5/3/2011 11:11 AM ET|
Single? Can you ever retire?
Unmarried people face greater challenges in saving for a comfortable retirement, but careful planning can help make it happen
Single people have one big advantage when saving for retirement: They don't have to argue with their spouse about it.
Singles needn't cajole reluctant partners into boosting their 401k savings or worry that their spouse's spending or bad investments will upend their retirement plans.
"It is easier because I am in control and don't have to worry about someone taking my savings," Jean Maxon, a single mother from Twentynine Palms, Calif., wrote on my Facebook fan page when I asked about this issue. "Most couples I know don't plan well together."
But the advantage of autonomy can seem pretty small against the considerable headwinds that singles face in trying to save for a comfortable retirement.
Married people accumulate significantly more wealth. Married people in general save more and amass more wealth than singles. In the critical 55-to-64 age bracket, when household wealth typically builds to its peak before being drawn down in retirement, the median net worth for married couples is about four times higher than that of singles, according to the latest Census Bureau wealth study.
|Median net worth by marital status|
|All households||Ages 55-64|
|Source: Census Bureau, 2004|
Economists will tell you that while two people can't live more cheaply than one, a couple can live the same lifestyle for less than two comparable households run by single people. Sharing housing payments, utilities and other household expenses frees up more money for other purposes, including saving and investments.
Married people also often have significant advantages when it comes to Social Security benefits. Spouses can opt to take checks based on their own work records or that of their partner, and they can switch from one to the other. One strategy that can boost benefits by tens of thousands of dollars over a couple's joint lifetime is to have the lower-earning spouse claim a benefit at 62 based on the partner's work record, then switch to benefits based on her own record at full retirement age. Singles typically don't have that option, unless they were married for at least 10 years to someone who qualifies for a Social Security benefit.
"I think a single person with an average, middle-class income has to do a lot more planning to make retirement happen, and they have to choose a pared-down lifestyle, compared to their dual-income friends, to meet all of their financial goals," said Delia Fernandez, a fee-only financial planner in Los Alamitos, Calif., who is also single. "There's little room for error."
Singles are at more risk of not having enough saved to get through retirement. Fifty-one percent of U.S. households aren't on track to maintain their living standards at retirement, according to the Center for Retirement Research at Boston College, but married couples aren't as far behind as singles.
To show the size of the gap between what people are likely to need and what they have already saved, researchers at the Employee Benefit Research Institute estimated the "net present value" of the retirement deficit -- the extra amount needed to maintain the household's standard of living, discounted to reflect what that future amount is worth today. Another way to think of it is the lump sum you'd need to deposit into your retirement funds right now to catch up.
For couples, the retirement deficit varies from $29,467 for early baby boomers (for the purposes of the EBRI study, those born between 1948 and 1954) to $32,048 for Generation X couples (those born between 1965 and 1974).
The deficit is 19% to 34% bigger for single men. That's bad, but the numbers for single women are much worse: Their retirement deficits are at least twice as big as those of couples. For single Gen X women, the average deficit is more than $75,000. Not only do single women earn less and save less than single men, on average, but they live longer, so they have more years of expenses to cover.
Add in nursing home and health care expenses, and the picture grows even gloomier. Those costs increase the average retirement savings shortfall by $25,317 for married couples, $32,433 for single men and $46,425 for single women. Perhaps now it's becoming clearer why elderly women are nearly twice as likely to live below the poverty line as elderly men.
Singles are more at risk of losing what they have. Most adults face setbacks as they approach retirement. A 2006 Center for Retirement Research study said about seven in 10 adults who were 51 to 61 in 1992 had developed major health problems, lost their jobs or lost partners to death or divorce in the next decade.
Singles may be spared those latter two events, but they're more likely to face health problems in late midlife and to lose more as a result. Unmarried adults in the study were more likely to:
- Develop a major medical condition than married adults (44.3% compared with 40.2%).
- Become severely disabled (10.5% compared with 5.6%).
- Enter a nursing home (5.7% compared with 2.7%).
Disability reduced wealth by 16% for married people but by 42% for single people. Even medical conditions that didn't necessarily limit the ability to work took more away from singles, reducing their household wealth by 23% compared with 17% for married couples.
Layoffs were only somewhat more common for singles (20%) than married couples (18.2%), but again singles paid a higher price: They lost 33% of their net worth, compared with 21% for married couples.
No one to fall back on
As the study pointed out, health problems and job loss are especially serious for single people, because they cannot fall back on the economic resources of a partner.
Virginia resident Marisa Minor, 45, knows what that's like. Minor was used to being the one on whom others in her family depended, until job loss and health issues hit. Now she feels the lack of a partner who might have been able to blunt the financial impact of those setbacks.
"I feel like I have to begin again from the beginning," Minor wrote on Facebook. "I think, what type of retirement am I now going to have for myself?"
Not having that second income is somewhat analogous to not coming from a family with money, Fernandez said.
"It's nice to have some financial safety net in life, and single people often don't have it, certainly not from a second wage earner," she said.
So singles should give up any hope of retirement, right? Don't tell that to Christine Tsotsos, 54, who recently retired to Dunedin, Fla., from her job as a schoolteacher.
As a young woman, Tsotsos wasn't dissuaded by teaching's low pay -- "teaching was in my heart" -- and couldn't have cared less about the fact that it came with a pension, even though her mother was thrilled by that fact.
Tsotsos credits her parents for teaching her to save 10% of every paycheck -- and, unintentionally, for giving her a life lesson in what can happen when you depend on others. Her mother was widowed at 43.
"I watched what my mother had to go through financially when my father died," Tsotsos said. "She worked as a school secretary and struggled. I gave her a part of my salary, and this continued until she passed away four years ago. This experience taught me never to rely on anyone financially."
Tsotsos said she made it a point to funnel any "extra" money -- tax refunds, bonuses, awards for teaching excellence -- into her savings account "instead of spending it right away on trivial things." She struggled with department store credit card debt for a while until she opted to stop using her plastic.
"I decided that whatever I wanted I'd pay cash for instead of using credit," Tsotsos said. "I saved separately for holiday spending."
Then, two years before she planned to retire, she got ready to start living on half her teaching income. She trimmed expenses, paid off the last of the credit card debt and used some of her savings to pay off the rest of her mortgage. She wound up teaching an extra year to boost her pension check from 48% of her salary to 51%.
"I think the most important thing is that even with a modest salary -- Florida teachers earn close to the bottom of the national scale -- it can be done," Tsotsos said.
Tips for making it happen
If you're single, here's what you need to know:
- "Single people don't get to live like married people." That's what planner Fernandez tells her clients who aren't married or who are going through divorce. Single people typically don't have as much income or the cushion provided by a potential second earner. There's less margin for error, so you need to make sure you're living well within your means and saving for the future.
- Denial and despair aren't your friends. You can use depressing statistics above as a wake-up call, rather than as an excuse to do nothing. Anything you save now can help boost your standard of living later in retirement. Delaying and hoping to be rescued -- by a future partner or a lottery ticket -- isn't a rational financial plan.
- Pay attention to benefits. Finding any job in this economy can be tough, let alone a job with decent benefits or one that comes with an increasingly elusive traditional pension. But when you have a choice, opting for a position with good benefits can give you more financial security. If you can't find a job with a pension, shoot for one that has a 401k with a match. Over time, good savers can actually accumulate a bigger retirement benefit with a 401k than they could with most traditional pensions, according the Center for Retirement Research's director, Alicia Munnell. But that requires diligent saving and not cashing out.
- Get disability and long-term-care coverage if you can. You may not be able to qualify if you already have health issues, and sometimes the policies are too expensive. But your employer may offer affordable plans, so check there first. If not, an independent insurance agent can help you review your options.
Liz Weston is the Web's most-read personal-finance writer. She is the author of several books, most recently "The 10 Commandments of Money: Survive and Thrive in the New Economy" (find it on Bing). Weston's award-winning columns appear every Monday and Thursday, exclusively on MSN Money. Join the conversation and send in your financial questions on Liz Weston's Facebook fan page.
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Other factors that make it hard is that we singles are taxed disproportionally, and we have to pay for benefits in the workplace that benefit the married ones with children. It's a rare place that offers the fair cafeteria plan, where every worker, regardless of marital status, gets the same amount of money for benefits. I don't need life insurance - I need a LTC plan.
I've chosen the 1BR and small car route, even though I technically could afford more, to make up financially for retirement. However, it's mentally difficult, since married people can live and drive in a nicer fashion. It's hard enough not to feel like a second-class human because you're unattached. I'd probably feel better if we didn't in a society where we exhibit our status w/ stuff, but it is considered tacky to speak your net worth out loud.
Single. Can you ever retire? YES you sure can . I'm 62 now and retired three years ago. I put the max. into my 401k and did a little more saving on the side, nothing sophisticated , not a lot of stock trading or anything fancy, pretty much just buy and hold quality stocks most of which pay dividends, and when the stock market would drop I would keep adding to the 401k, not sell. It seems the most money is made in down markets..I payed off my house 10 years ago and then I did not buy a McMansion. Car is also payed for. Social security and a small pension total about 36k per year. The 1.3 million that accumulated in retirement savings provides more than enough additional income to have a comfortable retirement. Once again I did not do anything complicated, I did not try to time the market, I did very little trading and took very little advice from from financiial "experts". Also I still live a simple life style.
Gotta admit that as a single person, I am losing something but also gaining something.
Probably the thing I'm missing is a little help here and there with a multitude of issues and being able to share a private side that is not for public viewing.
Probably the things that I gain are unequivocal independence, not feeling the guilt of spending money that WE can't afford to and being able to plan for my retirement with the freedom of knowing that I am not going to mess up someone else's goals.
It's a very comfortable feeling being single. The loss of two paychecks doesn't affect me in the least.
Every single guy I know with a professional job retired a millionaire. Guys can wear the same shoes for 3 years and drive the same car for 10 years with no breakdowns (it is called preventive maintenance).
I was single no girl until 32 and saved 100k in the bank during that period. Almost nothing afterwards.
The only thing I would spend significant amounts of money for were decked-out gaming computers - but you spend around $5000 and you are set for 3-4 years.
Family is a financial black hole. It is sure better to have a family than not - after all this is what the life is all about: but single folks with at least minimum of brains will be swimming in cash by the time of retirement.
This article makes me shake my head. Doesn't take into account children, divorce, health issues (prior to retirement) and housing. I wasn't able to have kids and divorced almost 20 years ago, starting from scratch. I am fortunate to have a job with a pension and will retire in 4 years with 70% of salary. (Okay, the salary isn't the greatest, but the bennies more than offset that.)
My car and house will be paid off before then too. I bought my current house 8 years ago as a fixer upper. Definitely not a McMansion. Lots of cosmetic work to do and CLEANING, omg, the cleaning it needed. But I have the room I need and it was more than affordable. And a great place to retire.
Knock on wood, I'm pretty healthy.
A part time job will pay for my medical plan (although that looks like a mortgage payment to me) and I can work on fixing up some house things. I don't want month long European vacations, I don't golf but I do have an expensive hobby (quilting). I have my family and friends and I think that with some more planning, my retirement will be interesting and full of fun people.
It can be done. Don't let the naysayers get you down, they don't have to live your life, but YOU DO.
I am a single male, 57 who just retired and I don't see how a single person doesn't have more money than someone being married. First off, you don't have to "Carry" someone else financially, and secondly, you control your own destiny without having someone else overriding your decisions.
I was married once many years ago and if I were still married, we would be broke. She always wanted more than we could afford and she thought it was bad to pay off the house early. Well I paid it off early, put more money into the company match 401k and played it for the long term.
Now I am financially secure, I spend what I need, not what I want. I can do anything I want. Also most importantly, I have no kids to send to college and take care of because they can't find a job. I made the right move.
I guess the marriage thing could possible work if both contributed equally, but try finding that kind of relationship. More time than not it won't work. Long term relationships where both share the same goal are very rare these days.
My net worth is far more than that married couple on the chart, many times more!
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