By Dave Carpenter
Single people get left out of the picture a lot when it comes to retirement. Typically it’s smiling couples who are shown contemplating their sunset years in ads, brochures and magazines.
The big picture is about to change, however. Financially ready or not, a wave of single baby boomers is poised to alter the face of retirement, bringing a new set of planning priorities into focus.
Single people are now 96 million strong and make up 43 percent of the adult population, up from 28 percent four decades ago. Nearly half are over age 40, including 13 million who have never married. Those figures have swelled as people divorce more often, live longer or simply choose not to marry.
That means single people are commanding more attention from financial planners and companies looking to cater to their needs — and even the occasional magazine cover.
“It’s still mostly couples who seek retirement planning, but more singles are starting to come forward,” said Eleanor Blayney, consumer advocate for the nonprofit Certified Financial Planner Board of Standards.
With no spouse to rely on, extra precautions are needed in order to be well-positioned for retirement. That holds especially true for women because they live longer. Three of every four single people age 65 or older are women.
Klea Theoharis, a 54-year-old investor relations consultant from Queens, N.Y., has been a diligent saver ever since her mother told her as a young child about the need to be self-sufficient. She reckons she has saved an average 30 percent of her pay each year and now has a comfortable cushion for retirement.
But she is surrounded by single women in her condo development who are struggling because they didn’t plan well. One has burned through her money, another had to go back to work after retiring early, a widowed neighbor doesn’t know what to do with her money, and still another is divorced and doesn’t understand investing.
“Just being around all these older single women and seeing them suffer, trying to make ends meet, I just feel a little education and a lot of retirement planning would have gone a long way,” she said.
Theoharis doesn’t blame the women for their lack of financial acumen. Rather, she said, it’s all the retirement articles and planning models based on couples.
“It doesn’t help someone who’s single to have everything geared to couples,” she said.
Single people need to pay more attention to concerns that may not be as urgent for traditional families, said Jacob Herschler, vice president of business strategy at Prudential Financial Inc.
Here are some retirement planning priorities that single people in particular should focus on:
1. Save or pay a price — The cost of living for single retirees is about 40 percent higher than for couples, according to the American Academy of Actuaries. That’s because couples can share housing and other expenses.
Still, planners say single people tend to wait longer than married people to take retirement saving seriously. That can lead to big problems.
Roughly half of all people age 55 and over — single and married alike — have saved less than $50,000, according to the Employee Benefit Research Institute. That’s an alarmingly small sum in light of rising health care costs and growing length of retirement, which now lasts 15 to 20 years on average.
The focus on savings should include building a large emergency fund since single people don’t usually have a second income to fall back on when something goes wrong, as couples do, said Jean Setfand, AARP director for financial security.
2. Calculate retirement income: The traditional three-legged stool approach to retirement security — employer pension, Social Security and personal savings — is a bit lopsided for single people because of their heavy reliance on Social Security.
Social Security benefits account for 90 percent of income for four of every 10 unmarried retirees and two of every 10 married couples, according to the Social Security Administration.
That underscores the added urgency for single people to carefully assess their sources of retirement income. They may want to also consider buying an annuity to provide an additional stream of regular income.
Go to the Social Security site (www.ssa.gov) to estimate how much you will receive from the government at various retirement dates. It’s a good idea financially to wait at least until full retirement age — 66 or 67, depending on your birth year — before starting your benefits.
Social Security checks are about 25 percent less if you retire at 62 instead of full retirement age. After full retirement age, the monthly benefit will increase by 8 percent for each year you delay.
Singles who are divorced or widowed should look into whatever assets they might be entitled to — from a former spouse’s Social Security benefits to his or her pension, 401(k) or group life insurance.
3. Get disability insurance — Who’s going to pay for your retirement if you have a serious accident or prolonged illness that prevents you from working?
Single people generally don’t have the ready solution that married couples do. That makes long-term disability insurance all the more important so their retirement security isn’t ruined by a medical issue.
Employer-paid disability insurance is required in most states. But confirm that your employer offers long-term disability coverage — not just short-term, also known as sick leave. The typical long-term disability group plan covers up to 60 percent of salary.
If your employer doesn’t offer long-term coverage or if you’re self-employed, strongly consider an individual plan. The cost varies widely depending on age and health but can easily approach $100 a month. It might be worth it.
4. Make long-term care insurance a priority — Long-term care insurance is a critical part of single people’s retirement plans because there’s likely no one else to take care of them. As opposed to long-term disability insurance, long-term care coverage helps pay for professional care when you can no longer perform the regular activities of daily living, such as bathing, dressing and eating.
It can run $2,000 a year or more if you wait until your 60s to get it, less if you get it earlier.
“The numbers are big, but so is the risk,” said Bryan Place, a certified financial planner in Manlius, N.Y.
About 70 percent of people over 65 will require some type of long-term care services during their lifetime, according to the National Clearinghouse for Long-Term Care Information.
On the bright side, life insurance is an insurance you can probably forego if you have no partner or children.
5. Do thorough estate planning — Single people should take extra pains to ensure that someone has the legal right to manage their assets or make medical decisions for them.
Consider meeting with an estate planning lawyer to get the proper documentation in place. You’ll need a will to state how you want your assets distributed after your death, a health care proxy and living will should you become incapacitated and unable to make medical decisions, and a durable power of attorney for finances to allow someone to handle your money matters in an emergency.
Despite the need for extra planning, the outlook for single retirees certainly isn’t bad. They can enjoy greater flexibility and financial autonomy than their married counterparts if they prepare well.
“I often tell my single retirees that retirement is their ‘me’ time, hopefully,” said Blayney, who also is president of a financial advisory service for women, Directions LLC. “They’ve just got to make sure they’ve got the resources.” — AP