It may seem impossibly far off, but it’s never too soon to start planning your financial future, especially when you are single.
Solo living is increasingly a reality for many, both before and during retirement. Nearly half of women and 18 percent of men over age 65 are single today, according to Census Bureau statistics. When planning for retirement on your own, there are some distinct financial considerations. While many of the fundamental aspects of retirement planning hold true regardless of marital status, such as the importance of savings, having a written financial plan and securing sources of guaranteed income that last your lifetime, there are nuances for single retirees that are worth noting.
First, have a plan for your long-term care. As a single retiree, it is not enough to rely upon a friend or family member to help in case of declining health due to old age or medical issues. For couples, there is an added element of security with a spouse providing some measure of care and support. Yet, singles need a plan to take care of themselves mentally and physically as they age, often with long term care insurance. This insurance protection can provide financial assistance to help cover an extended hospital or nursing home stay. Relying just on one’s own individual assets or support network may not be enough and can lead to less-than-optimal care when it is most needed later in life.
Second, look at securing guaranteed income that lasts a lifetime. For this, many of my single clients explore an immediate or lump sum annuity. This product involves a lump sum payment that provides guaranteed income for life. Single people often opt for a “maximum benefit” which means they receive higher monthly payments that stop when the individual passes away.
In contrast, couples often opt for spousal benefits that continue payments to take care of a surviving spouse. But, a single person may not have anyone else relying on those retirement dollars, so opting for the larger monthly payments may make more sense and increase retirement income. When I work with single clients who are nearing retirement, we sit down and project what their totally monthly income is likely to be in retirement, taking into account a lump sum annuity (if that is the right option for them) as well as Social Security, any pensions and other savings. Guarantees in annuities are based on the claims-paying ability of the underlying insurance company.
Third, find a financial support network. As a financial advisor, many of my single, retired clients appreciate my role as a sounding board and voice of reason on money matters. It is an honor and responsibility to play that role in other people’s lives. Especially for singles, it is important to seek out productive input from others who have their best interests at heart. Bouncing ideas, fears or disappointments off of someone else who is not going to feed into fear or paranoia can make a big difference in maintaining an even keel. A financial network could include a financial advisor, friends, family members or other trusted individual with whom you feel comfortable discussing money concerns, ideas and plans.
Fourth, make plans for your legacy. While every retiree should make sure wills and financial documents are in order, single individuals should pay extra attention to this. A surviving spouse is the default inheritor of a deceased spouse’s assets, giving some assurance to married couples if one of them should die without a will in place. But single individuals may leave their family and friends mired in conflict and legal battles if their wishes are not clearly documented in wills and beneficiary information before death.
Lastly, find a community. I encourage single retirees to remember one of my favorite phrases, “have something to do, something to look forward to and something or someone to love.” A common concern for older singles is isolation, which can create a negative, downward spiral that impacts all areas of life. Without the order, routine and social interaction of work, retirement can feel lonely, especially for people who are single.
In retirement, I encourage singles to embrace their passions and interests — whether it be cooking, traveling, gardening, grandchildren, church, pets or volunteering — and build communities that keep them active and engaged. Given the trend towards more people living single in retirement, there are many opportunities for seniors to find communities and activities on a fixed budget.
For a single person approaching retirement, it can be empowering and confidence-inspiring to get on top of the financial planning and be in a position to be ready to retire and embrace this new phase in life.