Guide to Finance for LGBTQ+ Americans
Lesbian, gay, bisexual, transgender, and queer (LGBTQ+) people have seen many historical, societal, and legal changes in recent years that grant them more equality and protection. Despite these advancements, they still face many unique challenges, including financial ones.
Whether it is legal disparities that leave LGBTQ+ populations financially unprotected or personal finance concerns, it is important to recognize these issues. Defining the problems will help bring attention to them and build ways to address them.
This article will provide an overview of the financial issues that LGBTQ+ people face in regard to marriage and family planning, debt, insurance, and retirement—sometimes because of the history of discrimination against LGBTQ+ communities, but also in part due to the unique financial challenges that come with being an LGBTQ+ person.
- Because much of the change and movement for the advancement of LGBTQ+ rights has occurred relatively recently, members of these communities are still learning how to cope financially with the specific challenges that they face.
- Members of LGBTQ+ communities have less saved for retirement on average.
- LGBTQ+ people carry $16,000 more in student loan debt than their cisgender/heterosexual peers.
- Family planning for LGBTQ+ people can easily cost in the tens of thousands of dollars.
- LGBTQ+ retirees may have less saved for retirement and wish to retire to accepting communities that can have higher-than-average living costs.
A History of Discrimination
There is a long history of LGBTQ+ discrimination in the United States. It wasn’t until 2015 that gay marriage was legalized in all 50 states. And it wasn’t until 2020 that the U.S. Supreme Court barred discrimination in employment decisions in relation to a person’s sexual orientation or gender identity. But these are just some of the concerns facing LGBTQ+ people.
Over time, many laws have been passed and notable events have occurred that have helped and hurt members of LGBTQ+ communities. Below are some of the key laws and moments that have shaped the world and issues that they face today.
- 1969: The Stonewall Uprising occurred at the Stonewall Inn, a gay bar in New York City. This uprising is often cited as a catalyst for the beginning of the LGBTQ+ rights movement.
- 1974: The Equal Credit Opportunity Act (ECOA) of 1974 prohibits discrimination in lending based on race, color, religion, national origin, sex, marital status, age, or the receipt of public assistance, but omits any mention of sexual orientation or gender identity.
- 1977: Harvey Milk is elected to the San Francisco Board of Supervisors. He was one of the first openly gay elected officials. He was assassinated after serving less than a year in office.
- 1988: The Fair Housing Act, originally passed in 1968 and amended in 1988, protects Americans from discrimination based on race, color, national origin, religion, sex, family status, and disability, but omits any mention of sexual orientation or gender identity.
- 1994: “Don’t Ask, Don’t Tell” is instituted, a policy that banned openly gay and lesbian members of the military from serving in the U.S. armed forces.
- 2009: Then-President Barack Obama signs a Presidential Memorandum that allows same-sex partners of federal employees to receive benefits, but it does not cover health benefits.
- 2010: The “Don’t Ask, Don’t Tell” policy is repealed, allowing gay and lesbian people to serve openly in the U.S. military.
- 2015: Same-sex marriage is legalized in all 50 U.S. states by the U.S. Supreme Court ruling in the case of Obergefell v. Hodges.
- 2019: The Fair and Equal Housing Act of 2019 was introduced in the U.S. Senate. The bill would have provided protection from discrimination in credit lending in relation to sexual orientation and gender identity. It did not receive a vote, and therefore did not pass. To date, the bill has not been reintroduced in the current Congress.
- 2020: The U.S. Supreme Court ruling in the case of Bostock v. Clayton County bars discrimination in employment decisions in relation to a person’s sexual orientation or gender identity.
- 2021: The Consumer Financial Protection Bureau (CFPB) clarifies that the ECOA includes protections for LGBTQ+ people, making it illegal to discriminate on the basis of gender identity or sexual orientation.
Much of the change and movement for the advancement of LGBTQ+ rights occurred in the last 50 years. The monumental changes outlined above give a glimpse of the struggles and victories that LGBTQ+ communities have endured and achieved. Because some rights and protections have only been granted in recent years, such as marriage and workplace protections, members of LGBTQ+ communities are still impacted by the long period of time without them.
These milestone events have had substantial ramifications for LGBTQ+ people in relation to finance. Whether it was leaving out protections against discrimination or granting rights (such as health coverage and marital status tax and other benefits), these events shaped the financial future for LGBTQ+ people in the form of personal finance, debt, insurance, retirement, and many other areas. Exploring these areas helps spotlight the financial struggles that LGBTQ+ people may encounter.
Marriage and Family Planning for LGBTQ+ People
The right to legally marry drastically changed the landscape for LGBTQ+ people. With the right to marry came spousal benefits through Social Security, pensions, and work. Married couples also received important tax benefits, including being able to file taxes jointly and avoid enormous tax burdens when receiving payouts from a deceased partner’s retirement plans.
With or without marriage, though, LGBTQ+ people face financial challenges when it comes to family planning. There are many options for an LGBTQ+ person to start a family—including adoption, in vitro fertilization (IVF), surrogacy, and artificial insemination—all of which cost money.
For example, adoption can cost $20,000 to $70,000, depending on whether the adoption is done domestically or internationally. IVF can cost $13,500 to $21,000 or more, and thousands more per attempt. Depending on the type used, surrogacy can cost from less than $60,000 to more than $150,000.
Paying these costs is difficult for most couples or individuals. The difference is that almost all LGBTQ+ people face these obstacles when choosing to start a family. This can cause financial strain or the buildup of debt.
On top of this, some states do not allow gestational surrogacy or have proposed bills to outlaw IVF. As a result, financial challenges can be coupled with legal challenges.
LGBTQ+ People and Debt
On average, LGBTQ+ people carry more student loan debt than their cisgender/heterosexual peers. According to Student Loan Hero, they hold $16,000 more in student loan debt. Various factors can lead to this problem, including students who have no financial support from parents unwilling to fund their LGBTQ+ child’s education.
With the often heavier student loan burden come financial struggles in other aspects of life, too: 41% of LGBTQ+ people reported being unable to buy their first house due to student loan debt, and 23% reported being unable to buy their first car.
Aside from student loan debt, debt in general appears to be top of mind for many in the LGBTQ+ communities. A survey of LGBTQ individuals from Experian reports that the second biggest financial concern for respondents, 20%, is paying off debt. Not only that, but 70% of respondents report using credit cards to purchase necessities.
Insurance Issues for LGBTQ+ People
LGBTQ+ people face unique financial challenges when it comes to insurance. According to the Movement Advancement Project, “42% of [the] LGBTQ population lives in states with insurance protections that include sexual orientation and gender identity,” meaning that fewer than half of LGBTQ+ people in the U.S. live in states with insurance protections for them.
In addition to this, healthcare for LGBTQ+ people is often threatened, such as when laws are passed that allow discrimination in healthcare against LGBTQ+ people. In his first day in office in January 2021, President Biden issued an executive order that expanded nondiscrimination protections for LGBTQ+ people, which included healthcare.
Health insurance issues include gender confirmation surgeries. A massive expense for transgender people, these often cost in the tens of thousands of dollars—they can exceed $100,000—and are not always covered by insurance. Paying for these surgeries with or without insurance presents a challenge for transgender people, causing some to turn to fundraising sites such as GoFundMe.
LGBTQ+ People and Retirement
When it comes to retirement, LGBTQ+ people have specific hurdles to overcome. To start, as a group they have less saved for retirement. This is caused by several factors, one of them being that LGBTQ+ people make less money, according to a study by Prudential.
The Prudential report shows that gay men make $56,936 on average, while straight men make 46% more: $83,469 on average. It also notes that lesbian women make $45,606 on average, while straight women make $51,461. (This second group of figures conflicts with other studies that have concluded that lesbian women tend to earn more than heterosexual women, such as a 2014 analysis of 29 studies.)
According to the Prudential report, bisexual men make $85,084 on average and bisexual women make $35,980. A Williams Institute at UCLA School of Law report concluded that bisexuals tend to earn less than gay or straight people.
Less information is available for the transgender community when it comes to retirement, but the U.S. Transgender Survey from the National Center for Transgender Equality states that transgender people are more likely to be living in poverty, which leads to having less saved for retirement. In fact, a 2011 report from the National LGBTQ Task Force found that 15% of transgender people had an annual household income of less than $10,000.
Additionally, until recently, many LGBTQ+ people faced retirement issues when it came to the lack of marriage equality. Social Security, pensions, and other retirement plans could not be transferred (or if they could be transferred, not easily) between partners because they were not legally married.
For example, until 2006’s Pension Protection Act (PPA), unmarried beneficiaries were forced to take any retirement funds in the form of lump-sum payments, not only creating enormous tax burdens for the beneficiary but also preventing them from receiving continuous payments over time, which could end up being more beneficial for the recipient. Individual retirement accounts (IRAs) and other retirement plans favor those who inherit from a spouse (as opposed to being a non-spousal beneficiary); the ability to legally inherit this money as a person’s spouse is extremely important.
Also, members of LBGTQ+ communities often have different needs in retirement. Many LGTBQ+ people seek out accepting parts of the country as locations for their post-employment years. This often means living in cities where living and housing costs can be much higher than the national average. This can make retirement more expensive for LGBTQ+ people.
The Bottom Line
LGBTQ+ communities face many financial challenges in addition to the ones outlined here. But recent changes—like the Supreme Court ruling in 2020 that granted federal nondiscrimination protections to LGBTQ+ people, along with the presidential executive order from Biden that expanded these protections—point toward progress being made.
Advocates push for further change, such as passing the Equality Act, which would expand the Civil Rights Act of 1964 and several other laws and would impact LGBTQ+ people “across key areas of life, including employment, housing, credit, education, public spaces and services, federally funded programs, and jury service.”
As advocacy for LGBTQ+ rights continues and members of the community receive more legal protections, the financial burden that LGBTQ+ Americans face may begin to decrease.