Ah, the single life. You can do as you like. There’s no need to deal with a spouse who has difficult relatives or opposing views, or one who spends too little or too much, or who has a different vision of retirement.
Still, there are trade-offs. As a single person, you are 100 percent responsible for creating a sound budget and a financial plan to safeguard your future. With one income, you alone must cope with inflation, or with a recession that could be just around the corner.
And it’s on you to learn about laws, rules and policies that can have major consequences for your money, and which just got a significant overhaul in Congress in the form of the SECURE Act 2.0, a set of retirement savings provisions enacted by Congress at the end of 2022.
That’s a lot to handle on your own, says Lamar Brabham, a wealth management specialist and the founder of the Noel Taylor Agency in North Myrtle Beach, South Carolina. “Carrying the burden for all living expenses can be a challenge, not to mention managing the payments and making sure nothing is left undone.”
The recession many economists expect in 2023, “along with continued inflation and a volatile stock market, will continue to impact retirement planning for years to come,” says Krisstin Petersmarck, an investment adviser at Bridgeriver Advisors in Bloomfield Hills, Michigan.
How do you make your financial footing as secure as possible? By getting organized to gain a greater sense of control over your money, now and later. Financial pros suggest the following steps.
1. Make informed decisions
Are you used to handling money, or did a partner do it? Either way, there’s much to know. To make the best choices, you’ll need to be up to speed on topics like Social Security, Medicare and required minimum distributions (RMDs) — mandatory withdrawals from retirement savings plans such as 401(k)s and traditional individual retirement accounts (IRAs).
If you’re divorced or widowed, make sure to understand the rules around Social Security ex-spouse and survivor benefits, says Bradley Lineberger, president of Seaside Wealth Management in Carlsbad, California. Your age can affect eligibility for these monthly payments, and the amount you can receive.
Lineberger also recommends waiting until 70 to claim your Social Security retirement benefit, if possible. You can file as early as age 62, but your benefits increase by as much as 8 percent a year for each month you delay up to 70. “Where else can you get a guaranteed return of 8 percent per year?” he says.
Income from other sources, such as part-time work or withdrawals from retirement accounts, can help you delay taking Social Security. Lineberger suggests attending retirement planning sessions near you to learn more, adding, “Many community colleges offer classes that people like me love to teach.”
2. Seek expert advice
Look for a financial planner to help you develop a retirement plan. Only about a third of Americans work with a financial adviser, according to a 2022 study by Northwestern Mutual found. Prior research by the insurance company found that single people are twice as likely as married people to have talked to no one about retirement.
“Financial planners can run scenarios and investigate the lifestyle spending a person has and determine it. This helps the person understand when they can afford retirement or how many more years of work they need to perform,” says Jordan Benold, a certified financial planner (CFP) at Benold Financial Planning in Frisco, Texas. “Social Security and Medicare can be examined in this analysis.”
D. Scott McLeod, a CFP at Brown Financial Advisory in Fairhope, Alabama, also recommends tax planning long before retirement.
“Because single filers have lower thresholds in the tax brackets, being very intentional about your savings vehicles, your distribution plan, when you draw Social Security and your required minimum distributions is critical to properly managing your tax bill,” he says.
The Financial Planning Association has an online search tool you can use to find professionals in your area.
3. Map the new landscape for RMDs
SECURE 2.0 is already introducing changes that can affect how you strategize around other forms of retirement income, notably required minimum distributions.
For one thing, the new law raised the age at which you must begin taking these mandatory withdrawals from 72 to 73, starting this year. It will go up again, to 75, on January 1, 2033. That allows you to postpone the income taxes you’ll need to pay on these funds, Petersmarck says.
“Tax planning now, before you take RMDs is important,” she says. “There are many ways to reduce that looming tax bill on your retirement savings.”
In addition, SECURE 2.0 makes RMD mistakes less costly by slashing the penalty for failing to take a distribution when you should or taking less than the required amount. The law reduces the penalty from 50 percent of the under-withdrawal to 25 percent. That can be cut further, to 10 percent, if you make up the difference in a timely manner, generally within two years.
You don’t need to take RMDs from Roth IRAs, and SECURE 2.0 will eliminate them from Roth 401(k) as well, starting in 2024. “It makes it much simpler to leave funds alone to grow in your company retirement account, if you wish,” says John Bergquist, president of Lift Financial in South Jordan, Utah.
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4. Create, and stress-test, your retirement budget
Have an adviser review your spending plan, considering many factors, including inflation and a potential recession. This can help ensure you have an adequate emergency fund to draw upon so unexpected circumstances don’t derail your financial plan.
Laurie Allen, a CFP at LA Wealth Management in Manhattan Beach, California, creates income plans tailored to her clients’ current needs. “For our clients who are single women because they are widowed, what worked for you as a couple may not work now,” she says. “One of your Social Security incomes may be gone, and possibly a pension too.”
When creating an income plan, Michelle Gessner, a CFP at Gessner Wealth Strategies in Houston, considers unforeseen events, such as disabilities, family financial issues, investment losses and possible tax increases to determine how much spending a plan can support. “I beat the heck out of it to ensure that we have thought of everything.”
5. Assemble a worthy team of advisers
Ideally, your financial planner is just one player on a team of experts who advise you. Besides a financial plan, you’ll need legal documents like a will, a living will, powers of attorney and, perhaps, a revocable living trust, McLeod says.
“They all name people to be in charge in case you can’t handle it yourself,” he says, a particular need for people who don’t have a spouse to step in. If you don’t have family members you trust with the responsibility, “use professionals like attorneys or trust departments to step in for you in the case of incapacity.”
6. Think hard about long-term care needs
Do you need long-term care insurance? It’s an important question if you don’t have someone to take care of you at home in the event of a major illness or incapacitation, says Andrew Houte, director of retirement planning at Next Level Planning & Wealth Management in Brookfield, Wisconsin.
“It may be less important if all your assets can go toward providing your care. You won’t be using funds that a spouse would need in the future,” he says.
Lineberger likes some of the newer hybrid life insurance policies with riders that can divert part of the death benefit to pay for long-term care if the need arises. “That is a nice compromise,” he says.
7. Gather documents and digital files
Getting your affairs in order can give you peace of mind while providing a road map for your personal representative or executor. Assemble a binder of all your legal documents and a list of all financial accounts, utility bills, life insurance policies and work-related benefits.
Don’t forget to create a digital plan, so the personal representative named in your will or power of attorney has the legal authority, allowed in many states, to access your online accounts and digital property — digital assets (business or personal websites, art, music, cryptocurrency and more) as well digital information (email and social media accounts).
Be sure to write out clear instructions for your representative and keep them updated. Upon your death, they can use this information to liquidate your assets, settle your debts and share the news of your passing via your email and social media.
To protect these vital records and your passwords, use a combination of low-tech (a binder) and high-tech methods (a thumb drive or secure website). Your instructions should include how to locate everything, including keys to your home. The Federal Emergency Management Agency’s Emergency Financial First Aid Kit has checklists and forms you can use to organize your info.
Patricia Amend has been a lifestyle writer and editor for 30 years. She was a staff writer at Inc. magazine; a reporter at the Fidelity Publishing Group; and a senior editor at Published Image, a financial education company that was acquired by Standard & Poor’s.