How to revolutionize the financial power of your couple, in three easy steps...
One of the most under-utilized powers in the world of personal finance is the financial power implicit in your couple. It is a very pervasive strong resilient power. It provides an income hedge to individual job loss via a second labor based income and diversifies risk of job loss if you work in different areas, cost savings in a variety of areas such as shared shelter and food and transport, health and other insurances, and a reduction in entertainment budget through shared time on common interests and pursuits. However, these conventional wisdoms in the financial staying power of a couple fade into insignificance when compounded with a little astute global country selection for your stage of life, as we discover the secret super power of the global couple...
I am going to show the secret couple super-power of a pair of unassuming acquaintances of mine. They chose to move to and live in the USA after the introduction of the Trump tax cuts for the 2018 calendar year, over 6 years ago. It was a watershed year for american couples as we are about to discover. Prior to that this particular pair had been living in France and i will duly explain why...
The primary financial power of the global couple is in providing a double income in a high income country based on their skills, education and experience. The primary global tradeoff in couple life is between countries that tax couples as two individuals and relatively un-favorably, or jointly and relatively favourably compared to two individuals, in some cases with further favouratism once children arrive. Historically, one of many acute differences between the american household fiscal model and that of major european countries was the relatively penurious tax environment placed on married couples in america compared to individuals contrasted against the very favorable treatment of couples in countries such as France.
France traditionally allowed income sharing in a married or civil couple so that a couple with mismatched earnings levels (one high and one low) would reap a very significant tax reduction compared to two similar individuals in combination. Upon the arrival of children a further income sharing and tax amelioration took place across typical middle class houshold income levels. By contrast, in the USA, married couples filing jointly paid in typical middle class household income ranges paid substantially more income tax than the two equivalent individuals in combination.
With the Trump Tax Cuts this historical situation was reversed literally overnight. Tax brackets were adjusted so that married couples filing jointly were effectively taxed just like two individuals in combination. This removed a quite significant fiscal bias against household formation in the USA. It is still not a children friendly fiscal regime but at least it is not marriage hostile any longer. So, our couple returned to the USA from France and promptly sent one to work and left the other at home to bond with a young child. The tax savings involved combined with the savings in child care costs essentially amounted to the second mid-range after-tax earnings stream.
The stay-at-home partner promptly noticed that there was a foreign earned income exemption provision in the household fiscal tax regime in the usa and went back to London for several months at a time on consulting assignment, staying with his parents there. That little country arbitrage allowed another earnings stream at low taxation to be added to the household total, and a currency hedge too!, not too mention the consumer choices of both countries. It's a good deal if you can get it. Another example of the natural power in globalism, global families, and global access.
However, i was able to give my friends a little pointer in the direction of our core belief system in multiple social pensions. In the USA, a minor-earning spouse is entitled to a social security benefit equal to half that of the major-earning spouse. That is without a dollar of contribution folks. As i have told you before, one of the primary attractions of the UK for the seasoned frolicker is that after 3 years of record you can make voluntary contributions from wherever in the world you are. You guessed what happened next right? Oh yes, my friends are fully paid up on the uk pension record and will be receiving 1,5 times whatever the major earnings record in the USA brings them too. In this particular case, they may well receive a core couple social pension benefit of $6 000 from the USA, $GBP 3000, and a small retainer from the French government for their years of work their too.
.... and again, these benefits are for life, no arguments about x% portfolio withdrawal rules to be had here, and are indexed for inflation. Now, that is what i call using the global power of the astute frolicking couple.