Retirement planning for single people
has its own unique set of challenges and opportunities. This is true whether
you are a widow, divorced, or you never got married. While it’s true that in
some ways retiring single is less complex, it is certainly true that other
aspects need more attention.
It is important to note that there are
many items to consider in your planning
regardless of your relationship status. This article will focus on some of the
unique challenges and opportunities for solo-retirees.
Many aspects of estate planning, from
medical decisions to inheritances, default to your spouse if something were to
happen to you. If you don’t have a spouse, things can become considerably more
The three documents that you’ll want
to consider drafting are a Last Will and Testament, an Advance Directive, and a
Power of Attorney. These documents allow you to make decisions ahead of time as
well as name trusted people to make decisions on your behalf in the future.
Many people will name children in
these roles, but what if you don’t have children? You may need to name a
professional trustee or agent-in-fact to make these types of decisions. This
will commonly be an attorney who has a legal responsibility to act in your best
The majority of families in the US are
blended families. If you plan to get married and become a blended family, it is
shockingly easy to disinherit your children without proper estate planning.
Many states have laws that give the
spouse rights over your children so careful planning must be done to ensure
your money is going to your intended recipient. Prenups and postnups are
awkward to discuss, but they can be the best tool in this situation.
Multi-year tax planning is often
overlooked for all retirees, married or not. However, it has become more
important to evaluate its applicability to your situation with the new SECURE
The SECURE Act also eliminated the
stretch IRA for many people who were previously eligible. If you inherit a
qualified plan, then you will need to do proper tax planning to determine the
most advantageous way to access the funds over the next 10 years.
Many people have heard about the
“marriage penalty,” but did you know there is also a “widow penalty”?
It is not hard to imagine a scenario
where a widow’s income is very similar to the couple’s combined income. The
widow’s penalty can cause that income to be taxed at higher rates. Roth
conversions can help with this, among other strategies.
Many people believe you no longer need
life insurance once you’re able to retire because you are, by definition,
financially independent. I generally agree with this, but there are still
specific situations where someone is dependent on you and would be financially
harmed if you were to pass away.
Have you considered long-term care insurance
(LTCI)? LTCI has had its share of headlines recently, and for good reason. It
is very expensive, but that’s because long-term care is expensive.
The probability that you will ever
fully collect from a LTCI policy is low, but if you ever needed to, then the
decision to purchase the policy will turn out to be one of your greatest
This mathematical paradox is why it’s
important to take other factors into consideration. For instance, the more you
value leaving an inheritance the more likely you would want LTCI.
For anyone in good health and
financially planning to live a long time, you are generally better off to wait
until 70 to maximize your Social Security benefit. There are special rules for
widows and divorcees.
For example, a surviving spouse can
claim an ex’s benefit as early as 60 without impacting their own benefit. A
divorced person may collect on their ex-spouse’s benefit if the marriage lasted
10 years or longer.
The rules are very specific so make sure
you know the options available to you given your specific circumstance. The
last thing you want to do is leave money on the table.
Retirement planning in general has a
lot of moving parts no matter your relationship status. Some items can be
simpler for the solo-retiree than a married couple, but in many other areas the
decisions involve more careful planning.
Which of these areas have you
considered in your financial planning? Which have you not? What steps can you
take now to better prepare for retiring single? Please share with our