Being single has its advantages. This means you can live by your own rules and enjoy your financial resources without having to share them with a partner.
But being single can also be difficult in the context of retirement. Here’s why – and what to do about it.
1. You may need long-term care
Being married does not guarantee that you will not need some type of long-term care in retirement. But if you’re married and sharing a life with someone, that person might be able to provide care so you can minimize the amount you have to pay. If you are single and living alone, you may need to spend more on home help or even assisted living. And the costs could be astronomical.
You can prepare for long-term care expenses — and help offset them — by purchasing long-term care insurance. The ideal time to do this is usually in your mid-50s, when you’re more likely to get a premium discount, depending on your age and health. Having this coverage could save you a world of stress down the line, while helping to ensure that you are able to get the care you need.
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2. You will only have one set of Social Security benefits to collect
Married couples can play with different Social Security filing strategies. And one of the most popular is to have low-income people claim benefits while the other is delaying their filing for a higher monthly benefit down the line.
If you’re single, you can’t use the same approach to Social Security. But that doesn’t mean you can’t maximize your benefits.
If you plan to work until age 70, you can delay your filing until then and give your monthly benefit the maximum increase for which it is eligible. The result? A higher monthly salary to expect for the rest of your life.
3. You will only have access to one IRA or 401(k)
Married people who save individually in an IRA or 401(k) plan can pool these resources during retirement for a higher total household income. If you are single, you will only have your own savings to use. And while it’s true that you’ll only have one mouth to feed, not two, many other costs you’ll incur, such as housing, will be largely the same whether there’s someone living under your roof or two.
But you can compensate for not having access to a second retirement savings plan by enhancing your own. Start by increasing your savings rate by 1% or 2% each year so you can build a solid nest egg. At the same time, invest your savings wisely so that your money can grow. This means not playing too conservatively in your retirement plan, but betting heavily on stocks when you still have many years of hard work ahead of you.
Avoiding expensive retirement plan fees is another great way to end up with a bigger nest egg. If you have a 401(k) plan, aim to invest more money in index funds, which generally charge much lower fees than actively managed mutual funds. Also consider ditching your 401(k) and switching to an IRA if administrative fees continue to pile up. (If your employer offers a matched 401(k), save enough to claim it, but put extra funds in an IRA instead.)
Being single can be a challenge when it comes to retirement. But with careful planning and the right strategy, it’s definitely not necessary.
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