Retirement challenges for single people

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The financial industry tends to focus on married couples or widows.  The assumption one is tempted to make is the retirement planning for single people is easier and that single people don’t need help.  The opposite is actually true – single people have more complex retirement planning needs and the need for outside help is just as great as for married couples.  There are several reasons for this.  Below is my list of issues that single people face that married people do not and why single people may need professional help sooner than married couples.

  1. Single people spend more of their income in income as a percentage of their pre-retirement income than married couples. For example, many married couples go down from 2 cars to 1 in retirement.  Single people are already there.  Another example is downsizing their homes.  Many single people “right-sized” their housing during their working years. Married couples, however, tend to wait until they have retired to move to a smaller home.
  2. Married couples with children tend to spend a lot of money on their children through their college years.  In order to do this, they chose not to spend money on themselves.  However, when the kids grow up and move out, many couples do not significantly increase the spending on themselves.  This, in turn, helps them put a lot of money for retirement in the last 10 or so years before retirement.  Single people near retirement who did not have kids have built a lifestyle over 30 or more years.  If that person did not aggressively plan for retirement when they were younger, it is difficult to both lower your standard of living and accumulate a large amount of funds later in life.
  3. Single people tend to have a lower risk tolerance and needed a larger emergency fund than married couples (on a per person basis) because they had no “safety net” in the form of a second income or someone to rely on to help in their working years.  The result is they have less money to invest and the returns on the money that is invested tends to be lower.  These behaviors tend to continue into retirement, making it more challenging to meet their cash flow needs in retirement.
  4. Single people have more complex estate planning issues.  For many married couples, these decisions are somewhat easy – their spouse will take care of them if needed, then the children.  Similarly for who to leave their money to, it is often the surviving spouse then the kids.  Single people do not have a spouse, and older single people may have no children.  They must determine who will care for them as they age, and who to give their money to when they die.  The changing acceptance over the last 15 to 20 years around single people having children will change this, but 20 plus years ago there was a social stigma for a person who was never married to have children.
  5. The Social Security options for single people are much more limited than for married or divorced people.
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