Retirement Planning is Different for Singles

Most retirement planning articles are geared toward couples.  Those who are single – whether by choice, widowed or divorced – have planning needs that are a bit different and challenging. 

Much retirement planning advice for singles is similar to that for couples – track your expenses, clear up debt, automate your savings, and keep investment costs low.  However, the biggest challenge of being a single person is you don’t have anyone else to rely on.  Your decisions and choices about retirement need to be made on your own. 

You also face higher per-person costs for just about everything including housing, taxes, and even travel.

Although those of you who are widowed or divorced can have additional unique hurdles, these are general planning strategies for singles to ensure you can enjoy your retirement.

1.  Increase your savings

The fact is, most singles will have to save a higher percentage of their incomes than couples because they don’t have the same economies of scale.  This makes budgeting even more essential for singles so you can allocate money to fund your retirement goals.

You can’t just take the amount couples spend and divide it by two. The cost of living for singles is about 70% of the combined spending of a couple to achieve a similar lifestyle. So, singles have to save more for retirement on a per-person basis than retirees who can split the load with a partner.   

Consider adjusting your short-term lifestyle to improve your retirement lifestyle.

If you are a homeowner and have finally paid off your mortgage, you can supercharge your savings and direct that former mortgage payment amount to your investments.

2.  Do your planning

Retirement planning is both simpler and harder for singles.  On one hand, you can set your own priorities for lifestyle, travel, and activities.  On the other hand, you’re on your own to save.

Consider your vision when planning how much to save.  What will retirement look like for you – and roughly what would it cost?

Calculate expected payments from government benefits and pensions (if any). The rest needs to come from your savings.

Related:  Determining Your Retirement Income

You may want to consider securing a guaranteed income with an annuity.  Singles opt for the maximum benefit which means a higher payment than couples who usually choose spousal survivor benefits.

Taking a realistic look at your financial resources helps you make important decisions, such as whether you need to work longer or delay the start of CPP or OAS benefits to increase the payments while you draw from your investments.  The difference in the payment amounts for delaying could make your monthly cash flow a lot more comfortable.

3.  Reassess your housing needs

Your goal should be to finish paying off your mortgage before retirement, but that doesn’t always work out. It may be a good decision to sell and buy a less expensive home or just simply rent.

The proceeds from the sale of the property when you retire could be added to your savings, which will boost your retirement assets.

4.  Don’t overstuff your RRSP

Some financial experts recommend stopping RRSP contributions after a certain dollar amount (e.g. $200 -250K) and saving in your TFSA and non-registered accounts instead.

Single people end up paying more tax on RRIF withdrawals because they can’t take advantage of income splitting which allows people to transfer income to a lower-earning spouse to reduce tax payments.

You can achieve a more tax-efficient income stream with a mix of RRSP/RRIF, TFSA, and non-registered withdrawals to supplement your pension benefits.

5.  Build a safety net

One of the drawbacks of being single is that if a financial crisis comes up, it’s up to you to solve it.  As a single, you are not able to rely on a spouse’s income.

Make sure you have adequate disability insurance in the years leading up to retirement.  Your retirement plans can be derailed by a premature disability if you have to use your savings.

Build up an emergency fund – at least six months of expenses – so you don’t have to draw from your retirement savings. 

If you own a home, a Home Equity Line of Credit may be an option for additional funds, if needed.

Single retirees often have higher long-term care expenses than their married peers, since they need to hire someone to assist them with many day-to-day tasks that a healthier spouse might take care of.  You might want to look into long term care insurance which will pay for professional care, either at home or in a nursing home.  Premiums aren’t cheap, but the earlier you purchase the better rate you’ll likely get.

6.  Get your legal house in order

Spouses have legal standing to make decisions if a partner becomes incapacitated.  But if you’re single, you’ll need to designate someone as power of attorney for your finances and health.  You can use a sibling or other relative but consider geography.  If you don’t have family living nearby, a close friend or even your lawyer might be a better choice.

Pay extra attention to your will and beneficiary designations.  Married couples enjoy some spousal inheritance rights which don’t apply to singles.  Consider the estate tax implications for the assets you want to pass on to your heirs.

7.  Nurture your network

Having friends and relatives who care about you will not only increase your enjoyment during your retirement years, they can help you out if you have a medical or other emergencies.

You can band together to share resources which can help reduce your living expenses.  You might even decide to have a roommate or rent out a portion of your home.

Single women face additional challenges

Unless you had long-term employment in those sectors with high defined benefit pension coverage (education, health, public administration), when it comes to retirement planning, most women start out at a disadvantage.  The earnings gap creates inequalities in everything from pension and CPP payments to RRSP balances.

Women are more likely to take time out from the workforce to care for children or parents.  They also live an average of five years longer than men.

This means they’ve got to stretch fewer dollars over a longer period of time.

Adding a few more years to your working career and delaying CPP payments can provide additional income for a more comfortable retirement.

The bottom line

Retirement planning doesn’t have to be harder if you’re single.  You have full control over your finances and future after all.  But, because singles run a bigger financial risk, careful planning is a necessity.

You may want to seek advice from a trusted professional.  A financial planner can assess your overall personal situation, act as a sounding board, and give you tailor-made recommendations.

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