The average American will retire at the age of 66, but they'll live until about 79 years old and many more will retire for more than another decade. The problem is that most Americans aren't saving enough for retirement.
According to Bloomberg, nearly 19% of people who were 65 years old or older were working either full- or part-time as of 2017, and around 20% of them said they’ll never be able to retire.
You'll need a hefty savings in order to support your lifestyle, take care of any health issues that may arise and possibly cover assisted living costs if you need it some day. After all, almost 70% of people who reach age 65 will need long-term care at some point in their lives and, according to Genworth Financial Inc., the median cost of an assisted living facility was $4,000 per month as of 2018 (and, according to AARP, it was more than twice that cost for a private room in a nursing home in 2018).
"If a single retiree needs long-term assistance with activities of daily living, he or she will likely have to hire ongoing help or pay to move in to a long-term care facility; on the other hand, when couples retire and one of them needs long-term assistance, the other person is usually the assistance provider," says Andy Panko, owner and financial planner at Tenon Financial LLC.
It's also worth noting that medicare only covers 100 days of care at a nursing facility — and that's only if your care was preceded by a hospital stay of three days or longer.
With that all said, here are some tips for saving for retirement as a single person, so that you can do your best to put enough money in the bank.
1. Remember that single people need to save more than couples.
How much do you need to retire as a single person? The answer depends largely on your lifestyle, needs, health and income/feasibility of saving.
"To list the exact amount somebody needs to retire as a single person is challenging of course because everyone has different lifestyles, incomes and spending habits," says Garrett Konrad, Partner at IFC, an investment advisory firm. "It is important to note, though, that single people typically have higher expenses than 50% of what a couple has, because of shared expenses that don't increase when adding a second person to the mix. For example., someone's mortgage payment doesn't change if they are single vs. a couple, you might pay 80% as much for a gym membership as a 'family plan,' etc."
For comparison, you're probably wondering how much a couple typically saves. How much does a couple need to retire at 60? Well, according to thestreet.com, an average couple in the 56-to-61 age range without any retirement accounts had just about $17,000 in savings in 2019. Of course, that's not nearly enough for most of us to survive a year, let alone for two people to survive an entire retirement period. That's why most couples open retirement savings and have a mean retirement savings from 32 to 61 years old of $95,776, according to the Economic Policy Institute.
2. Use the 4% rule for saving.
"Unfortunately, there is no universal answer to how much money is needed for retirement," says Panko. "It’s determined by a few things such as what your anticipated expenses will be in retirement and what other sources of income you’re going to have, such as Social Security. If you don’t already have enough sources of income to cover your expenses, then you need to rely on your nest egg to make up the difference."
Pank recommends using the “4% Rule” to estimate how big of a nest egg you’ll need.
"The 4% Rule essentially says a retiree can withdraw 4% per year of his or her nest egg and expect to statistically not run out of money during retirement," he explains. "For example, if you’ll need to withdraw $40,000 a year in retirement, you’ll want a nest egg of approximately $1,000,000 since $40,000 is 4% of $1,000,000."
However, it’s important to keep in mind that the 4% Rule is just a rule of thumb — there are a lot of unknown variables that go in to it.
"For example, it assumes the nest egg is invested in approximately 60% stocks and 40% bonds, and further assumes stocks and bonds will on average perform as they have in the past," he says. "It also assumes the retiree will live approximately 30 years. It further assumes the retiree won’t make any large additional one-time withdrawals from their savings."
3. Start saving early.
"Start saving and investing early (or at least start NOW!)," he says. "For a 30-year-old, even a couple hundred bucks a month adds up quick. Aim for 10% of your income going to savings and investments. Invest in a prudently constructed portfolio of equities and safe money tailored to your risk tolerance. Keep an eye on fees. There is nothing wrong with hiring an adviser or investing in a mutual fund, but it does get crazy if you are paying an advisor 1.5% to invest in mutual funds charging 1.5% (I've seen it before...). And equities (like company stocks) are one of the best ways to hedge against inflation and make that seemingly crazy $4,000,000 number more attainable over that 35 year period."
4. Downsize and minimalize your lifestyle.
"I am single and just retired in May 2019 — I did not call my retirement a retirement; I called it a graduation," says Emily Harman, who worked for the Navy since 1981 as a Midshipman at the Naval Academy, Naval Officer and Federal civilian employee. She now hosts the Onward Podcast and works as a personal coach and small business consultant. "My best tip for retiring as a single person: Downsize so you can live within your budget. The typical rule that you need 80% of your income doesn't apply to everyone."
5. Wait as long as possible to take out Social Security.
Social security is important. What percent of retirees live on Social Security alone? Almost nine out of 10 Americans who are 65 years old and older currently receive Social Security, and the Social Security Administration (SSA) estimates that 21% of retired married couples and 45% of retired single seniors rely on it for a whopping 90% or more of their income.
So, when should a single person take Social Security? While it differs for everyone, you may want to wait until you're older than 65 years old.
"Establish a relationship with a financial planner and let her/him help you decide the optimum age to retire and the optimum age to take social security — but, in general, I encourage people to wait as long as possible (age 70) to take social security if they are healthy and still working," says Sara Zeff Geber, PhD, author of Essential Retirement Planning for Solo Agers.
Why wait to take out social security?
"If you can postpone social security until around age 70, you'll be better off," says Chane Steiner, CEO of Crediful. "You'll end up with an 8% increase in benefits and, since you'll likely live longer, you need to stretch your finances so you can live comfortably."
"The longer you wait to start Social Security, the larger the payment amount will be… for life!"Panko says. "For example, the payment you’d get by waiting to start benefits at age 70 is approximately 75% higher than the payment you’d get if you started benefits at age 62. Social Security also has an inflation increase feature whereby payments increase each year there is inflation."
So, while there's no right answer as to when you should take Social Security, wait as long as possible if you can.
"As a single retiree, the decision of when to begin taking Social Security ultimately boils down to a break-even analysis based on how long you think you’ll live," Panko says. "By delaying the start of Social Security, you permanently increase the payment you will get when you do begin benefits. But you obviously forego getting any payments while you delay… That’s the trade-off. Mathematically, if you’re single and have reason to believe you are likely to live past your early-80s, then you’ll ultimately be better off by delaying Social Security as long as possible."
6. Focus on health insurance.
There are other benefits of waiting to take out Social Secuity, too — like the possibility of more affordable health insurance, which can make surviving retirement much easier.
"Oftentimes, there is a possibility people over 65 years old can qualify for a subsidy through the Affordable Care Act to help make health insurance much more affordable," says Brendan Willmann, a CFP® and CPA based in Asheville, NC who specializes in working with retirees and the self-employed. "If this is a consideration, they likely need to avoid claiming Social Security until at least age 65 and consider withdrawing from savings that won't generate excessive taxable income. Health insurance is often a key concern for singles under age 65. Coordinating your financial planning, tax planning and health insurance is essential to optimizing your finances during this time."
7. Make a retirement plan.
"Do basic estate planning," Geber says. "Make a will, create a power-of-attorney, draw up an advance directive. These will be important documents as you move on in life."
Having a plan is hugely important, especially for single people.
"If a single person becomes incapacitated and cannot make his or her own legal or medical decisions, there may not be anyone to make those decisions for them," Panko adds. "With a retired couple, they each usually make those decisions on behalf of the other person. Therefore, single retirees should carefully select people they trust to act on their behalf in situations like this. Estate planning attorneys can help put in place legal powers of attorney and/or medical powers of attorney."
8. Also make a Plan B.
It's important to have a plan for your life, but it's also important to have a Plan B in case of emergencies.
"Everyone should have an emergency fund, but where couples can look at three to six months worth of backup expenses, a single person needs to think bigger," Steiner says. "Without a secondary income to balance out losing the first, you may struggle for longer and with a bigger impact. Plan for a year if possible."
So what does that really mean? About 15%.
"It's recommended to set aside about 15% of your income for retirement, but you might want to extend it to 20% if you can swing it, " Steiner says of an emergency fund. "Keep in mind that you will likely be living longer into retirement than previous generations, and you won't have combined retirement to fall back on."
9. Start thinking about your support network.
"Start thinking about where you want to live as you make your way through your 60s, 70s, 80s and beyond — are your friends and family close by?" asks Geber. "If not, consider moving closer to them while you are still healthy and strong. Take stock of your 'social capital.' Who and where are your friends and relatives? Can you count on them to help you in an emergency? If you have been too busy working to nurture the important relationships in your life, now is the time to do it. You will need them when you are no longer working and have said goodbye to your work buddies."
10. Have conversations with your children, if you have them.
For women with children, Geber also suggests talking to them about your plans and discussing the future and your retirement together.
"You age you may need help from your children (even though you swear you don’t want to be a burden to your children)," she says. "Is your relationship with them strong? If not, or if you do not have children, build up the other relationships."
AnnaMarie Houlis is a feminist, a freelance journalist and an adventure aficionado with an affinity for impulsive solo travel. She spends her days writing about women’s empowerment from around the world. You can follow her work on her blog, HerReport.org, and follow her journeys on Instagram @her_report, Twitter @herreportand Facebook.