Savvy financial strategies for singles

Key Points

  • More than 4 in 10 Americans are unmarried — and 19.5 million are retiring single 
  • While some expenses may be higher for retired singles, there may be ways to save
  • If you’re suddenly single, your advisor can help prioritize decisions by urgency

If you or a parent are one of the 19.5 million Americans retiring single, you’re in good company. Close to half of U.S. adults are unmarried — 45.2% to be exact.This percentage includes those who were never married or are widowed or divorced.

While the numbers may be somewhat skewed by Millennials waiting longer to tie the knot, it’s not just the younger generation driving the statistics. According to MarketWatch, many Americans are healthier and living longer – divorce may be a possible consequence of this new longevity.2 Research indicates that many later life divorcees are looking to pursue their own interests and independence for the remaining years of their lives.3

Today’s singles are reinventing what it means to retire alone, staying active in their communities and leading full, meaningful lives. Whether you’re single by choice or circumstance, here are some key considerations to help you stay on the path to a confident retirement.

Living single

A single person tends to have different needs and considerations as they look toward retirement. They typically spend more than a member of a couple on expenses that can be shared, such as housing, transportation, food and travel. But there may be other areas where expenses are lower — especially for those who don’t have dependents. They may also need different types of support in order to maintain their independence. Key considerations for people living a single lifestyle:

  • Singles may be able to save on life insurance if they don’t have any dependents — and estate planning in general can be simpler for those who never married or had children. If you’re looking for other ways to leave a legacy, remember that there can be tax benefits to giving money to charities.
  • Other types of insurance could be more crucial for singles, considering family assistance may not be available if help is needed with daily activities. In case of a temporary inability to work, disability income insurance can help preserve savings. Long-term care covers in-home help and a variety of assisted living options, allowing you to maintain independence in retirement.
  • Engaging someone you trust to serve as your power of attorney (POA) can be more important for a single person in lieu of a spouse to speak on your behalf if you encounter health issues. Make sure to keep this paperwork updated to reflect your current wishes.

Suddenly single?

If divorce or a spouse’s death is a recent event, you may want to make the next 12 months a “no-decision zone.” In other words, hold off selling your home, rethinking your portfolio or making any big gifts or purchases while in the fog of grief. 

That said, some actions should be taken soon after a life-changing event. A financial advisor can help prioritize items that need immediate attention above those that can wait.

If you’re recently divorced

  • Consider revisiting your retirement plan after a divorce. You may want to set fresh goals for your new life and adjust savings rates accordingly. Couples often have “built-in” diversification simply through holding different types of accounts. Adjusting your asset allocation appropriate to your new personal risk tolerance is sometimes necessary.
  • For couples divorcing after 2018, alimony is no longer considered taxable income due to changes made in the 2017 tax law. This means that those paying alimony can no longer deduct it from their taxes. And those receiving alimony can’t count it as taxable income – which may impact the total amount you can contribute to an IRA depending on the type of retirement account.
  • Divorcees can receive Social Security benefits based on the ex-spouse’s earning record if the marriage lasted at least 10 years, you are 62 or older and you haven’t remarried. Also, the benefit you are entitled to receive based on your own work must be less than the benefit you would receive based on your ex-spouse's work.4 If you were a stay-at-home parent and didn’t earn an income, this helps ensure that Social Security will be available to you. This is also helpful if you earned less than your spouse: If 50% of your former husband or wife’s Social Security payment is more than 100% of your own, you can claim the greater amount.
  • If your ex-spouse is still listed as your beneficiary, he or she could still receive proceeds upon your death, depending on individual circumstances and local laws. It’s safest to update all paperwork to reflect your current wishes

For widowers and widows 

  • If your spouse has passed away, don’t assume you should simply roll over their accounts into your own. If you take distributions from an inherited retirement account, the 10% IRS early withdrawal penalty is waived because it’s considered a distribution due to death. However, if you consolidate the accounts into your own IRAs and you’re not yet 59½, you’ll have to pay a 10% early withdrawal penalty on any distributions you take. Your advisor can walk through various scenarios and help you develop a plan appropriate to your new needs and goals. 
  • Social Security survivor benefits can be collected as early as age 60. And then once age 62 is reached, a widow/widower could choose to receive their own benefits if they are higher (you'll receive either your own or your spouse's benefits — whichever is greater — but not both).
  • Make sure your beneficiaries are updated, as well as your health care proxy and power of attorney. You’ll also need to update your will and might consider appointing a professional to handle your estate, rather than relying on children or other relatives. Appointing a neutral third party can take some of the emotion out of decisions about your legacy.

Contact your advisor

Whether you’re never-married, divorced or widowed, an advisor can tailor retirement advice specific to your shorter-term needs as well as long-term goals.