Pride Month: Supporting LGBTQ+ financial wellness

The financial needs of the LGBTQ+ community may not receive sufficient attention, yet many facets of this community are unique in terms of financial planning needs and need to be specifically addressed. That’s why it’s especially important for employers and leaders to include this community in conversations around benefits and understand the many financial twists and turns that LGBTQ+ workers may face.

Research from Experian shows that the majority (62%) of LGBTQ+ individuals say they have faced financial challenges due to their gender identity or orientation, and the Human Rights Campaign Foundation has found that LGBTQ people are more likely than the general population to feel their personal finances are worse now than they were a year ago. Meanwhile, in a 2021 E*TRADE survey,3 over one third (35%) of LGBTQ investors said finding someone to trust is the biggest challenge when it comes to investing , and over half (55%) are interested in companies with a strong environmental, social, and corporate governance programs. 

Where does your company stand? How can you create a safe space and help your LGBTQ+ employees thrive financially? One way to support LGBTQ+ financial wellness is to illuminate their choices and workplace benefits around relationships, family planning, and retirement.

Better together

If you think about the chronic discrimination the LGBTQ+ community has faced, it’s easy to make the mental connection to understand how much stress many LGBTQ+ employees experience. Anything leaders can do to provide support tailored to this community can dramatically help LGBTQ+ individuals thrive both in the company and in their personal finances. 

Let’s start with looking at primary relationships. Marriage isn’t everyone’s goal, but Pew Research found that a majority of same-sex cohabitating couples have taken the plunge since 2017. When LGBTQ+ couples do decide to tie the knot, it’s important to help employees understand how this milestone can affect their spouses’ eligibility for workplace benefits, estate planning and gifting strategies, adoption and family planning, income tax filing, healthcare coverage, social security spousal benefits, and retirement plan spousal benefits.

Encourage employees to consult with a tax advisor about their unique situation. For example, newly married couples filing a joint tax return might qualify for deductions and exclusions that reduce their tax bill—or they might get a so-called “marriage penalty” tax increase if their combined income puts them in a higher tax bracket. And when it comes to estate planning, married couples can enjoy estate tax exclusion portability.

Some couples might also consider other ways to help protect their legacy and their loved ones, such as a domestic partnership or cohabitation agreement. While the law does not recognize domestic partners as family, some workplaces and companies do—make sure you are communicating clearly and proactively about what benefits your company provides to domestic partners.

The rules on domestic partnerships and civil unions vary by state, but the IRS requires domestic partners to file taxes individually—and if there are children, it’s key to check local laws to determine if they qualify for deductions. State laws may also affect whether employees can extend healthcare coverage or community property to a partner, and estate planning will look different than in a marriage.

Similarly, a cohabitation agreement can formalize partnerships and may also offer room to customize legal arrangements while establishing a financial baseline and detailing how property, debt, and children will be cared for in the event of a separation. If your company includes any policies or benefits for cohabitating couples, make sure this information and support is easy to access.

Modern families

When it comes to building family wealth or building a family, many LGBTQ+ individuals face certain financial challenges and expenses that the general population might not have to grapple with. Building an LGBTQ+ family can be complex, but many workplaces offer benefits that can help.

For starters, many LGBTQ+ individuals may have experienced a rocky beginning when it comes to leaving home, acquiring debt, or building financial stability. Their careers may have experienced discriminatory hurdles, and they may not have the support system that members of the general population take for granted. So once LGBTQ+ individuals are ready to start their own family, they may be starting from a more difficult position—and their relationship status and where they live can affect their choices. Foster care, adoption, assisted reproduction, and surrogacy all come with unique legal and financial considerations, and employees may need your assistance.

Adoptions might be domestic or international, open or closed, and with public or private agencies. Prospective parents must juggle questions around tax credits, legal agreements, and money— The Balance estimates the average cost of an adoption is approximately $40,000. Yet assisted reproduction through cryopreservation, in-vitro fertilization, and surrogacy can be even more expensive at $60,000–$150,000, according to Surrogate.com. 

LGBTQ+ families will also need legal support to help them navigate the adoption or assisted reproduction process. Laws vary from state to state, and unmarried co-parents may not automatically receive the same rights as married parents. While there is a lot for employees to think about and work through, it’s doable and joyful with the right support system. It can be very helpful for you to   let your workforce know the extent of your current benefits offerings.

Healthy, wealthy, and wise

Saving for retirement is a challenge for many, but as Forbes Advisor notes, discrimination and inequality have taken a particular toll on many LGBTQ+ retirees’ ability to save. Yet things are looking brighter: E*TRADE found that more than four in five (87%) LGBTQ investors are now confident they are saving enough to enjoy the retirement they would like.

In order to help employees plan for retirement it is important to start the conversation as soon as possible. Encourage your employees to think through timing, who they want to provide for, and what their ideal retirement might look like. Raise awareness for contribution matching programs to make sure employees are not leaving money on the table, and encourage workers to connect with Financial Advisors to figure out how much they’ll need to save. Companies can also add value for LGBTQ+ employees by connecting them with additional resources like the Gay and Lesbian Medical Associations or the National Register of Health Service Providers in Psychology, which can help pinpoint LGBTQ-friendly care providers.

Employees may also appreciate support in getting their ducks in a row assembling legal paperwork or receiving education and resources from their company to help them think through the possibility of providing long-term care for a loved one.

Taking pride in wellness

Pride Month began with an uprising against discrimination at Stonewall, and  Pride Month 2020 ushered in a historic Supreme Court decision forbidding job discrimination on the basis of sexual orientation or transgender status, but even with these developments and federal protections, Forbes Advisor notes that systemic forces and life milestones can still have a significant impact on LGBTQ+ financial wellbeing today.

As Pride Month celebrates the historic twists, turns, and triumphs the LGBTQ+ community has won along the road to where we are today, it’s also a valuable time for companies to help advocate for important next steps that can help bring our community even greater equality, opportunity, and wellness—beginning with workplace benefits.

Jon Jensen is Executive Director for Product Management and D&I Committee Member, Morgan Stanley at Work.

Disclosures This article has been prepared for informational purposes only. The information and data in the article has been obtained from sources outside of Morgan Stanley. Morgan Stanley makes no representations or guarantees as to the accuracy or completeness of the information or data from sources outside of Morgan Stanley. It does not provide individually tailored investment advice and has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. The strategies and/or investments discussed in this article may not be appropriate for all investors. Morgan Stanley recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a Financial Advisor. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.