The Single Retiree
As a single person, you’re the one in charge of saving for your retirement .jpg)
If you’re like most Americans, you’ll spend more of your life single than married. And like many, you may experience those single years while you’re preparing for retirement and in retirement. Whether you’re part of a couple or not, you still should save as much as you can for retirement. The difference between being part of a couple and being on your own is not only a matter of accumulating enough funds, but also of assembling adequate financial safeguards to protect yourself from unemployment and disabling illness.
What’s the difference between couples and singles retirement planning? There are certain costs, like utilities, property taxes and housing expenses, that are not much less if you are single than if you are in a couple. On the savings side, the difference is likely to be substantial — the single person doesn’t have the benefit of someone else working and saving in a 401(k) plan. If you haven’t saved enough for retirement, join the club. The Employee Benefit Research Institute reports that roughly half of all workers have saved less than $25,000. Because of advances in health care, financial advisers are recommending that Americans save enough to provide for themselves through age 100 or even 110. $25,000 will probably cover a little over one year into a luxurious retirement.Single people usually wait longer than married people to take retirement saving seriously, says Bob Enright, a certified financial planner with the Burton/Enright Group in San Francisco. “Traditional financial planning is all about making sure that you, your spouse and kids are taken care of,” he says. “When you are single, the focus is drastically different. Single people tend to feel more invincible because they haven’t had as much responsibility thrown their way so they don’t start saving until their 40s or even their 50s.”
If you’re not sure how much you should be saving, try this simple formula: whatever percentage represents half of your current age. “If you are 50, you should be saving 25% of your income,” he says. “A lower percentage — like 10% — isn’t enough. And with this formula, the percentage increases as you get older, so you’ll be saving more.”
The obvious first destination for your retirement savings dollars is an employer-sponsored retirement plan — a 401(k) , 403(b) or 457 plan. If your employer matches any portion of your savings, those funds are equivalent to free money. If you max out your 401(k) or don’t have one, consider either a traditional or Roth IRA. If you are under certain income limits, you can make a before-tax contribution to an IRA of $4,000 in 2007, along with a $1,000 catch-up contribution if you are 50 or over. Experts are divided on the advisability of setting up a Roth if you’re single. “The biggest benefit of a Roth — the ability to pass on money to your heirs — isn’t as big of a deal for someone who is single and has no kids,” Enright says.
When considering a retirement date, money isn’t the only issue. Obviously, it’s important to have enough savings to live comfortably, but it is also important to have an idea of what to do with your time when you retire. Think about what interests you and what interests that you weren’t able to pursue when you were busy with your career. A key issue in a fulfilling retirement is finding some type of affinity group to get involved with. Besides retirement, drafting and updating wills, financial and health care power of attorneys and other estate planning documents is a must-do, especially for single people who don’t have a spouse to back them up.
