Same-Sex Couples' Not-So-Golden Years

BOSTON ( TheStreet) -- As same-sex couples are increasingly being granted rights similar to those of traditional marriages, many will be at a comparative disadvantage as they enter retirement.

The study by the Williams Institute at the UCLA School of Law says gays and lesbians will have less retirement income and fewer ways to pass savings on to their families after their death. Merrill Lynch, a unit of Bank of America ( BAC), helped fund the report.

A large share of same-sex couples will be entering retirement in the next two decades, just as states open marriage and civil-union laws. There are about 1.2 million gay people living with a same-sex partner in America, according to the most recent U.S. Census.

Inequality in retirement savings needs to be addressed, says Naomi Goldberg, author of the survey, titled "The Impact of Inequality for Same Sex Partners in Employer-Sponsored Retirement Plans."

The study, citing census statistics, shows that traditional couples earn an average of 4% more in combined household retirement income each year compared to same-sex couples. It claims, however, that the statistic only tells part of the story.

Same-sex surviving spouses can't directly receive the balance of their deceased spouse's 401(k) plans. Because they must begin making withdrawals immediately, they face a higher tax rate and the loss of accruing interest. Surviving same-sex spouses also pay higher estate taxes.

"The bulk of these inequalities are a direct result of the Defense of Marriage Act (DOMA), which forces the federal government to treat same-sex couples differently than married couples when it comes to retirement savings or estate taxes after death," Goldberg says. DOMA was passed under President Bill Clinton.

There have been changes that have benefited gays and lesbians. The Pension Protection Act of 2006 gives surviving partners of same-sex relationships access to retirement assets.

Corporate America has shown an increased willingness to recognize same-sex couples. Companies such as Boeing ( BA), Coca-Cola ( KO), Pepsi ( PEP), Nike ( NKE) and Microsoft ( MSFT) offer the same benefits to straight and gay couples.

The federal government has proven less open-minded with its employees. Same-sex couples are unable to receive the same health-care, retirement and family-leave benefits. Congress is debating a bill sponsored by Sen. Joe Lieberman (I-Conn.) and Sen. Olympia Snowe (R-Maine) that would change that. The move could affect as many as 35,000 government workers at a cost of $56 million in 2010.

The federal government's lack of recognition for same-sex marriages -- even when legally sanctioned by such states as Massachusetts, Connecticut and Iowa -- has a broader impact. Surviving same-sex spouses and partners are unable to tap Social Security spousal or survivor benefits, losing out on an estimated $5,700 a year.

Goldberg says female couples are at a particular disadvantage.

"A female same-sex couple is more likely to be on public assistance, more likely to continue working older in life and they receive less in overall income," she says. "Women are more likely to move from job-to-job, whether it is because of taking time out for kids or otherwise. When you have two women who are creating a household together, that disadvantage is compounded."

The study found that female same-sex couples over age 65 have an average of $3,615 less income than straight married couples.

-- Reported by Joe Mont in Boston.