Planning for Retirement as a Single Person

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 adults who were married in 1960. 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.

Having a built-in support system and a strategy for planning this monumental task of planning for retirement works best if one sets a goal to live modestly, continues to work, invest, take good care of one’s health—and check in periodically with a financial adviser to make sure they are still on track. One could also consider various other options for housing, if they can no longer live alone.

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. 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.

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. 

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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, I would 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.

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.’ 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.

Until Next Time!