Being single certainly has it perks. You have just one pair of dirty socks to wash each day, those dinner dishes don’t pile up that fast in the sink, and you get control of the remote 24/7, even if all you want to watch is golf for six hours. But when it comes to saving for retirement, single folks don’t have it quite so easy, a new study finds.
A study released this month by the Employee Benefit Research Institute found that while 80% of married people are financially prepared for retirement, just 55% of single people are. The trend persists regardless of education levels: For example, while more than 88% of college-educated married folks are financially prepared for retirement, just over 68% of single college grads are. “When you’re single, retirement planning is often 100% on you,” says Deana Arnett, CFP, a senior planning consultant at Financial Planning Services in Northern Virginia. “You are it, and that’s tough.”
So, what does this mean for single folks beyond the vague “save more”? Encore asked Arnett how singles can shore up their retirement. Here’s what she told us:
Save 20% of your pre-tax income. Sure, single folks know they need to save more for retirement than many married people, who have dual incomes, but the question is — how much more? Arnett says you should shoot for saving 20% or more of your pre-tax income, ensuring that you have both padded retirement accounts and six months worth of income in an emergency fund so you can have some liquidity if you need it.
Buy quality disability insurance. “This is something that a lot of people — single and married — don’t have or don’t have enough of,” Arnett says. And when you’re single, it can be especially important because you don’t have another income to fall back on should you become ill or injured and unable to work, she says. Arnett recommends you get a non-cancel-able and guaranteed renewable plan and make sure that the policy covers your own occupation (some plans will only cover you if you’re unable to do any job, not your own job). You should also get a residual benefit rider, she says, which will pay you pro-rated benefits if you can only work part-time. Finally, “don’t just assume you have enough insurance from your employer plan,” she adds. “Sometimes, these plans are very restrictive.” Click here to learn more about disability insurance.
Have a “durable power of attorney” document drawn up. A durable power of attorney is a legal document that outlines who will make decisions — including financial decisions — for you if you are unable to. So, if you are sick or injured, this document might give someone else the power to access your bank account, so they can pay your bills. Why does this matter? Arnett points out that if you’re in the hospital for a while your bills might pile up, unpaid, which can seriously hurt your credit score.