Expenses the Bride is Traditionally Responsible For
Traditionally, the bride pays for her future husband’s wedding ring, as well as a special gift for him. She may also buy gifts for her bridesmaids. In some cases, she’ll pay for the flowers, and she usually pays for her own hair and makeup.
Nowadays, however, brides may step up and pay more to help out her parents. Many brides choose to do this in part so that they can feel like they have more say in determining the plans for their special day.
People are also getting married later than they did in past generations (the average age for women is now 30 and for a man it’s 32), which means brides (and grooms) may feel more financially capable of covering the expenses themselves.
The Groom
The groom isn’t off the hook either. At weddings, he’s responsible for a few purchases as well.
And even though he and the bride may have separate wedding responsibilities, as a newly married couple they are likely planning to combine their finances, if they haven’t already. Even if they don’t have a joint bank account, the bride and groom are essentially covering their wedding expenses together.
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Expenses the Groom Is Traditionally Responsible For
The first big expense a groom encounters is the one that sets the whole wedding in motion: the engagement ring. The average cost of an engagement ring is now about $6,000. Grooms who don’t have that kind of cash lying around often turn to engagement ring financing options, including personal loans.
While the ring is often the groom’s biggest expense, he’s also responsible for the bride’s wedding band, gifts for his groomsmen, a gift for his bride, his own tux, and the honeymoon — if his parents aren’t footing the bill. (The honeymoon isn’t cheap either; the average cost of a honeymoon is now $5,100.)
Some grooms may also pay for the license and officiant, instead of asking his parents to cover that cost.
Who Pays for Other Wedding Costs
There is also the cost of being in someone’s wedding. For instance, groomsmen and bridesmaids are typically responsible for paying for their own tuxedos and dresses.
These two groups also pay for the bachelorette and bachelor parties for the bride and groom. Bridesmaids may also need to pay for their hair and makeup on the big day.
As someone attending a wedding, you should give a gift, unless the couple has discouraged this. And if it’s a destination wedding, you’ll have to pay your own travel costs, which can include hotels and transportation.
Wedding Costs
Now we know who traditionally pays for what at weddings — and that many modern couples are foregoing these traditions. But how much does a wedding cost?
In 2023, the average couple will spend $29,000 all-in on a wedding. For couples who are paying without their families’ help, a personal loan is the best route, if they don’t have the money in savings or have that money earmarked for buying a house or starting a family.
Are you considering taking out a loan to cover the cost of your wedding? Here are the typical personal loan requirements you’ll need for approval.
The Takeaway
Weddings are expensive, and traditions usually put the bulk of the financial burden on the bride’s family. However, many couples are breaking from tradition nowadays, paying for wedding expenses themselves or splitting the cost among family members more evenly — or in a way that reflects each family’s means.
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FAQs
Who pays for the wedding reception?
Traditionally, the bride’s family pays for most of the wedding reception, including the venue, food, and decorations. However, the groom’s family usually pitches in by covering the music and the alcohol. Increasingly, couples are choosing to pay for their wedding receptions themselves or splitting the cost with their parents.
Who pays for the engagement party?
The bride’s family is traditionally responsible for paying for the engagement party. Nowadays, however, engaged couples often pay for such parties on their own.
Photo credit: iStock/Halfpoint
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Architect Louis Naidorf had a disastrous 80th birthday cake. In 2008, Naidorf, who designed the Capitol Records building in Hollywood, was presented with a celebration cake that had been custom-baked in the shape of his iconic cylindrical building. But the pastry soon reflected the rather substantial difference between concrete and flour.
“When the cake was brought out, it gently collapsed, and everyone applauded,” Naidorf says, laughing over the phone from his home in Santa Rosa. “It was like in one of the movies where the Capitol Records building was destroyed.” Thankfully the cake for his 95th birthday, which he celebrated last month, was more structurally sound.
Designated a historic-cultural monument in 2006, the building has long been a favorite Los Angeles landmark to demolish on film — especially for filmmaker Roland Emmerich, who blew it up with an alien spaceship in “Independence Day” and slammed it with twisters in “The Day After Tomorrow.” Yet no movie can ever write the building out of a central place in popular music history. The tower is synonymous with the illustrious Capitol Records, home of Nat King Coleand Frank Sinatra, and the American record label of Pink Floyd and the Beatles, with the latter’s stars lining the Hollywood Walk of Fame right in front of the building.
Over the last several years, the building has been illuminated in support of various sociopolitical causes. In 2020, it was lighted red to support independent music venues. Last year, during their performance in Hollywood, Duran Duran lighted the Capitol Records building blue and yellow in solidarity with Ukraine. “I think that’s excellent,” Naidorf says. “Anything that vigorously engages the public on the right side of good causes transcends other issues. I’m flattered they use the Capitol Records building. It means it has enough cachet to merit being chosen to do that.”
Like the famous landmark he designed, Louis Naidorf has of late been experiencing his own brush with stardom, with postcards from autograph seekers arriving at his door. He is flattered but doesn’t take the attention too seriously.
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“It’s obvious that if someone asks me for four signatures I’m part of trading baseball cards or something,” he says. “They are going to trade four Lou Naidorfs for one Joe Smith.”
Still, he’s surprised and somewhat baffled by the sudden burst of recognition after all these years. “I guess my name ended up on a list or something,” he shrugs.
Naidorf was just 24 years old when he designed the Capitol Records building, in 1953. It was the world’s first circular office building.
Though it was 70 years ago, he vividly recalls how he felt when he received the assignment for his first solo project. “At one level, I felt enormous anxiety that if I didn’t get a solution, very, very quickly, something terrible would happen,” he says. “On the other hand, I felt a total confidence that I could do it. So it was a crazy contradiction.”
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Naidorf notes the building’s porcelain enamel sunshades with carefully spaced gaps to play with light and shadow. These cause spiral lines to appear on the building, drawing the eye into a rhythm rather than straight up and down. “You can see Capitol Records from quite a distance and you get a first impression of its basic form and character. You have a reading of it as complete,” he says. “But the building is designed so that the closer you get to the building, you discover more details.”
What about the long-standing myth that its round shape was designed to look like a stack of records with a rooftop antenna resembling a phonograph needle? As hard as it might be to believe, the legendary story about the building is just a coincidence — an urban legend that Naidorf has tried to debunk for decades.
In fact, when his boss, Welton Becket, tasked him with the assignment, the building was simply referred to as Project X. Shrouded in secrecy, Naidorf was given little guidance for the project other than being asked to design a 13-story building on a sloped side street in Hollywood that had to be kept as cool as possible and had smaller than usual floor space. He also didn’t know for whom he was designing it. Naidorf says it was common for clients’ identities to be kept confidential during the initial planning stages of a project.
However, Naidorf relished the creative latitude. The absence of information left him unburdened by preconceived ideas. “I knew the door was open for something special. It urged me so strongly,” he says earnestly. “I felt, and I think all architects feel this way … there’s a drive to translate the mundane bare requirements that clients come in with into something that has some poetic qualities about it.”
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Naidorf then had an epiphany: The project’s requirements were “eerily resonant” with a series of circular buildings he had designed for his master’s thesis in college. “The round shape is a very efficient enclosure of space,” he says. “You get more bang for your buck.”
Not everyone agreed with his approach. Naidorf says that Capitol Records co-founder and President Glenn Wallichs became irate when Naidorf presented him with a model and drawings of a round building, and “violently rejected” the design. “He thought it was a cheap stunt designed by a young guy to make the building look like a stack of records,” Naidorf says, laughing.
Wallichs insisted that Naidorf replace the round design with plans for a rectangular building. But when both rectangular and circular designs were presented to the insurance company financing the land, Naidorf says that Wallichs was urged to proceed with the round design.
Soon after, when talk of the building housing a radio station (that never came to fruition) was raised, Naidorf fretted when he was asked to design an antenna. He was worried that it would look like a phonograph needle and cement the idea that the building was designed to look like a stack of records.
Owing to his nagging concern, Naidorf positioned the rooftop spire asymmetrically, poised to appear as if it touches the roof delicately, like “a ballerina en pointe.” He calls it the building’s “grace note.” Still, the stack-of-vinyl myth persists. Laughing, Naidorf says, “It’s the most enduring myth of all.”
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Despite his good humor, it leaves him conflicted. “The building was not designed as a cartoon or a giggle. To have it trivialized with the stack-of-records myth is annoying and dismaying,” he says. “There’s not a thing on the building that doesn’t have a solid purpose to it.”
Naidorf’s ingenuity has been especially impressive to Los Angeles-based architect Lorcan O’Herlihy, who says he has “often responded strongly to the fact and admired that here was this interesting architect [Naidorf] who was combining science and art, or artistry and technology. Welton Becket [& Associates], very much to their credit, were at a period where modernism was at its heyday and they had to come up with ideas that were new and fresh and they did it, and Lou was certainly instrumental in that. His work is extraordinary.”
Naidorf was born in Los Angeles in 1928. His father owned a shop where he made and sold women’s clothing, with Naidorf’s mother lining the garments. Owing to his father’s lack of accounting skills and business acumen, however, the business often collapsed, forcing his parents to work at a garment factory until debts could be paid off to reopen the store.
Throughout his childhood, Naidorf’s family struggled financially as they moved around, living mostly in Silver Lake and Los Feliz. With only enough money to rent studio apartments, Naidorf’s parents slept on a Murphy bed while Naidorf spent his nights on a mattress on the floor.
As a little boy, Naidorf felt drawn to buildings. When his third-grade teacher decorated the classroom with a Hawaiian vacation theme, his fascination morphed into a calling. “I asked my teacher who made the drawings and she said, ‘Naval architects.’ And then I asked her who draws the plans for houses and she said, ‘Architects.’ She told me to ask my mother to show me the floor plans that were published in the real estate section of the Sunday edition of the newspaper.
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“When I saw them, I was a goner,” he swoons. “I now knew what I wanted to do. I wanted to be an architect.”
Naidorf remembers, at age 8, designing a three-bedroom house, using a card table as a makeshift drafting table. Soon after, he began designing small towns. “It wasn’t anything brilliant, but I was learning to draw, learning to scale and learning to think in spatial terms,” he says. When he was 12 years old, Naidorf got a part-time job at a bookstore, where he spent his first two paychecks on architecture books, absorbing them until they were threadbare.
Beyond literature, Naidorf amassed a growing collection of architectural materials (T-square, rectangles, instruments for ink drawings), thanks to his bar mitzvah presents, and decided he was ready to get to work. Sanford Kent, a young architect who had just graduated from USC, hired a tenacious 13-year-old Naidorf, paying him out of his own pocket.
Naidorf says tackling the abstract problems Kent gave him at once stimulated his mind and were instrumental in forming his long-standing ethos. “It got me thinking about architecture in terms of its effect on human emotions. The key issue is, ‘How do people respond to your work, whether from a distance or by living it?’” he says.
He continued to soak up whatever he could about architecture, gearing his junior and high school classes toward studying architecture in university. He attended UC Berkeley instead of the privately funded USC, not only to leave home and expand his horizons but also because of its affordability.
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Even still, Naidorf couldn’t afford all of the program’s required materials. He borrowed airbrushes from his fellow students, who would also give him their pencil stubs instead of tossing them out. Naidorf submitted his assignments on pebble board, which was not only cheaper than illustration board but allowed him to draw on one side, flip it over and draw on the other.
In 1950, Naidorf graduated at the top of his class and got his master of architecture degree a year early. He skipped his graduation ceremony because he had a job interview the next day at Welton Becket & Associates, where he was promptly hired. Among his earliest design assignments: a tray slide for a hospital cafeteria, a clothes closet and a “Please Wait to Be Seated” sign for a restaurant.
Three years into his employment, he began working on the Capitol Records building. Naidorf says he would design it the exact same way if he were given the assignment today.
Andrew Slater, former Capitol Records president and chief executive (2001-07), attests to the building’s distinctive charm. “When you go to work every day in that building it’s like you’re going into a piece of art, and it informs your attitude … to do something with that mindset, which is great,” he says. “Even though working in the music industry is, in a sense, an industrial endeavor, you never felt like you were doing anything industrial when you walked into that building.”
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Still, Naidorf fears being perceived as a “Johnny One Note,” as he puts it. Noting the plaque bearing his name outside the building’s main entrance, he expresses gratitude but wariness “that this one modest project has to carry my whole reputation on it.”
It’s a fair point, given the magnitude of Naidorf’s notable oeuvre. It’s earned him 17 regional honor and merit awards and AIA California’s Lifetime Achievement Award (2009). His work also has been featured at the J. Paul Getty Museum in Los Angeles.
“I know Capitol Records is always the first one people talk about and it’s a splendid, iconic building that fuses artistry and functionalism, but he’s also produced other projects over the years,” says fellow architect O’Herlihy. “The Santa Monica Civic Auditorium is brilliant.”
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Naidorf designed the 3,000-seat capacity Santa Monica Civic Auditorium on the heels of the Capitol Records building, in the late 1950s. Essentially two buildings in one, it was a challenge to design a locale that functioned at once as a performance space with a sloped floor and an exhibit hall with a flat floor for sports events, banquets and trade shows.
He transformed the floor from flat to tilted using a hydraulic system that was hailed for its innovation. “I don’t think you’ll find any place that has a symphony on a Friday night and a gem show, or some kind of hobby show, on Saturday,” he says.
Formerly home to the Santa Monica Symphony Orchestrabut currently sitting vacant, the Civic Auditorium opened its doors to the public in 1958. From 1961 to 1968, it hosted the Academy Awards. It also was the site of live recordings including George Carlin’s comedy record “Class Clown” and the Eagles’ “Eagles Live,” a double LP recorded during their three-night run at the venue. It also hosted “The T.A.M.I. Show” in 1964.
In the meantime, while the Civic was still under construction, Naidorf designed the 15,000-seat capacity Los Angeles Memorial Sports Arena, the biggest arena in Los Angeles when it opened in 1959. (The arena was demolished in 2016 to make way for the Banc of California Stadium, now called BMO Stadium.)
Naidorf says the Sports Arena, home to various Los Angeles sports teams including the NBA’s Lakers (1960-67) and Clippers (1984-1999) and the NHL’s Kings (1967-68), was built to attract sports teams to Los Angeles, but uncertainty about whether they’d catch on meant the facility had to be viable for other purposes.
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In 1960, a year after it opened its doors, the Sports Arena hosted the first Democratic National Convention in Los Angeles, where John F. Kennedy became the presidential nominee. Muhammad Ali (then known as Cassius Clay) won a boxing match there in 1962. It also hosted rallies by Martin Luther King Jr. and the Dalai Lama, and saw concerts by legendary rock acts including the Grateful Dead.
Bruce Springsteen played the venue’s final concerts before the building was demolished, a three-night stint during which he dedicated his song “Wrecking Ball” to the building lovingly nicknamed “The Dump That Still Jumps.” “Well, it was pretty dumpy by the end,” Naidorf says, laughing. “Not all architecture is permanent,” he continues. “I’d rather it was demolished and some useful purpose made of the site than having it sit there old, shabby and neglected as it was.”
Naidorf’s credits also include the Beverly Hilton Hotel, the Beverly Center and the Reagan State Office Building downtown. Outside of Los Angeles, Naidorf helmed the restoration of the California State Capitol Building in Sacramento, a six-year undertaking and then the largest-ever restoration undertaken in the U.S., and he designed President Gerald Ford’s house in Rancho Mirage.
The tallest building in Arizona, the Valley National Bank building (now Chase Tower) in Phoenix, also was designed by Naidorf, as well as the Hyatt Regency Dallas and adjacent Reunion Tower, the most recognizable landmark of the city’s skyline.
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He details these and his other high-profile projects in his 2018 book “More Humane: An Architectural Memoir”, filled with photos, backstories and personal anecdotes. Flipping through its pages, one learns that Naidorf not only took risks designing his projects but even risked his job on occasion.
He writes in his memoir that in 1958, when he was designing the Humble Oil (now Exxon) headquarters in Houston, he refused to design separate locker rooms and drinking fountains for Black and white people, as the company asked him to. When he went home on that Friday night, he describes not knowing if he’d have a job the following Monday. Not only did Naidorf not lose his job, he says, but the company ceased segregating its locker rooms and drinking fountains after that.
“I realized architects have access to some of the most powerful people in the world and it is our job to bring up issues that represent social issues rather than just architectural design,” he says. “The only thing for evil to triumph is for good people to remain silent. Architects should not remain silent.”
Naidorf also understood that sometimes he was designing projects where people don’t want to be, like the Naval Medical Center in San Diego, which opened in 1988. “I felt that there were two emotions we had to contend with,” he says. “One was to lay the sense that this would be welcoming and have a more personal quality. But if you go to a hospital you want a quite contradictory thing. You want to have a sense that it’s state-of-the-art, that whatever powerful forces can cure you, they’re there.”
Instead of one medical building, which he felt would seem ominous, he designed several structures and a series of outdoor walkways to make the facility feel warm and comforting. The treatment and diagnostic part of the facility was bold, with an abundance of steel and glass. Walkways were lined with floor-to-ceiling glass to allow patients to see the outdoor courtyard, grass, trees, sky and distant views of a golf course “based on the primitive feeling you have in the hospital, which is to get out of the damn place,” he says.
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When he was out shopping a few months ago, Naidorf met a woman who mentioned that she had been in the Navy, forcing her to move around a lot when her son was battling childhood leukemia. Without knowing she was talking to the Naval Medical Center’s designer himself, she told Naidorf that it was the only hospital that didn’t scare her ill 6-year-old son, who has since made a full recovery.
“What kind of an architect…,” Naidorf says, overcome with emotion and his voice breaking, “do you have to be not to hold that as better than any design award?”
Though Naidorf had risen through Welton Becket & Associates’ ranks to become vice president, director of research and director of design, he grew increasingly unhappy after the firm’s merger with Ellerbe Associates (it was renamed Ellerbe Becket). He moved into academia full-time in 1990, spending just one day a week at the firm.
Naidorf became dean of the School of Architecture and Design at Woodbury University, earning numerous distinctions, including teacher, faculty member and administrator of the year. He was also a guest professor at UCLA, USC, Cal Poly Pomona and SCI-Arc. At his retirement ceremony in 2000, he was awarded an honorary doctorate, marking not only the end of his academic career but also his time in Los Angeles.
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Charmed by the beauty of Northern California, Naidorf moved up the coast to Santa Rosa. For the next 15 years, he continued working with Woodbury University as campus architect, designing and remodeling some of its buildings, and was invited to be a board member.
When he parted ways with Woodbury at 87 years old, it was not with the goal of taking it easy. Naidorf had other pursuits in mind, including his work with City Vision Santa Rosa revitalizing the city’s downtown area.
He also helped his close friend, Mike Harkins (who edited Naidorf’s memoir), design his new house free of charge after the 2017 Tubbs Fire burned Harkins’ home to the ground and he and his wife lost 99% of their belongings.
“Lou offered without solicitation: ‘I’d like to design your house,’” Harkins says. “To me or anyone else who knows him, it was a heartfelt offer that of course he would make, and yet so much more. One analogy might be if Eric Clapton said, ‘I’d like to play at your wedding.’ The knowledge and sensibility that comes along with a Naidorf design offering is huge, just like his heart.”
Most recently, Naidorf has been experimenting with plans for a project to help people who are unhoused.
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Naidorf has made the most of his architecture license over the last 71 years. His voice fills with pride when he reveals that he holds the earliest issued active architecture license in the state of California, obtained in 1952.
“It’s something I wanted to be since I was a little kid. My architecture license was so hard to come by. I don’t want to give it up,” he says with palpable emotion. “I don’t want to be retired. I want to be an architect until I fall over. I plan to be buried as a licensed architect.”
Of recently turning 95, he jokes that he feels like a bad vaudeville performer who soon will be pulled offstage by a hook. But Naidorf remains in remarkably good health after surviving both prostate and esophageal cancer in his 80s.
To keep his brain sharp, he does exercises including counting backward from 100 by sevens and taking IQ tests online.
As a nonagenarian, he says there is no key to living a long life. He suggests, though, that it helps to try to use it well. “It’s not how big the steak is but how tasty it is,” he says. “I think you have to seek a calling, listen for it and search for it. Find something in your life that is really yours. … Get engaged with something that’s going to scare you, something where the problems are hard. And take risks. There is no failure.”
He also notes the importance of adaptability. “I have had four marriages. I’d better be resilient,” he quips. Twice divorced and twice widowed, Naidorf has a daughter from his first marriage, four stepchildren (who call him “Dad”) from his fourth marriage, 11 grandchildren and six great-grandchildren. An intensely private man, he’s reticent to speak publicly about his relationships and family, preferring to focus on his work.
“I remain so fascinated with architecture,” he says. “I cannot even walk past a store where somebody is putting in an electrical outlet without stopping to look in and watch it.”
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The chatty Naidorf turns summarily succinct, saying, “I certainly have had a good run.”
Inside: Do you want to claim your partner as a dependent on your taxes? This guide will explain the rules of claiming dependents whether girlfriend or boyfriend and help you take the necessary steps to do so.
Navigating the waters of tax credits can be tricky, especially when it involves claiming an unmarried partner as a dependent.
The Internal Revenue Service (IRS) does permit the declaration of a non-relative adult as a dependent, provided certain conditions are met.
And that is where it gets tricky for the tax novice.
That is where we are going to reference the IRS guidance, so you can determine whether or not you qualify for this deduction.
By pointing you in the right direction, you can understand the specific tests and requirements to avoid any tax-related complications.
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Understanding dependency in the context of taxes
The word “dependent” might remind you of a newborn baby or an elderly family member. But in tax terms, the meaning broadens.
In the IRS terms, a “dependent is a person, other than the taxpayer or spouse, who entitles the taxpayer to claim a dependency exemption.” 1
This might be a child, an adult family member, a significant other, or even a close friend. This term “qualifying relative” is crucial in IRS parlance for its implications on your tax dues.
Typically, any person can qualify as a dependent if more than half of their financial support, including living and medical expenses, is taken care of. Also, it’s an opportunity to boost one’s tax return by up to $500 with the Other Dependent Tax Credit.
What qualifies a person as a dependent?
The IRS bases dependents on two categories: “Qualifying children” and “Qualifying relatives.”2 You might think of a qualifying child as your son or daughter. Expanding the scope, a qualifying relative can be a sibling, a parent, or even a significant other.
The essence lies in their financial reliance on you and the nature of your relationship. They ought to:
Be related to you via blood, marriage, or adoption;
You provide over 50% of their financial support including housing, food, medical care, and other expenses
They are U.S. citizen.
The income of the possible dependent.
These nuanced rules might sound overwhelming, but IRS guidance and tax experts like TurboTax can help lighten the load.
Now, let’s address this sticking point: Can you actually claim your partner as a dependent? The following section unravels the mystique.
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Can I Claim My Partner as a Dependent?
You can claim your partner as a dependent on your tax return, provided they meet certain criteria explained by the IRS, including passing the non-qualifying child test, the citizen or resident test, the joint return test, the income test, and the dependent taxpayer test.
I know this is where it gets difficult to follow for the average person.
So, we are here, to break this terminology down into layman’s terms, as such you can then make the best decision for your tax situation.
If you are still confused, then consult with an online tax software like TurboTax or a tax professional for guidance on your personal taxes.
Basic requirements for claiming your partner as a dependent
This essentially means that your partner should be financially dependent on you, where you bear more than half of their living expenses.
In essence, claiming your partner as a dependent revolves around these fundamentals: 2
Residency: Your partner must have been living with you for the full tax year.
Income limit: Your partner’s gross income should not exceed $4,700 for the year 2023.
Support Requirement: You are the main pillar for your partner’s financial needs by covering over half of their total expenses.
Anyone Else Claiming Them: None else should claim your partner as their dependent.
Unmarried. Your partner must be unmarried legally.
All fulfillment of these criteria moves you a step closer to enjoying some tax relief.
Confirm with an accountant or tax expert as exceptions can exist, such as temporary absences due to illness, education, business, and others.
Common scenarios where you can claim your partner as a dependent
Claiming a partner as a dependent isn’t as fancy as it sounds, but it’s plausible. Here are common scenarios enabling you to do so:
Co-habiting Before Marriage: You and your partner share a home, and you pay more than half of your partner’s living costs. However, your living situation cannot violate local laws, as in some states, “cohabitation” by unmarried people is against the law.
Unemployed Partner: Your partner’s tie with working life is severed (e.g., due to health issues or being laid off), and you bear most of the living expenses.
Supporting Student Partner: Your partner pursues their education, and you shoulder the majority of their expenses.
Take this interactive IRS quiz to determine whom I may claim as a dependent.
How much will I get if I claim my girlfriend as a dependent?
Now the pivotal question: what’s the advantage in dollars and cents?
In essence, claiming your partner as a dependent will slash your taxable income by $500 with the Other Dependent Tax Credit. 3
If you already qualify for Head of Household status with another dependent, then it is possible your deduction may be more. 4
Remember, there’s no one-size-fits-all answer. When tax complexities strike, consult an expert!
Is it better to claim my girlfriend as a dependent?
Honestly, like most tax questions, the answer is: it depends.
If you’re covering your partner’s majority expenses and they’re fulfilling all IRS criteria, then claiming them can bring solid tax savings.
Yet, bear in mind:
If your partner earns substantial income (greater than $4,700), they might lose personal benefits by becoming your dependent.
By claiming your partner, their Social Security or medical benefits may take a hit.
So, assess your partner’s income, benefit entitlements, and your tax situation. Then, tread wisely.
e-file
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Important Rules to Keep in Mind When Claiming Your Partner
When filing taxes, it’s crucial to understand that both parties are responsible for the accuracy of each other’s tax reporting and liability.
It’s worth noting that tax advantages and disadvantages exist in the scenario of being married and filing jointly, such as potential reductions in your tax bracket and sharing of business losses. So, it may be something to consider.
Can I claim my girlfriend as a dependent if she has no income?
In a nutshell, yes! If your girlfriend had no income in the tax year, you might claim her as a dependent. Given you provide over half of her total support and she lived with you all year, you’re golden.
For 2023, your partner’s gross income should not exceed $4,700.
However, keep in mind that in cases where public assistance or Social Security benefits are her primary financial sources, claiming her could negatively impact those benefits.
Learn the answer to do you have to file taxes if you have no income.
Remember: tax waters are often murky. When in doubt, lean on a tax professional’s shoulder!
Support factors
Answering the support question plays a hefty role in determining who qualifies as a dependent.
You shouldn’t just share the living cost; you should pay more than half of it. Remember, it includes an array of expenses, like food, clothing, education, or medical expenses.
The implication of your partner being claimed by someone else
Here’s a key rule: if someone else is claiming your partner as a dependent, you’re out of the game. The IRS rules say a person can be claimed as a dependent by only one taxpayer in a single tax year.
This could happen if your partner perhaps lives part of the year with someone else like a parent.
Another possibility is if your partner is legally married still, then they would have to file a married, filing separately return.
So, if your partner qualifies as someone else’s dependent, even if they don’t claim them, you can’t claim your partner.
Frequent Situations Where You Can’t Claim Your Partner as a Dependent
Considerations for Non-resident or Non-citizen partners
If your partner isn’t a U.S. citizen, resident, or national, the dependent claiming game changes. Notably, nonresident aliens cannot be claimed as dependents.
However, if your partner is a resident of Canada or Mexico or a U.S. national, you may claim them. But they should be living with you full-time. 2
This rule extends to partners awaiting changes in their residency or citizenship status. In such cases, you must wait until their status changes before claiming them.
When your partner earns more than the stipulated income threshold
When your partner’s income level sails past the IRS limit ($4,700 in 2023), claiming them as a dependent slips off the table. 2
Any part-time job, seasonal work, or income source counts, even those seemingly negligible. As soon as they cross this threshold, regardless of how heavily they rely on you or where they reside, they can’t qualify as your dependent.
Make sure to stay updated on IRS rules. They adjust the income limit for inflation annually, which changes this income ceiling. Keep an eye peeled for those IRS updates!
TurboTax
TurboTax® is the #1 best-selling tax preparation software to file taxes online. Easily file federal and state income tax returns with 100% accuracy.
This is how I have filed my personal taxes for many years.
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How to Officially Claim Your Partner on Your Taxes
To officially claim your partner as a dependent on your tax return, you will do this when you file your taxes.
Thankfully, this is made easier with online software companies like TurboTax or H&R Block.
The same is true when you are trying to figure out how to file taxes without a W2.
Necessary steps to claim your partner on your taxes
You will first identify them as “other qualifying dependent” or “other qualifying relative”.
Gather the facts first: Confirm your partner’s income, residency, and who has been supporting them for more than half the year.
Document expenses: Keep track of all relevant bills and receipts to demonstrate your majority support.
Use tax software or a professional: Follow prompts about dependents in tax software like TurboTax. They could guide you through the process and specifics.
Complete relevant Tax Forms: Prepare the necessary forms such as Form 1040 and Schedule H and have proof of residency, financial support, gross income information, and certification of your domestic partnership to support your claim.
File your return: Don’t forget to include your partner’s details and tick the correct boxes.
Remember, the devil is in the details. So carefully evaluate your situation to avoid missteps, and consult with a tax professional when in doubt.
Pitfalls to avoid while filing tax returns
While preparing to file your tax returns, beware of these common pitfalls:
Incorrect income calculation: Ensure you tally your partner’s gross income accurately. Reminder: it should not eclipse $4,700 in 2023.
Overlooked Living Qualification: Your partner must have resided with you the entire year. Temporary absences (illness, education) can be exceptions.
Ignoring Other Claimants: If someone else is poised to claim your partner as a dependent – even if they don’t – you can’t claim them.
Emergency Funds Consideration: If your partner taps into their savings for a large expense, this could speak against you providing most of their support.
Forgotten Documents: Maintain a record of bills, receipts, and other expense documents.
The IRS overlooks no mistakes, so take care and stay informed. When in doubt, professional tax help is a button away.
Frequently Asked Questions (FAQ)
Intriguing question! Here’s the short answer: Your partner’s marital status may indeed affect your ability to claim them as a dependent.
For instance, if your partner is married and files a joint tax return with their spouse, you can’t claim them as a dependent.
Remember, tax rules are lock-key specific, and bending them can lead to penalties. Always seek advice from a tax professional.
While you might be able to claim your partner as a dependent, laying claim on their children as dependents is unlikely. IRS rules are clear: you can claim a dependent only if they’re your child or relative.
Since your partner’s children don’t fulfill this requirement, you can’t claim them unless they can be considered your qualifying relative AND you provide more than half of their support.
As always, it’s best to run this by a tax professional for clarity on your unique situation. All we tax-seers can do is guide; the decision falls on your shoulders.
Here’s the hard truth: if your partner didn’t live with you all year, you couldn’t claim them as a dependent. IRS rules are stringent about this: your partner must have the same home as you for the entire year. That is 365 days, no less.
However, IRS grants a green light to temporary separations due to special circumstances like illness, education, military service, or even a holiday. The key lies in their intent to return and, of course, their follow-through.
Stay wise and stay informed, and consult with a tax analyst to seal your decision with assurance.
Get Online Help
Navigating tax rules and regulations doesn’t need to be overwhelming. With the advent of online help, understanding whether you can claim your partner as a dependent becomes considerably more manageable. Here are a few benefits of seeking online help:
Convenience: With online help, you can access the information you need anywhere, anytime. No need to schedule appointments or deal with traffic to get to a tax office. You can get the updates and instructions right from the comfort of your own home.
Accessibility: Some great examples of accessible platforms are TurboTax, e-File, and H&R Block which provide 24/7 support and resources. They offer a wealth of information and experts at your fingertips.
Expertise: Apart from the convenience, these websites employ tax experts who deliver professional analysis and guidance tailored to your specific needs. Specifically, you can use TurboTax Live Full Service for someone to do your taxes from start to finish. Or you can ask questions with TurboTax Live Assisted.
File your own taxes with confidence using TurboTax. This can greatly simplify the process and minimize potential missteps.
Now, Can I Claim my Unmarried Partner as a Dependent is Up to You
As they say, “Ignorance of the law is no excuse”. The same holds true for tax rules.
Falsely claiming a dependent can lead to severe penalties, not just a dinging of your wallet. You’d be sailing the choppy waters of tax evasion, which can bring on hefty fines or even dark days behind bars.
In blatant cases, the IRS could impose a Civil Fraud Penalty. That means a penalty amounting to 75% of the unpaid tax amount resulting from fraud. 5
In short, play by the rules! Accurate and clear tax filing may seem tedious, yet it will steer clear of any legal trouble. Remember, it’s always safer to ask if you are unsure!
Now, are you wondering why do I owe taxes this year?
Source
Internal Revenue Service. “Tax Tutorial.” https://apps.irs.gov/app/understandingTaxes/hows/tax_tutorials/mod04/tt_mod04_glossary.jsp?backPage=tt_mod04_01.jsp#dependent. Accessed October 23, 2023.
Internal Revenue Service. “About Publication 501, Dependents, Standard Deduction, and Filing Information.” https://www.irs.gov/forms-pubs/about-publication-501. Accessed October 23, 2023.
Internal Revenue Service. “About Publication 501, Dependents, Standard DeductionUnderstanding the Credit for Other Dependents.” https://www.irs.gov/newsroom/understanding-the-credit-for-other-dependents. Accessed October 23, 2023.
Intuit TurboTax. “Guide to Filing Taxes as Head of Household.” https://turbotax.intuit.com/tax-tips/family/guide-to-filing-taxes-as-head-of-household/L4Nx6DYu9. Accessed October 23, 2023.
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If you have a car loan, making your payments on time and in full each month should help build your credit over time.
Having good credit can save you a significant amount of money in interest fees on a car loan. Ideally, you’ll want a credit score of 660 or higher to get a favorable interest rate, but did you know that having a car loan may also help improve your credit?
We’re going to explain how car loans can affect your credit report and how they may be able to help raise your credit. You’ll also learn how to find the best car loans to help you save money on your new vehicle.
Is a car loan good for your credit?
Applying for a car loan can hurt your credit temporarily, but your credit can recover and even improve in time. When you apply for a car loan, the lender needs to run a hard inquiry to check your credit history, which is what can lower your score. The decrease can also happen if you refinance your car, but in both cases, the impact is usually minimal.
The good news is that a car loan can help you boost your credit in the long term. One of the primary factors that determines your credit score is your payment history. If you take out a car loan and make your monthly payments on time, these payments are reported to the major credit bureaus. If you’re wondering how fast a car loan will raise your credit, the answer is that it can take a few months to start seeing results.
One way to ensure you make your monthly payments on time is to set up automatic payments. After months of making these on-time payments, the consistent positive payments should far outweigh the temporary decrease from the hard inquiry.
How auto loans affect your credit report
Your credit report has a lot of data, and it can seem a bit overwhelming. Before going over how auto loans affect your credit report, it’s helpful to know the five factors affecting your credit score.
Each factor is weighted differently, so they’ll have a different level of impact on your credit. The following percentages are based on the FICO® scoring model, which is the most commonly used model.
Payment history (35 percent)
Your payment history is the most heavily weighted factor of your credit score at 35 percent. Late and missed payments can result in derogatory marks, which have a negative impact on your credit. On the other hand, when you make your car payments on time, the credit bureaus report them, which can help your credit.
Credit utilization (30 percent)
Credit utilization is how much you owe compared to your overall credit limit. Your utilization is often in the form of a percentage or a ratio. Ideally, you want to keep your credit utilization under 30 percent. For example, if you have a $1,000 credit limit and only owe $200, that’s a 20 percent utilization rate. Your car loan won’t affect your credit utilization.
Credit age (15 percent)
Your credit report also shows the length of your credit history, and this helps lenders see how much experience you have with credit. When you acquire an auto loan, you’re typically paying off the vehicle for years, and this is factored into the average age of all of your credit accounts. By having a long history of making your payments on time, it can help your credit.
New credit (10 percent)
Earlier, we mentioned that the application process can temporarily lower your credit due to hard inquiries. If someone is regularly applying for new lines of credit, it may be a red flag to lenders. But remember, financing a car can also help you build your credit over time, eventually outweighing the negative impact of the hard credit check.
Credit mix (10 percent)
The two primary types of credit are installment credit and revolving credit. Credit cards are considered revolving credit because when you make your payments, you can access that money again. With a line of installment credit, you owe a set amount each pay cycle, and car loans fall into this category. When you have a variety of types of credit, it helps improve your credit mix.
On your credit report, you will find two categories that will provide information about your car loan:
Types of accounts: In this category, you will find your credit mix, and under the installment accounts category, you will find your car loan as well as other installment loans. Other examples of installment loans include mortgage loans and student loans.
Current status: You will also see the status of your auto loan. If you make your payments on time, it may say that the account is “current,” or it will say “paid as agreed.” Basically, this showcases your payment history on a specific account. If you’re 30 days late on your payments, this can hurt your credit, and the lender may even repossess your vehicle.
It’s also possible that a reporting error inaccurately shows a missed or late payment, and this can unfairly lower your score. Should this happen, you can file a dispute to address it.
How to find the best car loan
It’s common for people to shop around for the best deal on a car, but it can also be helpful to shop around for the best car loan. When taking out a loan, one of the primary considerations should be the interest rate. The overall interest rate of the car can vastly change the price.
For example, let’s say you put $1,000 down on a $20,000 vehicle with a loan term of five years and a 5 percent interest rate. The total interest on the vehicle would be $2,513, making the vehicle cost $21,513.
Using that same example, you would pay far more at an 8 percent interest rate. At an 8 percent interest rate, the total interest would be $4,115, which is around $1,500 more than the 5 percent interest rate.
You may be able to find better interest rates by going through your current bank or other lenders. Good credit is another key factor in finding a good interest rate.
Repair your credit before shopping for a car
Your credit can have a major impact on how much interest you pay for your vehicle. According to recent data, the average car loan interest rate for a new car for people with a credit score of 781 or higher is 5.07 percent. If your credit score is under 661, the average interest rate for a new car is 8.99 percent.
If you need help with your credit prior to getting a car, reach out to Lexington Law Firm. There may be errors on your credit report hurting your credit, and we have a team who will work to address these errors on your behalf. Sign up today to get a free credit assessment.
Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.
Reviewed By
Brittany Sifontes
Attorney
Prior to joining Lexington, Brittany practiced a mix of criminal law and family law.
Brittany began her legal career at the Maricopa County Public Defender’s Office, and then moved into private practice. Brittany represented clients with charges ranging from drug sales, to sexual related offenses, to homicides. Brittany appeared in several hundred criminal court hearings, including felony and misdemeanor trials, evidentiary hearings, and pretrial hearings. In addition to criminal cases, Brittany also represented persons and families in a variety of family court matters including dissolution of marriage, legal separation, child support, paternity, parenting time, legal decision-making (formerly “custody”), spousal maintenance, modifications and enforcement of existing orders, relocation, and orders of protection. As a result, Brittany has extensive courtroom experience. Brittany attended the University of Colorado at Boulder for her undergraduate degree and attended Arizona Summit Law School for her law degree. At Arizona Summit Law school, Brittany graduated Summa Cum Laude and ranked 11th in her graduating class.
As anyone savvy in personal finance knows, it’s never too early or too late to start thinking about retirement. An individual retirement account, or IRA, is a retirement account that allows you to save money for your golden years in a tax-advantaged way.
There are several types of IRAs—Traditional, Roth, SEP, and SIMPLE—with varying rules and benefits. With the right account, you can grow your savings, manage your tax burden, and prepare for a comfortable retirement.
6 Best IRA Accounts
Check out our top 6 picks for 2023‘s best IRA accounts. Let’s examine each one so you can decide quickly and easily which is best for you.
Charles Schwab
Charles Schwab offers one of the best IRA accounts available thanks to its superior customer service. The company offers 24/7 customer support as well as extensive resources about retirement planning.
Charles Schwab recently eliminated its commissions on stocks, EFT, and options trades. Standard trades are $4.95. So, you can begin investing commission-free, and there’s no account minimum to get started.
The company also offers a robo-advisor called Schwab Intelligent Portfolios. The company will invest your money in up to 20 different asset classes at no annual charge.
This feature alone makes Charles Schwab one of the best options for new investors and anyone who is looking for a low-cost investing option.
Merrill Edge
Merrill Edge is one of the best brokerages for hands-on investors. The company is owned by Bank of America, so it’s a great option for anyone who is already a customer of the bank.
And this means Merrill Edge customers also have the option to receive in-person customer service. If you live near any of the bank’s locations, you can receive in-person assistance at the bank.
Merrill Edge offers unlimited $0 online stock and ETF trades with no trade or balance minimums. The company also offers mutual funds for $19.95 per purchase, though some mutual funds are available for free.
And the online broker doesn’t have a minimum deposit requirement to open an account. So, it’s an excellent option for new investors and anyone who is looking for in-person customer support.
Betterment
Betterment works to automate and simplify the investment process and offers traditional, SEP, rollover, and Roth IRAs. This robo-advisor makes managing your IRA extremely hands-off while helping you save money on excessive fees.
What’s the pricing structure like?
You have two levels of service to choose from. The first is the Digital level, which comes with a 0.25% annual fee and no minimum balance. So if your first year’s balance is $5,000 your fee would be $12.50.
Because Betterment is a robo-advisor, it offers automatic rebalancing so that you’re always hitting your target allocations, even with a shifting market.
Their portfolios are globally diversified, and you can adjust your risk tolerance based on your preferences. Plus, Betterment implements automatic tax-loss harvesting to boost your after-tax returns.
Need to talk to a certified financial planner?
No problem, you can chat online with a licensed expert with no limit on the number of questions you ask. If you want even more advice and support, you can upgrade to the Premium level. The annual fee jumps to 0.40%, and you’ll need at least $100,000 to start your retirement account.
But you get holistic advice on all of your financial questions, not just those related to your Betterment investments. So in addition to chatting about retirement, you can also talk to your advisor about joint financial goals with your spouse.
You can also discuss college savings plans for your children, and new and existing investments.
If you’re interested in a “set it and forget it” mentality for your IRA, Betterment certainly provides that option.
Ally Invest
Ally Invest is a great option if you’re just starting to build out your IRA rather than rolling over existing funds. It’s also directed to individuals who want to manage their own investments.
There’s no account minimum to get started, and you can choose from multiple types, including Roth, traditional, rollover, SIMPLE, and SEP IRAs.
Account fees are fairly limited as well. You don’t have to pay anything to set up the account, and there’s no minimum account opening, so it’s easy for anyone to start saving. Ally also doesn’t charge an annual fee or an inactivity fee.
There’s a $50 fee if you decide to terminate your IRA account with Ally Invest. If you transfer your funds, you’ll have to pay an additional $50 as a transfer fee — plus the first $50 termination fee. There’s also a $50 conversion fee if you want to change from a traditional IRA to a Roth IRA or the other way around.
If you’re an active trader even with your IRA, then you’ll appreciate Ally’s low trading fees.
Stocks and exchange-traded funds (ETFs) are $4.95 per trade, but you can get that lowered to $3.95 if you trade at least 30 times each quarter or have a balance of $100,000 or more. Options fees start at $4.95 each plus $0.65 per contract, and that price also lowers with heavy quarterly trading activity.
If you don’t want the burden of actively trading your IRA portfolio, then look elsewhere for an IRA account. But if you like handling your investments regularly, then Ally Invest could be a strong contender for your IRA account.
Wealthfront
Wealthfront is a robo-advisor that’s growing quickly. Your first $10,000 is managed for free. Thereafter, you’re charged an annual management fee of 0.25%, regardless of how much you have in your account.
You do have to open an IRA with at least $500. The more friends you refer to Wealthfront, the more you access free services, like getting an additional $5,000 managed for free. You can choose from a few different IRA types, including traditional, Roth, SEP, and rollovers.
Where does Wealthfront shine?
The answer is in retirement analytics. Wealthfront has a retirement planning tool called Path. It lets you integrate your various retirement accounts across financial institutions so you can see an accurate and comprehensive picture of your overall retirement plan.
Wealthfront economists use projects for things like inflation and Social Security to help plan for a realistic future.
Considering a major life event or financial change?
Wealthfront’s Path program lets you see potential impacts of these types of scenarios, so you’re not surprised at how your retirement savings are affected. Plus, like other online robo-advisors, all Wealthfront investments provide tax-loss harvesting and portfolio rebalancing.
You don’t have to worry about tracking individual stocks and funds. Instead, you get to invest passively while Wealthfront’s analytics keeps track of your portfolio. With IRA options and other tools at your disposal, Wealthfront is a solid choice for hands-off retirement investing.
E*TRADE
E*TRADE offers a ton of financial products, and their IRA offerings are straightforward with low fees.
There’s a great balance of getting access to in-depth research and resources, while also having the option to let E*TRADE take on your account management.
You can choose from a traditional IRA, Roth IRA, rollover IRA, or one-stop rollover IRA. That last one lets you transfer existing IRA funds in a diversified ETF that is managed by professionals.
This adaptive portfolio takes advantage of the automation processes. It requires a $5,000 minimum deposit to get started and comes with an annual advisory fee of 0.30%.
If you’re an avid ETF trader, you can trade for free on more than 100 funds; otherwise, it’s $6.95. Like Ally, that number drops if you make 30 or more quarterly trades, costing just $4.95 per trade at that point.
Stock trades also cost $6.95 each, with the same discount available as ETFs. Fees vary on mutual funds, but E*TRADE offers more than 4,400 no-transaction-fee mutual funds.
If you’re happy working with certain restrictions on the funds you choose, you can get away with a lot of fee-free trading via E*TRADE. Plus, you don’t have to worry about a minimum opening balance for most IRA accounts.
The company has been around for decades and consistently gets strong ratings from external sources, so they have a strong reputation in the industry, which can be comforting for beginning investors.
Understanding Different Types of IRAs
Now that we’ve explored the best IRA accounts of 2023, it’s crucial to understand the differences between the various types of IRAs. Each one comes with distinct advantages and rules tailored to unique financial circumstances and retirement goals.
Whether you’re just starting your retirement journey or you’re well on your way, familiarizing yourself with these options can help you make informed decisions about your future. Here, we delve into Traditional IRAs, Roth IRAs, SEP IRAs, and SIMPLE IRAs.
Traditional IRAs
Traditional IRAs provide a way to save for retirement with tax-deductible contributions. The contributions you make to a traditional IRA may lower your taxable income, meaning you’ll pay less income tax in the year you make the contribution.
You’ll pay taxes on your withdrawals in retirement. This type of IRA might be beneficial if you anticipate being in a lower tax bracket during retirement than you are now.
Roth IRAs
With Roth IRAs, you make contributions with after-tax dollars. This means you pay income taxes on contributions upfront, but qualified withdrawals in retirement are tax-free. Roth IRAs are attractive if you expect to be in the same or higher tax bracket in retirement.
Additionally, Roth IRAs don’t have required minimum distributions (RMDs) during the owner’s lifetime, a feature that can provide significant tax advantages.
SEP IRAs
SEP (Simplified Employee Pension) IRAs are for self-employed individuals and small-business owners. They work like a traditional IRA, allowing you to contribute pre-tax money, which grows tax-deferred until you withdraw it in retirement.
SIMPLE IRAs
SIMPLE (Savings Incentive Match Plan for Employees) IRAs are also for small businesses and self-employed individuals. They offer higher contribution limits than traditional and Roth IRAs but come with mandatory employer contributions.
Criteria for Selecting the Best IRA Accounts
As you embark on IRA investing, there are a few key factors you should consider when selecting the best IRA accounts.
Fees: Look for IRA providers with low or no annual account fees, low expense ratios on mutual funds or exchange-traded funds (ETFs), and no transaction fees. Even small fees can add up over time, eroding your investment returns.
Investment options: The best IRA accounts offer a broad array of investment options, including mutual funds, index funds, ETFs, bonds, and individual stocks. More options mean more opportunities to create a diversified portfolio.
Minimum balance requirement: Some providers require a minimum deposit to open an account, while others don’t have account minimums. This can be a barrier for new investors who want to start small.
Customer support: Excellent customer support can be invaluable, particularly if you’re new to investing. Look for providers that offer easy-to-use platforms, comprehensive educational resources, and responsive support.
Additional services: Some IRA providers also offer services like automated investing, financial planning, and wealth management, which can help you craft and stick to a retirement savings strategy.
Taxation: Understanding how different IRAs are taxed can help you optimize your retirement savings. For instance, traditional IRAs provide a tax deduction on contributions, but you’ll pay taxes upon withdrawal. Roth IRAs, on the other hand, don’t offer a tax deduction on contributions, but the growth and withdrawals are tax-free.
How to Open an IRA Account
Opening an IRA account is a fairly straightforward process, similar to opening a regular savings or brokerage account.
Choose an IRA provider: Decide whether you prefer an online bank, an investment firm, a robo advisor, or a traditional bank for your IRA. Each of these financial institutions offers unique benefits, so choose the one that fits your needs best.
Decide the type of IRA: Choose between a Roth IRA and a Traditional IRA based on your current income, future income predictions, and tax considerations. If you’re self-employed or a small business owner, you might consider a SEP or SIMPLE IRA.
Open an account: Visit your chosen provider’s website and select ‘open an account.’ You’ll need to provide some personal information, including your Social Security number, date of birth, mailing address, and employment information.
Fund your account: Decide how much you want to contribute to your account. Be mindful of the annual IRA contribution limits set by the IRS. You can fund your account through a transfer from a bank account or rollover from another retirement account.
Select your investments: Choose how your money is invested. Depending on the provider, you might be able to choose individual stocks and bonds, or you might select from a list of mutual funds or ETF trades. Some providers also offer target-date funds, which automatically adjust your asset allocation based on your age and retirement timeline.
Set up automatic contributions: If possible, set up automatic contributions to your account. Regular, consistent contributions can help your retirement savings grow over time.
Remember, it’s essential to regularly review your IRA to ensure it aligns with your retirement goals. Over time, you may need to adjust your contributions or rebalance your investment portfolio.
Common Mistakes to Avoid When Investing in an IRA
Procrastinating on opening an account: The sooner you open an IRA and start contributing, the more time your money has to grow. With the power of compounding, even small contributions can grow significantly over time.
Not contributing enough: Try to contribute the maximum amount to your IRA each year to take full advantage of the tax benefits and growth potential. If you can’t afford the max, aim to increase your contributions over time.
Investing in high-fee funds: Fees can eat into your retirement savings. Be sure to understand the expense ratios, management fees, and any transaction fees associated with your investments.
Not considering your tax situation: The tax benefits of Traditional and Roth IRAs are different, so consider your current and future tax situation when choosing an account. If you anticipate being in a higher tax bracket when you retire, a Roth IRA may be a better choice since withdrawals are tax-free.
Ignoring the income limits: Roth IRAs have income limits that can affect your ability to contribute. If you earn too much, you may be unable to contribute directly to a Roth IRA, though you might still be able to contribute to a Traditional IRA or execute a backdoor Roth IRA conversion.
Failing to update your beneficiary designations: Life changes, and so should your beneficiary designations. Make sure to review them regularly, especially after major life events like marriage, divorce, or the birth of a child.
Bottom Line
When it comes down to picking your IRA account, two of the most important factors are cost and your preferred management style. The two generally go hand in hand.
Do you want a DIY IRA that lets you do your own trading? You’ll need to compare online brokers and robo-advisors that offer free trades or lower-cost trade fees based on your trading activity.
Prefer a hands-off style? Think about how much money you’re likely to invest in the near term. Then, pick an IRA account that lets you go on autopilot while charging a flat annual fee.
For these types of IRA accounts, you’ll definitely want to dig deeper into how the financial advisors’ portfolios are chosen and whether their investment styles agree with your own.
Having any type of IRA can help you prepare for retirement. You can always transfer or roll over your funds into another IRA. However, choosing the best account in the first place can help prevent unnecessary fees.
And once you’re ready to retire, you’ll have a healthy nest egg helping you to finance your daily expenses.
Frequently Asked Questions
What is the maximum contribution limit for IRAs in 2023?
The maximum contribution limit for IRAs in 2023 stands at $6,500 for individuals who are under 50 years of age, and it’s $7,500 for those who are 50 or older. This represents a $500 increase from the 2022 limits for all age groups. It’s important to remember that these contribution limits apply collectively to your contributions to both traditional and Roth IRAs.
Can I have both a traditional IRA and a Roth IRA?
Yes, you can have both a traditional IRA and a Roth IRA. However, the total amount you can contribute to both accounts combined cannot exceed the annual contribution limit.
What is a backdoor Roth IRA?
A backdoor Roth IRA is a strategy for people whose income exceeds the Roth IRA income limits to still contribute to a Roth IRA. It involves contributing to a traditional IRA and then converting that contribution to a Roth IRA. There may be tax implications with this strategy, so it’s recommended to consult a certified financial planner or tax advisor.
Is the money I contribute to an IRA protected from loss?
No, the money you contribute to an IRA is not protected from loss. The value of your IRA is subject to market fluctuations and the performance of the investments within the account. It’s important to diversify your investments and align them with your risk tolerance and retirement goals.
Can I withdraw money from my IRA before retirement age?
Yes, you can withdraw money from your IRA before reaching retirement age. However, early withdrawals are subject to income tax and potentially a 10% early withdrawal penalty. There are some exceptions to the penalty, such as using the funds for qualified education expenses or a first-time home purchase. Be sure to understand the rules and potential tax implications before making an early withdrawal.
Are there any penalties for not taking distributions from my IRA?
Yes, there are penalties for not taking required minimum distributions (RMDs) from your traditional IRA. The penalty is 50% of the amount you should have withdrawn but didn’t. Roth IRAs, on the other hand, do not require minimum distributions during the owner’s lifetime.
Louisiana, the jewel of the South, is not just a state but an experience. While New Orleans often hogs the limelight, there are tons of hidden gems that call out to those in search of the perfect place to call home.
This article unveils the allure of some of these gems, showcasing why they proudly stand among the best places to live in Louisiana. Each city, with its own unique flair, offers a captivating glimpse into life in the Pelican State.
Population: 376,971
Average age: 37.2
Median household income: $45,594
Average commute time: 23.7 minutes
Walk score: 58
One-bedroom average rent: $1,399
Two-bedroom average rent: $1,800
Situated along the winding curves of the Mississippi River, New Orleans is undoubtedly one of the best places to live in Louisiana. Louisiana’s largest city is not merely a spectacle for tourists, but a welcoming home for its residents.
Despite its party-centric reputation stemming from legendary Bourbon Street, New Orleans boasts a relaxed pace of life. To put it simply, NOLA is a place where front porch conversations are a daily ritual, and where a strong sense of community is as enduring as the ancient live oaks that line the city streets.
Moreover, New Orleans offers an economic landscape as flavorful as its famous gumbo. Being a key port city, it has plenty of employment opportunities in maritime industries, alongside healthcare, education and technology. Life here extends beyond the working hours into the evenings filled with jazz tunes bumping out of The Spotted Cat Music Club, informal gatherings over Creole cuisine and weekends exploring the countless historical sites surrounding the iconic City Park.
Population: 222,185
Average age: 32.0
Median household income: $44,177
Average commute time: 27.1 minutes
Walk score: 39
One-bedroom average rent: $1,042
Two-bedroom average rent: $1,220
The majestic silhouette of the State Capitol, the tallest in the United States, stands as a sentinel to Baton Rouge’s past while signaling a future filled with promise. Here, in Louisiana’s second-largest city, the serenity of life by the banks of the Mississippi is complemented by a burgeoning economy led by jobs in petrochemicals, medical research and education. The food scene is a mirror to the soul of Baton Rouge, where traditional Southern fare melds effortlessly with modern culinary delights.
Life in Baton Rouge is often described as easy-going, yet filled with small, everyday adventures. It’s a place where weekends are eagerly awaited, not just to break from the work routine, but to explore the myriad parks, lakes and landmarks peppered throughout the city limits. The city’s sports scene is nothing short of legendary, with college football games transforming weekends into an electrifying festival of camaraderie. College town vibes are palpable with reputable institutions like Louisiana State University and Southern University, making it an enticing place for families and recent grads.
Population: 121,771
Average age: 36.4
Median household income: $55,329
Average commute time: 25.5 minutes
Walk score: 42
One-bedroom average rent: $1,257
Two-bedroom average rent: $1,525
Lafayette’s deeply rooted Cajun and Creole heritage is reflected in its food, music and community celebrations. A city that dances to the rhythmic beats of Zydeco music, Lafayette invites everyone to partake in its joie de vivre. Its heritage is not just a thing of the past, but a living, breathing essence of the community. Lafayette’s culinary scene is a dialogue between tradition and innovation, where classic Cajun and Creole dishes meet contemporary creativity.
When it comes to the daily grind, Lafayette boasts a flourishing economy with noticeable growth in healthcare, education and technology. The city prides itself on having a friendly business environment and a supportive community that cherishes local enterprises. The educational landscape is nothing to scoff at, led by University of Louisiana at Lafayette, instilling a youthful energy into the city’s rhythm. Being a smaller city, Lafayette has less traffic and a closer-knit community feel compared to its larger counterparts, yet with all the amenities and opportunities one would anticipate in a modern urban setting.
Population: 184,021
Average age: 36.1
Median household income: $41,782
Average commute time: 19.1 minutes
Walk score: 31
One-bedroom average rent: $993
Two-bedroom average rent: $1,346
Perched along the western banks of the Red River, Shreveport firmly claims its title as one of the best places to live in Louisiana. Not to be outshined by its neighbors, this city serves as a magnet for those seeking a harmonious blend of southern hospitality, diverse economic opportunities and easy access to a ton of outdoor activities. Numerous theaters, live music venues and art galleries stand as a testament to the city’s commitment to fostering the arts. Meanwhile, its bustling riverfront area showcases a delightful mix of shops, restaurants and music venues that entice residents and visitors alike.
Daily life in Shreveport is defined by a harmonious balance of work and leisure. The city boasts a robust economy thanks to key industries like healthcare, energy and manufacturing. On weekends, residents often find themselves casting a line in the serene Cross Lake, exploring the scenic trails of the Red River National Wildlife Refuge or perhaps indulging in a little fried food with friends. In essence, Shreveport combines the allure of a larger city with the warmth of a smaller town, making it a compelling contender among the best places to live in Louisiana.
Population: 81,097
Average age: 35.5
Median household income: $52,986
Average commute time: 21.7 minutes
Walk score: 37
One-bedroom average rent: $802
Two-bedroom average rent: $935
With its picturesque lakeside setting and classic Southern charm, Lake Charles is undeniably one of the best places to live in Louisiana. This Southwest Louisiana city provides a serene backdrop for a full life. Being a major hub for the petrochemical industry, it’s not just the waters of Lake Charles that glisten, but also the promise of economic opportunities. Yet, it’s the easy access to the great outdoors, from fishing on the lake to strolling the lush parks, that provides a pleasant contrast to the industrious heartbeat of the city.
Life in Lake Charles feels like a breath of fresh air. Residents revel in the city’s many festivals celebrating everything from Mardi Gras to pirates. The food scene, a delightful mix of Southern classics and innovative gastronomy, offers fresh fare that would tantalize any palate. In the realm of education, Lake Charles stands strong with reputable schools, like McNeese State University, contributing to the city’s learned atmosphere. Regardless of how you look at it, Lake Charles is a prime spot in Louisiana to settle down in.
Population: 138,511
Average age: 41.9
Median household income: $65,740
Average commute time: 21.0 minutes
Walk score: 54
One-bedroom average rent: $1,087
Two-bedroom average rent: $1,497
Just a stone’s throw away from the hustle and bustle of New Orleans, Metairie confidently establishes itself among the top spots to live in Louisiana. While it basks in the proximity to the Crescent City’s festivities, Metairie has carved out its unique identity, serving as a haven for those seeking suburban comforts with urban conveniences. Boasting the state’s largest shopping mall, Lakeside, and the scenic beauty of the Metairie Lakefront, the city cleverly blends commerce with leisure, allowing its residents to shop till they drop and then relax by the water’s edge.
Metairie’s tree-lined streets, bustling shopping districts and a solid selection of dining options offer an ever-engaging lifestyle. Family-centric events dot the calendar year-round, from the family-friendly Mardi Gras parades to the local farmers markets. It’s a place where schools are top-notch, parks are aplenty and where neighbors greet each other by name. Proximity to New Orleans means that a more frenetic nightlife or a dose of jazz is just a short drive away, yet many are content with the more mellow offerings of Metairie.
Population: 17,590
Average age: 41.4
Median household income: $44,688
Average commute time: 24.4 minutes
Walk score: 65
One-bedroom average rent: $995
Two-bedroom average rent: $1,217
Situated on the west bank of the Mississippi River across from New Orleans, Gretna might appear as a quaint, lesser-known town, but it holds its own among the best places to live in Louisiana. With its picturesque historic district, antebellum homes and bustling open-air markets, Gretna provides a sweet escape from the city’s clamor while being just a ferry ride away from the heart of the Big Easy. The town’s old-world charm is amplified by its brick-lined streets, where each corner seems to whisper tales from yesteryears, and the iconic David Crockett Firehouse, which stands as a proud testament to the town’s storied past.
With a community that celebrates together, from Gretna Fest to the melodies of the weekly concert series at the Market, there’s a palpable sense of camaraderie. Economically, the city boasts a thriving local business scene, supported by a community that values local products and services. Furthermore, Gretna’s educational institutions are lauded for their excellence, ensuring a bright future for the town’s younger generation.
Population: 62,865
Average age: 34.8
Median household income: $50,027
Average commute time: 19.0 minutes
Walk score: 31
One-bedroom average rent: $1,096
Two-bedroom average rent: $1,317
Bossier City isn’t just about glitzy casinos and entertainment hotspots; it’s a place where the pull of community spirit is just as magnetic as the allure of its boardwalk. Bossier City is like a masterful magician, balancing the thrills of urban life with the tranquility of picturesque neighborhoods and green spaces.
The rhythm of everyday life in Bossier City is a dance of opportunity and relaxation. The local economy is buoyed by a mix of retail, technology and defense jobs, thanks to the presence of Barksdale Air Force Base. For families, the city provides a sanctuary of top-tier schools, expansive parks and a healthy selection of outdoor activities. With its harmonious blend of economic growth, communal events and serene living spaces, Bossier City offers residents an enriching life right on the Red River’s shores.
Population: 44,787
Average age: 37.2
Median household income: $43,760
Average commute time: 24.5 minutes
Walk score: 30
One-bedroom average rent: $575
Two-bedroom average rent: $650
Hidden away in the heart of the state, Alexandria radiates an allure that firmly establishes it among the prime places to live in Louisiana. With the Red River gracefully snaking its way through the town, Alexandria’s scenic beauty is complemented by a thriving city center. It’s a place where history feels alive, evident in the preserved 19th-century homes of the Garden District and the majestic Hotel Bentley, a beacon of architectural splendor and timeless luxury.
The pulse of Alexandria is a harmonious blend of commerce, recreation and community ties. The city’s business landscape is diversified, spanning healthcare, education and retail. For residents, life is beautifully punctuated with visits to the Alexandria Zoological Park, afternoon strolls in the lush greenery of the City Park or perhaps indulging in the local dining scene, which offers a delicious marriage of traditional Southern flavors with contemporary twists.
Population: 28,658
Average age: 39.5
Median household income: $57,920
Average commute time: 25.7 minutes
Walk score: 36
One-bedroom average rent: $1,132
Two-bedroom average rent: $1,325
Located on the northeast tip of Lake Pontchartrain, Slidell shines brilliantly when it comes to places to live in Louisiana. With its alluring combination of waterfront vistas, majestic oak trees and a bustling town center, Slidell effortlessly blends the tranquility of lakeside living with the verve of modern life. It’s a place where sailboats dot the horizon by day, while the city lights paint a mesmerizing picture by night.
Life in Slidell is all about savoring the small moments while embracing the vast opportunities the city offers. A hub for shopping enthusiasts, the Fremaux Town Center boasts a range of retailers that satiate every shopping whim. Meanwhile, foodies can enjoy a taste of Louisiana’s culinary magic in the city’s many restaurants. For families, Slidell comes alive with parks, top-notch schools and community events that foster a tight-knit bond among residents of all ages.
Life is good in Louisiana
From the rhythmic streets of New Orleans to the tranquil shores of Slidell, Louisiana unfolds as a landscape of diverse experiences and unparalleled beauty. Those in search of a place to root themselves will find Louisiana’s cities and towns to be more than just places to live; they are gateways to a life rich in tradition, innovation and community spirit.
Discovering the best places to live in Louisiana is akin to uncovering hidden treasures, each more dazzling than the last. Whether you’re drawn by the promise of economic opportunity, the classic charm of historic districts or the embrace of a tight-knit community, the perfect Louisiana apartment awaits, ready to welcome you with open arms.
Selling a house amid a divorce can make an already-complicated situation even more complex. The need to manage a real estate transaction while also managing your interpersonal conflict is stressful, but sometimes financially necessary. Every couple’s situation will be a little bit different, of course, but if you need to sell the marital house due to a divorce, here are answers to some common questions and other things to consider during this difficult process.
Should I sell the house before getting divorced?
You can sell a property before, after or during a divorce, and the best option may be different for each couple. A number of factors can impact the best timing, including housing market conditions, how amicable your split is and the financial needs of each spouse.
One thing that can be useful is to work with a real estate agent who has experience in divorce transactions. “The common denominator for a divorce sale is that the divorcing parties must mutually agree to sell the marital property,” says Lou Rodriguez, an agent with United Realty Consultants in South Florida and author of “Selling Your Home During Divorce: How Everyone Can Win.”
An additional consideration for the timeline of your home sale is the potential profit you stand to make. If the value of the property has gone up significantly since you purchased it, you may have to pay capital gains tax, and the amount is very different depending on whether your taxes are filed jointly or as single individuals. For single tax filing status, you must pay taxes on anything over $250,000 in capital gains. That number doubles to anything over $500,000 if you file jointly as a married couple.
If you sell before the divorce is finalized, be sure you have a plan for what will happen with the earnings. “You’ll want to be careful how you handle the proceeds of the sale so that those proceeds are divided fairly during the divorce process,” says Randi Dukes, an agent with Repeat Realty in Dallas–Fort Worth and a divorce real estate specialist who has earned the RCS-D (Real Estate Collaboration Specialist–Divorce) designation. “It’s often recommended that those proceeds go into a separate account that can be divided upon divorce, rather than mixing the proceeds into other joint accounts.”
What are the options?
When you are going through a divorce, there are several different ways you could decide to sell the family home. Here are some common options.
Sell the house outright
“Often, selling the house makes the most sense because it provides both parties with a lump sum of money to establish a new home and a fresh start,” says Dukes. Selling the property outright means the proceeds can be more easily divided between two people. It also gives both partners the opportunity to establish the next phase of their lives.
Sell it to your spouse
Sometimes it makes more sense for one partner to continue owning the house. This can happen when one partner will have primary custody of the children, for example, as it eliminates the need for the children to move out of their home and be uprooted.
However, this option only works if the partner buying the home can make it work financially. “The spouse keeping the house needs to do their due diligence to make sure keeping it is a sound decision,” Dukes says. “A real estate agent can look at the title to see if there are any liens or second mortgages that one spouse may not know about, and the spouse can talk to a lender or financial advisor to see if they can actually afford to keep the house.”
If this is your plan, make sure you get all your legal ducks in a row. The partner selling the house will likely need to sign a quitclaim deed giving up their rights to the property and transferring them to the other partner — have a real estate attorney manage this process.
Co-own it
You could decide to hang on to the property and continue to own it together. Co-owning might allow you to rent out the property and both gain rental income, for example. Or, you could make the property work for both of you to live there with a renovation that divides it into two units. This can be a viable option for parents who both want to stay near the children.
Give it to your kids or family members
If you’d rather keep the home in the family than sell it, you could consider gifting the property to your adult children or another relative. This option eliminates the need to prepare the property for a sale and could be a way for both partners to put the property in the hands of someone they love. Again, be sure to have a real estate attorney handle the deal for you to ensure that ownership is properly transferred — and it’s a good idea to talk to a tax professional as well, to understand any tax or estate planning implications.
Community property states vs. equitable distribution states
There are two main legal approaches to how property is divided after a divorce. It all depends on whether you’re in a community property state or an equitable distribution state.
The majority of states fall into the category of equitable distribution, which means if one party earns or purchases certain assets, those assets are considered theirs individually. The assets don’t become shared property unless both parties agree to share them. “I live and work in Florida, an equitable distribution state, which simply means Florida courts will divide marital property in a manner which it considers fair, but not necessarily equal,” says Rodriguez.
Community property states, on the other hand, consider all assets acquired during a marriage to be jointly owned by both parties, and they are divided equally in the event of a divorce. Only nine of the 50 states are community property states, according to the IRS: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.
How to sell a house during a divorce
Selling a house can be stressful and time-intensive no matter what. Follow these steps if you decide to sell your house during your divorce proceedings.
1. Hire an experienced real estate agent and lawyer
Not every real estate agent or attorney knows how to navigate the conflict and tension that can come with selling a house during a divorce. It’s important to work with someone who has experience in sales like this, or even specializes in them.
“I would recommend that you work with someone who knows how to work in high-conflict situations and has experience in getting people moving in one direction to accomplish shared goals,” says Rodriguez. “Because whatever happens during the sale — accepting an offer, countering an offer, all the way to signing closing documents — requires that both parties agree each step of the way. It makes a difference having a transactionally experienced listing agent who has worked with other divorcing clients.”
2. Get a home estimate and agree on a sale price
It’s important that both parties come together on pricing. There are various ways to determine how much your home is worth, from online estimators to a thorough analysis of your local market prepared by a real estate agent. But a professional home appraisal, which will cost several hundred dollars, is probably the most accurate assessment of a home’s market value.
3. Sell the home and split up the net proceeds
Once you agree on the terms and price for selling the home, your agent will guide you through the home-selling process. This will involve preparing the home for the market, taking professional photos for the listing, listing and marketing the property, coordinating showings, reviewing offers and preparing all the closing paperwork. Once the sale is closed and complete, the proceeds will be shared as required by your state and established by your attorney.
Next steps
Ready to sell? It’s important to find a local real estate agent both of you feel you can trust. “Look for someone with additional training in divorce real estate, and ask them about their experience,” says Dukes. This type of agent will be skilled in handling not only the home sale but also any interpersonal conflict that may arise.
FAQs
The best time to sell a house will be different for different couples. “If both spouses agree, then selling your house before filing for divorce is an option — if you’re trying to take advantage of a strong seller’s market, this might be a good idea,” says Randi Dukes, a Dallas–Fort Worth Realtor who specializes in divorce real estate. However, selling the house after the divorce may be the right choice for other couples. Whichever timeline you choose, it’s important that both partners agree on the process.
In some cases, if both parties can’t come to an agreement on how to sell the property, yes, a court may intervene to force the sale. The laws will differ depending on your state and your specific circumstances, so be sure to consult both your divorce lawyer and a real estate attorney in your area.
WASHINGTON (September 14, 2023) – The current real estate market’s high home prices and mortgage rates, as well as limited inventory, are the top reasons that Realtors® and prospective home buyers across races and ethnicities cite as barriers to purchasing a home, according to two new reports from the National Association of Realtors®.
In partnership with Morning Consult, NAR’s 2023 Experiences & Barriers of Prospective Home Buyers Across Races/Ethnicities report surveyed White, Hispanic/Latino(a), Black and Asian prospective home buyers about their experiences. NAR’s 2023 Experiences & Barriers of Prospective Home Buyers: Member Study surveyed Realtors® who focus on residential real estate regarding the latest buyer with whom they worked who has not yet purchased a home, and it compares findings with the consumer study.
“Home buyers face the most difficult affordability conditions in nearly 40 years due to limited inventory and rising mortgage interest rates,” said Jessica Lautz, NAR’s deputy chief economist and vice president of research. “The impact is exacerbated among first-time buyers who are more likely to be from underrepresented segments of the population.”
Among prospective home buyers, Asian (27%), Hispanic (24%), Black (20%) and White (15%) respondents say the main reason they have not yet bought a home is because they are waiting for prices to drop. White respondents (15%) are just as likely to say it is because they are waiting for mortgage rates to drop. Additional market-related reasons that prospective home buyers cite as barriers include waiting for mortgage rates to decline (18% – 25% of all four groups) and not enough available homes within their budget (19% – 24% of all four groups).
The top three reasons why Realtors® say buyers have not yet purchased homes are the same as reported by consumers: not enough homes available for purchase in buyers’ budgets (34%), buyers are waiting for mortgage rates to drop as higher prices affect affordability (18%) and buyers are waiting for prices to drop (9%). These three factors greatly impact affordability since limited inventory drives up home prices and higher rates increase monthly mortgage payments.
Saving for a competitive home down payment is also a primary obstacle for prospective home buyers (6% – 9% of all four groups). In terms of what holds them back from saving for a sufficient down payment, prospective home buyers across races and ethnicities cite as barriers current rent/mortgage payments (43% – 56% of all four groups) and credit card payments (38% – 57% of all four groups). Despite this, awareness about existing down payment assistance programs is low among prospective buyers saving for down payments. Only 8% – 15% of all four groups applied for these programs, 20% – 33% considered but did not apply to these programs, 21% – 32% did not consider these programs, and one-third (30% – 33% of all four groups) say that they are not aware of these assistance programs. For prospective home buyers who are aware of down payment assistance programs, the primary reason they did not apply for them is because they did not know enough about the programs (44% – 58% of all four groups).
Likewise, more than half of Realtors® (53%) say that at least one issue is holding their latest buyer back from saving a competitive down payment: most likely current rent or mortgage payments (23%) or credit card balances or payments (17%). Further, only 23% of Realtors® say that their buyers experiencing these challenges have applied for down payment assistance programs. This is most likely because their income is too high (30%), they did not know enough about the programs (19%), or they are worried about the competitiveness of their offers in multiple-bid situations (17%).
“Down payment assistance programs often fly under the radar for potential home buyers. Using programs – like FHA, VA or USDA loans – can make homeownership more attainable. Experts, such as agents who are Realtors®, can educate potential buyers about these programs. Doing so will bring in more first-time buyers and narrow the racial homeownership gap,” added Lautz.
Discrimination also plays a role in the homebuying process. About one in six (13% – 16% of all four groups) prospective home buyers across races and ethnicities report facing discrimination. More than half of Black (63%), Asian (60%) and Hispanic (52%) prospective home buyers who report this say it was due to their race or ethnicity. Of these, the largest proportions of every group are most likely to report that this discrimination manifests in steering toward or away from specific neighborhoods (36% – 51% of all four groups) and more strict requirements (32% – 48% of all four groups). Despite all of this, most discrimination during the homebuying process goes unreported: 47% – 81% who describe it did not report it to a government agency or legal aid organization.
Interestingly, only 1% of Realtors® who took the survey report that their buyers experienced discrimination during the homebuying process, while 13% are not sure. Those reporting discrimination are most likely to say this is based on race or ethnicity and lay this at the feet of lenders, saying that buyers experienced this in the type of loan product offered (43%) or that buyers did not receive a call back from lender(s) (29%). Of those who report discrimination, 57% report it based on race, 29% report it based on age and 21% report it based on familial status (including marriage or parental status). Just 7% say that the buyer reported the discrimination, which was on the basis of either race or religion or both, to a government agency or legal aid organization.
To help address discriminatory practices in real estate, NAR offers several resources to its members, including Fairhaven, an interactive training simulation based on real fair housing cases; Bias Override, an implicit bias training course with practical tips to override bias; At Home With Diversity, a certification course aimed at serving diverse consumers; and a confidential voluntary self-testing program for brokerages to assess agents’ compliance with fair housing laws. In Washington, NAR advocates for strong fair housing and fair lending enforcement, and policies aimed at closing homeownership gaps among demographic groups.
About the National Association of Realtors®
The National Association of Realtors® is America’s largest trade association, representing more than 1.5 million members involved in all aspects of the residential and commercial real estate industries. The term Realtor® is a registered collective membership mark that identifies a real estate professional who is a member of the National Association of Realtors® and subscribes to its strict Code of Ethics.
Newrezhas launched Onward Home Mortgage, a joint venture mortgage companyin partnership with Keller Williams Georgia Legacy Group (GLCG).
Through the partnership with agents at Keller Williams GLG, mortgage professionals at Onward Home Mortgage and Newrez will target borrowers in the Southeast United States.
“This is a marriage of outstanding organizations that will now grow even stronger. I am humbled and honored to lead such a talented group of professionals and can’t wait to continue getting more borrowers into the homes of their dreams,” Kathy Vitali, President of Onward Home Mortgage, said in a prepared statement.
Headquartered in Roswell, Georgia, Onward Home Mortgage specializes in residential purchase mortgage lending and has a presence in the greater Georgia and Alabama areas. It is part of the Newrez Ventures platform.
GLG is a Keller Williams Realty franchise group of residential real estate brokerages located in Georgia, servicing Alpharetta as Keller Williams Realty North Atlanta, Roswell as Keller Williams Realty Consultants, Peachtree Corners as Keller Williams Realty Chattahoochee North and surrounding metropolitan Atlanta areas.
Established in 2017 as a group, the three franchises have been in operation independently for more than two decades and have more than 2,000 licensed real estate agents in Georgia.
Newrez has 15 joint venture partners including Carolina One Mortgage, Shelter Mortgage Company and Summit Home Mortgage, according to its website.
“Newrez and Newrez Ventures’ commitment to bringing affordable housing to borrowers nationwide continues as Onward’s vast product suite tailors uniquely to the needs of today’s borrowers, from FHA to First Time Homebuyer programs,” Newrez said.
A joint venture typically ramps up faster than a traditional mortgage company. At a mortgage brokerage joint venture, loan officers generally get paid a lower base salary than counterparts at traditional lenders and may get a smaller commission because the LO is doing less work finding customers as there are greater real estate agent referrals.
Though the mortgage-real estate brokerage JV model was popular during the pandemic years, the Consumer Financial Protection Bureau’s relative newfound interest in scrutinizing possible RESPA violations could chill interest.
What Is Financial Infidelity and Why Does It Matter?
In a survey about how money matters in relationships, we asked both men and women if they’d ever broken up with someone over money. Around a quarter of respondents said they had, while around a fifth said someone had broken up with them over financial matters.
Clearly, financial factors can create friction in relationships—and that’s true whether or not someone breaks up over these issues. According to a poll conducted by the Association of International Certified Professional Accountants, almost 70% of Americans who were married or living with a partner said they’d fought about money with their significant other within the past 12 months.
With money a stressor in relationships, it’s not surprising that financial infidelity sometimes occurs. Find out more about financial infidelity and the role finances play in relationships below.
In This Piece
How Are Finances Important to Relationships?
People often shy away from the importance of finances in a marriage or other relationship because they don’t want to seem materialistic or as if they’re putting money and things before their significant other. In reality, though, finances are critically important because they can provide stability—or take it away, as the case may be. Being honest with each other about finances and working together transparently for future financial goals builds trust and helps the entire marriage or relationship succeed.
Some things that might be important to financial fidelity in a relationship include:
Being honest about income. Even if you don’t put all your money in a joint account together, being honest about your incomes can be important. Hiding that you make substantially more, so you can keep money to yourself is a form of financial infidelity in marriage. Instead, consider coming clean about the income and working together to come up with a fair way to treat the budget if you don’t want a complete “what’s mine is theirs” relationship.
Working together on budgeting. Create a shared budget and stick to it. This is especially important if you put all your funds together and treat them as the same. If you don’t do that, decide what expenses you’ll cover together, and always honor your part of that agreement before you spend on or save for yourself.
Maintaining transparency about spending. Be honest about what you spend and how, especially if you’re sharing accounts. Don’t hide packages or things you bought from each other or downplay what something costs because you know the other person might be upset about it. When making big purchases, talk to each other beforehand.
Deciding together on frivolous expenditures. Make a budget for frivolous spending or a no-questions-asked cash budget. For example, maybe you each get $50 a week in cash to do whatever you want with. If you like expensive coffees or want to eat out and your spouse doesn’t see the value in that, you can use your fun money for it without feeling like you have to hide it.
Agreeing to debt and other major decisions together. Don’t incur debt the other person doesn’t know about, and make large financial decisions together whenever possible.
What Is Financial Infidelity?
Financial infidelity occurs when you lie about money matters to each other in a relationship where there’s an expectation that you won’t. Usually this is possible when a couple shares finances, but it’s also possible even if you keep your finances separate and are dishonest about things.
A few examples of financial infidelity include:
Incurring debt and hiding it from the other person
Not paying a bill but telling the other person you did
Buying something in secret you know the other person wouldn’t approve of, especially if it’s expensive
Hiding money from the other person, such as opening a savings account in your name only to funnel money into
Signs of Financial Infidelity
If you’re worried that financial infidelity is at play in your relationship, consider the following common signs:
The other person gets anxious or angry, seemingly for no reason, when the subject of money comes up
There are larger-than-normal cash withdrawals on any of your accounts
You haven’t seen a credit card or bank statement in a while and the other person makes excuses whenever that comes up
The other person makes it difficult or impossible for you to log into online credit card or bank accounts
The other person always tries to get to the mail before you and doesn’t show you all the mail
You find potentially expensive items in your home, and you’re not sure where they came from or when they were purchased
You or your spouse is denied credit based on high debt-to-income ratios or credit utilization, but you weren’t aware that you had a lot of debt
Does Financial Infidelity Signal the End of Your Relationship?
Whether you should break up with someone or ask for a divorce based on financial infidelity is a personal choice, and one that probably should take into account many other factors. According to our survey, men are slightly more likely to initiate a breakup over financial issues, with almost 30% saying they had, compared to close to 23% of females.
Age also seems to play a role. Almost 30% of those aged 25 to 34 say they’ve broken up with someone over finances, and just over 30% of those aged 35 to 49 said the same. For people aged 50 to 64 and 18 to 24, the number drops to less than 15%, and for those over age 65, only around 6% said they had broken up with someone for these reasons.
Avoid Financial Infidelity
Couples know they have to work on issues like communication and intimacy. But they often don’t realize they should put the same effort into working on finances together. Start today by being open and honest about money. Consider signing up for your free credit scores together at Credit.com, so you can see where you both stand.
Methodology
This survey was conducted for Credit.com using Suzy. The sample consisted of a total of 1,019 responses per question and is not statistically representative of the general population. This survey was conducted in September 2022.