Everyone's retirement needs are unique, especially when it comes to individuals versus couples. Here are seven considerations to keep in mind if you’re planning to live on a single retirement income.
The 50+ singles scene is substantial.1 And as the population ages, we’re likely to see more and more individuals entering retirement without a partner.
This sort of independence can be empowering. And financially, it can have its advantages, such as lower expenses and savings options that can benefit individuals retiring single.
There are just a few special considerations when planning for retirement as a single person. Here are seven ways you can prepare.
1. Build up your emergency savings.
It’s important to have emergency savings. Consider it a backup plan in case of an unforeseen hardship.
“A healthy emergency savings typically includes three to six months of expenses,” says Stanley Poorman, a financial professional at Principal®. “But being financially independent may require some additional savings in this area. It’s important to look at how to boost your safety net while also continuing to build your retirement savings.”
2. Know your Social Security options.
If you were previously married for a decade or more, consider all your options, including claiming benefits based on your ex’s earnings or claiming a widow or widower benefit. If possible, you may want to delay receiving Social Security until as late as age 70 to receive a larger monthly payment—up to 32% more at age 66.2
3. Be aware of prior commitments with your retirement accounts.
Evaluate your distribution options—IRA, 401(k), and any others—based on your marital status. If you’re divorced, there may be obligations for splitting 401(k) benefits or an IRA, which can affect withdrawal options. A financial professional can help you navigate this.
4. Consider what you want your life to look like in retirement.
“So much of retirement focuses on the numbers, but as you near retirement, it’s also important to consider who you’ll be in retirement and what sort of lifestyle you’d like to enjoy,” Poorman says. “What activities will bring you joy and purpose as you transition into your next stage of life?”
Also think about surrounding yourself with a support system as you age, encompassing everything from home maintenance to companionship.
5. Consider investing in long-term care insurance.
If you need constant care in retirement and can’t rely on a partner, long-term care insurance can help ease the financial burden of in-home help or a nursing home. Keep in mind that the cost of premiums tends to be cheaper when you buy at a younger age.
6. Plan strategically with annuities
Singles may be better poised to maximize their payout from a pension or other annuity. For example, the payout is higher on a single life-only annuity because it ends when you die and generally isn’t transferable to your heirs.
7. Stay on top of your estate planning
Without a default designee to carry out your wishes, decide how to distribute assets in your will early on—whether it’s to children, nieces and nephews, or a charitable organization. For those who have children and remarry, a will can avoid inadvertently disenfranchising your kids.
“It’s also important to consider your medical and financial power of attorneys,” says Poorman. “There may be an instance where you’re not able to make big decisions, and knowing that you have someone who will be able to act in that capacity for you can give you assurance.”