Planning for Retirement as a Single Person
If you’re unmarried and childless, you need special strategies for retirement saving, health care and estate planning—and a support network you can call on.
Robin Zenger has saved diligently and lived within her means for her entire life. When she was in her forties, she began taking a serious look at her finances to set herself up for a secure retirement. That’s a smart strategy for anyone, but it’s particularly important for people like Zenger, who is single and has no children.
Aging presents uncertainties for everyone, but single, childless seniors are missing the backup that many people take for granted: a spouse or adult children who can step in when needed. Many of the usual basics of saving, investing and long-term financial planning apply to those aging without a life partner or adult children, but they also need special strategies for retirement saving, health care and estate planning.
Because of declining birth and marriage rates, caregiving family members will likely be in shorter supply for baby boomers and the generations that follow than in the past. Today, about half of American adults are married, a dramatic decrease from the 72% of adults who were married in 1960. In 2016, roughly 9% of those who were 50 or older had never married, according to the U.S. Census. And about one-third of baby boomers don’t have children. Still others will age alone for other reasons, including the death of a spouse, divorce, or children who are estranged or unable to help.
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“Coming of age in the ’70s, I saw a lot of independent women and was keenly aware that I needed to be able to provide for myself,” says Zenger, 67, who is an adjunct history professor at the University of Arizona. Although she’s mostly optimistic about the years ahead, Zenger is still figuring out how she’ll navigate them without a built-in support system. Her strategy for this mammoth task? Live modestly, continue to work, invest, take good care of her health—and check in periodically with a financial adviser to make sure she’s still on track. She is also considering her options for housing if she can no longer live alone.
Build a team
For many people, the reality of aging alone becomes clear as they care for their parents and wonder who will be there to help them when they need it, says Joy Loverde, author of Who Will Take Care of Me When I’m Old?. Growing older without a significant other or adult kids means you’ll need to build a cast of supporting characters—including extended family, trusted friends and paid professionals—who can help with your finances, make medical decisions if you’re incapacitated and prevent you from becoming isolated as you age.
In addition to finding people who will manage your financial and medical affairs, you’ll probably need people to stop by, run errands or drive you to appointments. Many solo seniors branch out on the family tree, tapping siblings, nieces, nephews or cousins, while others add close friends to the mix. Zenger plans to rely on a longtime friend she has known since the two attended high school together in Panama. “She lives nearby and knows what I would do in various situations,” Zenger says.
Take the time to have a frank conversation with each of the people on your list, says Michael Branham, a certified financial planner at The Planning Center, in Moline, Ill. Find out what they’re willing to do, and outline your relevant plans or wishes. Revisit these plans often—particularly if you’re relying on siblings or friends who have their own health issues, or on younger family members who may move out of the area.
You’ll also need some professionals in your corner, particularly as you grow older. Start by finding a certified financial planner who can take a comprehensive approach, assess your finances, act as a sounding board and help you assemble and direct a team of other professionals. You can find advisers with the CFP credential at letsmakeaplan.org, or find a fee-only adviser at napfa.org. To find an adviser who has no asset or income minimum, visit Garrett Planning Network. For more help finding and vetting a financial planner, see kiplinger.com/links/advice.
To fill out your team, enlist the help of an estate-planning or elder-law attorney and perhaps a certified public accountant or enrolled agent to help with tax planning. A geriatric care manager can help with Medicare paperwork, monitor your medications and help you find a home health care aide or evaluate long-term-care facilities. If you don’t have a friend or family member in place to carry out your wishes and make legal, financial and health care decisions for you, consider working with a professional fiduciary, such as an accountant, lawyer or trust company officer.
Create an income safety net
If you’ve never had a partner or have been flying solo for years, you’re accustomed to living on one income. But many singles don’t have a strong enough backup plan to cover the costs of a major illness or other calamity.
Start by making sure you have enough cash on hand to cover emergencies, from a furnace that quits in the dead of winter to a job loss. While couples can generally aim to keep three to six months of living expenses in an emergency fund, many financial planners suggest that singles aim for a larger cushion, stashing between nine and 12 months of living expenses in a savings account. As you approach retirement, consider bulking up the account with at least two years of living expenses so that in the event of a market downturn, you won’t have to sell investments at a loss to pay the bills.
For singles who are still working, disability insurance is also more important than it is for those who are part of a couple, says Allison Alexander, a CFP with Savant Capital Management in Rockford, Ill. Many people have disability coverage through work, with premiums paid or heavily subsidized by their employer. That’s a start, but it’s rarely enough to meet your needs if an accident or illness keeps you from working. And if you’re out of work for a long period, you could end up depleting your retirement savings to cover living expenses.
Group long-term disability policies offered by employers typically replace up to 60% of your income, and the benefits are taxable if your employer pays the premiums. Many policies cap benefits at $5,000 or $10,000 a month and don’t include bonuses or commissions in the calculations—leaving high-earners and those who work largely on commission and other incentives with a smaller portion of their pay.
To make sure you have enough coverage, start by checking to see what your employer offers, and aim to bring your total coverage up to 80% to 90% of your take-home pay, including bonuses and commissions. Premiums may be locked in for life or increase over time. They are based on your job; the policy’s definition of disability; your health, gender and age; the benefit amount; and other coverage details. Every insurer has its own underwriting requirements, so if you have a health condition, it helps to enlist an insurance broker who specializes in disability insurance and works with several insurers to find the best deal.
Paying for retirement
Saving enough for retirement is a tall order for anyone to fill, but singles often find it even more challenging than their married counterparts. Some 38% of singles reported feeling “not at all financially secure,” compared with 23% of married men and women, according to a 2016 survey by Northwestern Mutual.
Try to save at least 15% of your paycheck for retirement. At a minimum, contribute enough to capture any employer match. In 2018, workers can contribute up to $18,500 a year to a 401(k). And workers age 50 and older can save an extra $6,000 per year in catch-up contributions. If you’re able to stash more cash away, open a Roth IRA. You can contribute $5,500 a year, plus $1,000 if you’re 50 or older. (For singles, your ability to contribute to a Roth begins to phase out if you make more than $120,000.) You’ll pay taxes on your contributions now, but your earnings will accumulate tax-free, and you won’t owe taxes when you withdraw the money in retirement.
Even if you’re well into your working years, there’s still time to build a respectable nest egg. Let’s assume you’re 55 and haven’t saved anything for retirement. You earn $80,000 a year and your company offers a 3% match in your 401(k) on the first 6% of pay. If you contributed just enough to capture your employer’s match, you would accumulate nearly $150,000 by age 65 (assuming your investments grow by 8% a year and your salary grows by 3% a year).
Social Security. Figuring out when to apply for Social Security is complicated. But singles have fewer options than their married friends, which makes the math a bit easier. If you were married for a decade or more and then divorced, or your spouse died, you may qualify for Social Security benefits based on his or her work history. If you’ve always been single, your check will be based on your earnings record only.
Married seniors are often encouraged to postpone claiming benefits in order to leave larger survivor benefits to a lower-earning spouse. That’s not a concern for never-married single retirees, so waiting to claim benefits until you are older than full retirement age may be less appealing—particularly if health concerns or family history make you think you won’t live past your mid eighties. But if you’re in good health and have a family history of longevity, postponing benefits may be worth it. For each year you wait past full retirement age—up to age 70—you get a bump of 8% in your benefit. (Full retirement age is 66 for people born between 1943 and 1954, and it gradually rises to age 67 for people born later.)
Zenger is waiting as long as possible to begin taking Social Security benefits, which has already added about 10% to her monthly benefit. Both of her parents are still alive at age 94, so there’s a good chance she’ll live into her nineties as well. “If I live that long, I want to be able to enjoy it,” she says.
For now, income from teaching, combined with the income from two small retirement accounts, covers Zenger’s housing, car payments and other living expenses. When she claims Social Security in a few years, her monthly income will be greater than what she has grown accustomed to earning while working.
Consider future care
No matter how carefully you’ve planned or how much you’ve saved, if you don’t have long-term-care insurance, a chronic illness could quickly drain your retirement coffers. The average cost of a private room in a nursing home is now $267 per day, according to Genworth Financial. The median cost of hiring a home health aide is $22 per hour, or almost $46,000 a year for a 40-hour week. Nearly 70% of seniors will eventually need some form of long-term care, and about 20% of them are likely to need it for more than five years. Women typically need care for longer periods than men. Long-term-care insurance policies—which cover expenses that aren’t typically covered by Medicare, such as home health care, adult day care and nursing home care—don’t come cheap, especially for women. For example, a healthy 55-year-old woman often pays about $5,100 per year for a Genworth policy with a benefit of $250 per day for five years. Premiums will increase as you age and can rise sharply. And because women typically live longer than men, single women often pay about 50% more in premiums than single men. In recent years, premiums for long-term-care policies have spiked, and the benefits have become skimpier. But buying early—generally when you’re in your late fifties or early sixties and still healthy—and making a few tweaks to the coverage can help keep the policies affordable.
To find the right policy for you, first check the cost of care in your area by visiting genworth.com/costofcare. Then consider your health, any hereditary conditions and how much care you could fund with your retirement income and savings, and fill the gap with a long-term-care policy. Shortening the benefit period or extending the waiting period will help reduce annual premiums but could leave you scrambling to pay for care when the policy runs out or while you wait for it to kick in. If you’re still working, you may be able to purchase a policy through your employer and keep it when you leave your job. Otherwise, find an agent specializing in long-term care at aaltci.org.
Estate planning can be tricky for childless seniors, and it’s doubly so for those who are single. But getting the right documents in place will make things easier if age or illness leaves you unable to manage your own affairs or make medical decisions. It could also prevent ugly court battles among your heirs after you’re gone.
To make sure your wishes are known and that someone you trust can make decisions for you, you’ll need to have several documents in place. Most childless singles find friends and family to carry out their wishes. Consider naming a backup (called a successor) in case the first person you’ve chosen isn’t available. Do-it-yourselfers can use a website such as LegalZoom.com to complete the forms, but you may want to hire an estate-planning attorney to make sure the forms adhere to state laws and will be properly executed. Lawyers may charge a flat fee or by the hour, but you’ll typically pay $1,500 to $2,500 for all of the following documents.Durable power of attorney. A durable power of attorney gives someone you select the authority to manage your finances if you’re unable to do so or you simply want help. A springing power of attorney doesn’t take effect unless you’re declared incompetent, while a limited power of attorney gives the person you select the power to make only certain decisions on your behalf, such as paying monthly bills from your checking account.
Some banks and brokerage firms have their own forms or won’t honor a power of attorney unless certain conditions are met. Sign several copies of the paperwork so your bank and other financial institutions, as well as anyone you’ve named, have the information on file.
Living will and health care proxy. To spell out your wishes for how you want to be treated in certain medical situations and make sure someone you know and trust can make other medical decisions for you, you’ll need both a living will and a health care proxy. You can find a form for a state-specific living will at caringinfo.org.
A health care proxy, sometimes referred to as a power of attorney for health care or an advance directive, gives the person you designate the right to make medical decisions on your behalf if you cannot. As with the financial power of attorney, you’ll want to have numerous copies available and share them with your health care providers in advance.
Information release. A medical information release gives doctors permission to share information with the people you’ve selected. Doctors and hospitals may have their own forms. Financial advisers and other financial professionals often have similar forms that will allow them to contact your doctor or a trusted friend if they’re concerned about your competency. Sometimes called a letter of diminishing capacity, these agreements are informal but should be signed and notarized.Will. If you die without a will, the laws of the state will prevail, which means relatives you barely knew (or didn’t get along with) could inherit your assets. Instead of letting the state decide, draw up a will. You can write a will on your own for about $70 using a do-it-yourself service such as LegalZoom or Nolo’s Quicken WillMaker.
You’ll also need to choose an executor, who will oversee the distribution of your estate and make sure your taxes, debts and other obligations are paid. You can hire a professional executor to oversee probate and prepare your final tax return, generally for a cut of up to 5% of your estate.
Where to live
Housing options for single retirees
Zenger has a strategy for growing old without a spouse or children. She lives modestly and has continued to work.
Still, Zenger has gaps to fill. Her estate plan is outdated. And although she hopes to remain in her Tucson, Ariz., home, she hasn’t decided what she’ll do if that’s no longer an option. She has toyed with the idea of sharing a house with friends or moving to northern Mexico. “The culture tends to be very generous and respectful toward older people,” says Zenger, who grew up in Latin America and speaks Spanish. She’s also considering retirement communities in Tucson.
For some single seniors, staying in their current home works—but usually only with structural changes. And even if your health is good, you may need someone to help out with household tasks, or to provide more-expensive care as you age.
Home sharing will feel familiar to those who recall The Golden Girls, and it is an appealing option for those with friends in similar situations. The arrangements vary, but often you have your own bedroom and bathroom while sharing the kitchen and other common spaces. To find organizations that match housemates, visit the National Shared Housing Resource Center at nationalsharedhousing.org.
Continuing care retirement communities, also known as life plan communities, offer living arrangements that range from independent living to skilled nursing, with people moving from one setup to the next as their needs change. Staying in the same community is often appealing to singles, who make up roughly two-thirds of the population in CCRCs. You generally must be at least 62 years old and healthy enough to live independently. There are nearly 2,000 CCRCs nationwide, many with waiting lists. Entrance fees range from $100,000 to more than $1 million; the average fee is about $320,000, according to the National Investment Center for Senior Housing and Care. You’ll also pay monthly fees, which average about $3,300.
Naturally occurring retirement communities (NORCs) are communities in which at least 40% of the population is 60 or older. Social service agencies, health care providers and other organizations offer on-site services to residents. People usually live in their own homes or apartments but pay an annual membership fee for access to transportation, social activities or health care management services.
Cohousing works a bit like a modern commune. Members typically buy their own apartment or home and pay monthly membership dues to be part of the community and use a common area for meals, socializing and events. Most aren’t set up to provide the specialized care you may need as you age. For more information, visit cohousing.org.
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