General Stock Investment Strategies/joint investing when unmarried

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Question
Hello,

Thank you in advance for your response.

Marriage is possible in the future, but my significant other and I are not currently ready to get married. But we are serious about setting up retirement goals right now.

IRAs are individual accounts, so how can two unmarried individuals set up a joint investment account with retirement in mind? Do institutions offer a type of account we can set up together?

thank you very much for your response.

Answer
Hi Vonnie-
You're right, the "I" in IRA stands for Individual. And in general, it isn't possible to set up a tax-advantaged retirement account with someone else - whether you're married or not. But you can always open up a joint bank, brokerage or mutual fund account with someone else and begin saving and investing in it, with the goal of leaving it there until retirement. A common account type for doing this is "joint tenants with right of survivorship" which you'll see abbreviated JTWROS. Most if not all financial institutions will offer this option for an account type.

A couple complications though...you're unmarried so can't file tax returns together. You'll need to divide any income or capital gains/losses in the joint account between you for tax purposes. That can be a tricky topic in itself, there are slight variations from state to state. Also, you lose some control...JTWROS means if one of you were to pass away, the other gets the entire account automatically. Both have the right to do transactions in the account including withdrawing the entire balance. That may not be what you want. It would be worth reading up a bit on how JTWROS accounts work, and how to report taxes from them, before opening one - to make sure it'll work for you and won't be more trouble than it's worth. They're a bit easier to deal with once you're married.

Another option to consider is simply saving separately and naming the other as the beneficiary of your account. On IRAs and similar retirement accounts, you can name beneficiaries, but you can also add "transfer on death" or "pay on death" designations to most taxable bank and investment accounts. Then, once you're married, you can look at how you'd like to combine things. That would be quite a bit easier to undo, if you don't end up getting married for whatever reason.

-Tad

General Stock Investment Strategies

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Tad Borek

Expertise

I am a San Francisco-based investment adviser and attorney.

Experience

I opened my investment advisory practice, Borek Financial Management, in 1999, and have been a licensed attorney since 1993.

I received my B.S from Cornell University, and a J.D. from George Washington University Law School.

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