How to manage your planning when there's no spouse at your back
The U.S. has a new and overlooked majority, one usually identified by the lack of a ring on the left hand. For the first time, a majority of U.S. adults are single. In 1976, the earliest comparable statistic available, 37 percent of adults were single.
The implications of all this singleness are enormous, especially for how Americans manage their finances. The single life has its perks, but can also be more expensive and harder to plan for.
Living alone may mean never having to share the remote, but it can also mean less financial flexibility. Singles need bigger emergency funds and have to pay more attention to protecting themselves with the right insurance. A financial misstep can have greater repercussions when there's no backup, says Baltimore planner Lazetta Rainey Braxton. One of her single clients in her 20s spent almost two months out of work after a serious bike accident. Only disability insurance kept her from financial disaster.
Singles face different challenges at different ages, though many problems overlap. Here's a look at some of the biggest financial threats.
1. The Savings Crunch
Young people are getting married and having kids later. Couples who wait to have kids in their 30s end up with three big burdens all at once: retirement planning, saving for a house and saving for college. The solution is to start saving earlier in their 20s, says Katherine Roy, chief retirement strategist at JPMorgan Asset Management. But it can be tough for young single people to save anything at all, especially while maintaining a household and paying off student debt.
2. Planning for Long-Term Care
The late 40s are the best time to start thinking about one of the biggest risks facing singles -- the likelihood they'll need long-term care. In most of the U.S., a private room in a nursing home can cost more than $100,000 per year, according to New York Life Insurance. People are less likely to be declined long-term care insurance coverage in their late 40s and early 50s, Ms. Roy says. An early start is especially important for women, who tend to live longer and thus pay higher long-term care premiums than men.
Singles -- or married couples -- who wait to buy until they're in their 60s may find the insurance prohibitively expensive. In the last decade, premiums have skyrocketed and policies are covering less, warns Timothy McGrath of Riverpoint Wealth Management. Wealthy singles might be better off self-insuring, or exploring alternatives like longevity insurance. Others might be better off planning to go on Medicaid, says David Cutner of elder-care law firm Lamson-Cutner. In that case, trusts can be used to protect some assets, which otherwise must be spent before patients qualify for the federal health plan.
3. Divorcing Well
While the overall divorce rate has dropped, it's doubled since 1990 for people over age 50. More women than men are initiating late-in-life divorces, an AARP survey suggests. And very often those divorces are destroying their finances. Along with the cost of the divorce, there's the impact of dividing assets shortly before retirement. Many women make the mistake of bargaining to keep the family house, financial planners say, an asset that can be more of a long-term burden than a benefit.
4. Sharing End-of-Life Plans
Too much time and money is burned in courtrooms figuring out who should be a guardian for sick or disabled single people, Mr. Cutner says. That's why aging singles need to make sure their documents are in place, including power of attorney and health care proxies. Those who don't want to rely on friends or family can hire a trustee to take on their finances in case they're incapacitated.
The idea of dying alone can be terrifying. But many older people enjoy the single life. In interviews with more than 300 people for his 2012 book "Going Solo: The Extraordinary Rise and Surprising Appeal of Living Alone," sociologist Eric Klinenberg found that many older singles living alone, especially women, were just as happy and more social than their married peers.
Ava, a retired bookkeeper in her late 70s interviewed for Mr. Klinenberg's book, spends every weekend with a widower named Victor. But she insists she has no intention of marrying him or moving him into her apartment. "I really don't have much much room here for a man," she jokes. "I mean, I have no closet space! Where am I going to put him?"
