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Saving for Retirement If You Are Retiring Alone

Written by: Kristy Welsh

Last Updated: September 11, 2017

Here is a staggering statistic we found in a 2014 Gallup Poll — 64 percent of 18 to 29-year-olds report being single and living alone. Gallup also found the percentage of young adults not in a committed relationship has jumped from 52 percent a decade earlier. In light of this growing trend, we found it odd that there is not a lot of information out there addressing the different retirement savings needs of a single person. Single, unmarried people planning for retirement face a lot of different challenges compared to a typical married couple. If you are single, and plan to stay that way, you need to read this article so you can plan for your retirement accordingly.

Life Insurance and Long-Term Care Insurance

This is probably not in the fore front of your planning, but it is something that is going to be very important to you once you hit your golden years — life insurance and long-term care insurance. Living alone, with or without the support of extended family members, means you are completely independent of any help from a spouse or partner. If you get sick and can not work, there is no one in your household to pick up the slack so you need to make sure you have an outside source of supplemental income. Furthermore, if you become so ill that you can not live on your own, you need a way to pay for long-term care.

The biggest struggle for a single person is the cost of these types of insurance and trying to fit this expense into your budget. On the whole, a single person's income is very limited and it might be hard to find the extra money to pay for life and/or long-term insurance. The upside of insurance is if you start it when you are young, the premiums are lower and usually you can lock yourself into this amount. You can also start off with a bare minimum policy and increase the coverage as you get older and are making more money. We suggest you find a good financial planner and schedule meetings with him or her every few years to re-evaluate your insurance coverages and needs.

Contribute to Tax-Deferred Accounts

Talk to any good financial planner, and he or she will tell you single people need to make sure they save a greater amount to their tax-deferred accounts and to start early. Reason being, they need to build a larger emergency savings account than that of a two-person income household. They do not have anyone to lean on should they lose their job. If you are single, and are lucky enough to work at a place that offers a 401(k) matching program, join it and contribute the maximum amount that will be matched. This is a great way to increase your savings and lower your taxable income. Make sure you can take this 401(k) with you if you ever have to leave this employer and make sure you can roll it into another account. 

If we can offer one piece of advice, try not to dip into this account prior to your retirement. When you turn 65, you will be glad your account is still in tack and you will really be happy with the nice nest egg you have saved up.

Housing and Cost of Living Expenses

The biggest expense for most people is housing, and single people still have to pay rent and mortgage bills on a residence that could house two. Fact is, married people in their late 20's spend about $7,200 less per person. That means a single person has much less left over to put into their savings accounts. 

The up side to living alone is the fact that a single person can save or spend their money on whatever they want and they don't have to ask for any input. The down side is, whether or not a single person is a spender or a saver, having a lack of "dependents" makes the over all savings plan very different from singles to married couples. Case in point is life insurance. Why have life insurance if there is no one to pass it on to? But, as for long-term care insurance, without a spouse to help out in the case of declining health, this is a very important option to have if you are single.

Another factor is Social Security. A married, divorced or widowed retiree can opt to get benefits based on a current or former partner's lifetime earning record, which may allow for a higher Social Security payment. Those who are not married can only receive benefits based on their income record. This means they will need more planning on when to retire and when to start taking Social Security benefits.

Saving Plan Based on Self-Reliance

Research confirms that a single person tends to save less for retirement than a married couple. This makes perfect sense since a single person is already at a disadvantage with only one income. With only one income, all expenses and investments must be funded from that one source making it more difficult to compound and grow a retirement savings account.

But, it can be done if you start saving early and if you are willing to cut out some expenses to save more money each month. A single person has to really budget their money and stick to a budget so they have money to put aside into a savings/retirement plan or pay for life and/or long-term insurance. The more planning done when you are young, the better off you will be in your golden years. 

Living as a single person does not have to be a bad thing, and many singles live a more happy fullfilling life. Just make sure to think far enough ahead and plan for the unexpected because being single means being self-reliant. And being self-reliant can be a powerful thing.