Retiring Solo
Think of all the commercials you’ve ever seen that show a happy retirement. More often than not, it’s a couple holding hands on the beach or venturing out on a cruise. It’s not just advertisements, either. Many of the financial strategies you read about involve leaning on your spouse or adult children for support. Of course, that’s not always the reality for people.
In some cases, the spouse may have passed away years ago and the children may live far away. In others, the children aren’t able to provide financial or other support for a variety of other reasons. Some people never marry or get divorced or don’t have kids. For a whole host of reasons, retiring solo is more common than you may think
While it may feel overwhelming at times, it doesn’t have to be. There are a lot of things you can do to ensure you have the right financial, legal, and healthcare support when you retire, even if you’re doing it on your own.
Retirement Planning for Solo Agers
One of the first things any soon-to-be retiree should focus on is preparing for retirement financially. No matter who you are, the idea of saving up a million dollars (or more) can seem like an incredibly tall task. However, it doesn’t need to be.
As with all retirement savings, the early you can start putting money aside for retirement, the better. For a lot of people in a lot of places, living alone can cost one person more than it costs a couple living together. Think about housing. Assume you’re paying $2000 a month to live in your home (rent, mortgage, property taxes, etc.) as a single person. Two people may have a larger home, which would cost more, but the cost probably wouldn’t double. The same is true for electricity, heating, internet costs, and basically everything. The cost per person is typically higher when you’re living on your own.
Since it is more expensive to live on your own, you may need to save more for retirement than if you were in a couple. You also don’t have the added benefit of sharing a pension or retirement plan with a partner, if needed.
Tracking spending is important, both before retirement and after. There are several benefits to this. The first is that it helps you see where your money is going, so you can adjust your spending as necessary and save more. It also helps you see how much you spend in an average month. This makes it easier to know how much you’ll need to save to retire comfortably.
Speaking of savings, if your employer provides a 401(k) match, take advantage of it. This is additional money you’ll have for retirement.
Not only does living alone tend to cost more, but many retirement strategies are aimed at couples. For instance, social security is designed so that either spouse can claim the benefits, regardless of their income. The maximum benefit is 50% of what your spouse would receive at full retirement age. However, solo agers have fewer options.
If you are divorced, however, you may be able to claim Social Security based on your ex-spouse’s work record, which could mean additional money. If you are a widow or widower, you might be able to claim a survivor benefit. Understanding these options can help you make the right choices in retirement.
It does make sense to work with a financial professional or trusted advisor when planning your retirement, since there are several aspects to consider.
Non-Financial Considerations
It’s important to remember that your healthcare costs will increase as you age. Medicare doesn’t cover everything and even many supplemental insurance policies won’t be enough to take care of all your healthcare needs. Things like dental care, vision care, or hearing aids aren’t often covered in full. Long-term care or assisted living services may also be necessary, and those can get expensive.
One option is a health savings account (HSA). This lets you set aside pre-tax money to pay for qualifying medical expenses. You can only contribute to an HAS if you have a High-Deductible Health Plan (HDHP) that only covers preventative services before the deductible. Contributing to an HAS can help you lower your healthcare costs. However, you are no longer able to contribute to an HAS once you are enrolled in Medicare. You can keep using your HAS funds for medical expenses though.
There are also legal considerations. If you get to a point where you’re not able to make your own financial or health-related decisions, who will handle these for you? Designating a power of attorney to handle these matters ensure that your wishes are carried out the way you’d like them to be.
Completing an advance directive lets you designate a trusted person who can carry out your healthcare wishes if the are not able to do so themselves. Laws and forms vary by state, so you’ll want to make sure that you have the right documents for your jurisdiction.
If you do not have any friends or family members who you trust to handle your financial and medical decisions on your behalf, there are professional services that can help you. However, you’ll need to make sure that you choose a service you can trust and that you get advice from trustworthy and knowledgeable sources. Also, know that the fees for these services may be quite high, so you’ll have to prepare for this financially.
How to Prepare
While handling everything you need to retire and live life in retirement on your own definitely feels like a lot at times, planning and preparing can make a lot of it better. Think about what you want your retirement to be like. How will you spend your time? What goals do you have for retirement? What do you see yourself doing? Picturing your retirement can help you plan for it.
For instance, if you dream about traveling the world and dining at fine restaurants, your retirement budget will be quite different than if you’re hoping to teach part time at a community college and do woodworking in your shed. That’s not saying that either option is the “right one”, but that you’ll need to visualize what you want to do so that you can plan for it.
It can be emotionally and mentally tough to think about future health changes and who will handle your financial and health-related decisions if you’re no longer able to do it yourself. These aren’t happy thoughts and a lot of people would rather pretend that they won’t have to face them by refusing to think about them. However, if you’re proactive and you plan for these situations in advance, you’ll have an easier time dealing with them if they occur. You’ll also give yourself some additional peace of mind. It can be very stressful to age on your own since you may have fewer people to count on. Planning for likely situations early will ease your mind because you’ll know that, no matter what happens, you’ve done your best to take care of yourself.
