Q: Most retirement advice is geared toward people “growing old together.” How do I plan for a fabulously single life after work?
A: If you’re single at retirement, you won’t have several benefits: spousal Social Security benefits, life insurance payouts and equity, and preferential tax treatment for married couples.
You’re not alone. The US census reports that 54% of men and 27% of women over age 65 are single, facing a more difficult retirement landscape than married couples.
However, there are many retirement strategies that are easier for single people to execute. Here are three steps you can take to make your retirement years safe and secure.
1.) Start saving now
Single people often have significantly less in retirement savings than married couples. There’s only one solution: Start saving more.
It’s easier to start small. Try saving a dollar every day for 30 days. Use that money to start or add to a tax-advantaged retirement account like an IRA. After 30 days, this practice will become habit.
Single retirement may require a more cautious retirement plan – you may need to work longer to achieve security in retirement. For many, the years just prior to retirement are their peak earning years. Several more years at your max salary (and max savings rate) can add up quickly!
2.) Choose your accounts wisely
There are some common retirement situations that put single people at greater risk than married couples. Primarily, single people have less support and flexibility if they outlive their savings because they lack the larger pool of assets and supplemental income streams of married couples. Consequently, they must be more careful in their selection of retirement vehicles. Guaranteed sources of income that provide security, like lifetime annuities and defined benefit plans, can alleviate these concerns.
Also, without a partner to depend on if you require long-term care, major medical problems pose a more significant challenge. Long-term care insurance provides excellent protection against these costs. Similarly, keeping a robust Health Savings Account (HSA) can help save on taxes now and pay for medical expenses later.
3.) Take advantage of the opportunities
Retiring single offers exciting opportunities. For example, you no longer need to live near your old workplace, and can move to a community with a lower cost of living.
Other available opportunities that aren’t as desirable for married couples include starting a small business, consulting or freelancing. These can help maximize your tax benefits and bolster your income over those early retirement years.
Since there’s no guaranteed inheritance outside a marriage, your estate planning has many more options; you can dedicate your remaining savings to your favorite cause.
YOUR TURN: What are you most looking forward to in retirement? How do you plan to make that dream a reality? If you’ve already retired, what tips do you have for the next generation?