Are you a single woman worried about your retirement? You’re not alone. Single women face unique challenges when it comes to planning and preparing for their retirement. We will explore some common mistakes people make when approaching retirement as a single individual and share a real client case study to help you understand how to address these challenges and create a retirement plan that suits your unique needs.
Common Mistakes to Avoid ❌
Before diving into the case study, it’s crucial to address some common misconceptions and mistakes that people often make when planning for retirement as a single person:
➡ Dividing Expenses in Half: While some costs may decrease when married, such as food and entertainment, others, like property taxes, utilities, and mortgage or rent, remain unchanged.
➡ Tax Implications: Single individuals have a different tax situation than married couples. The standard deduction is lower, and social security benefits are calculated differently, which can significantly impact your retirement income.
➡ Shift in Objectives: Your retirement objectives may differ when you’re single. Married couples often focus on protecting both spouses throughout retirement, while singles prioritize their own lifetime and objectives.
Beth’s Case Study 💭
Beth is a 63-year-old single woman who recently went through a divorce. Beth’s situation sheds light on how a change in marital status can impact retirement planning.
Beth’s initial plan was to stay in Southern California, travel, and visit her children and grandchildren in Tennessee. Post-divorce, her priorities shifted towards spending more time with her family.
➡️ Evaluating Beth’s Resources:
Beth had approximately $1.3 million in liquid assets and $1.45 million in home equity. Her income sources included her current salary and projected Social Security benefits.
➡️ Analyzing Expenses and Goals:
Beth’s desired annual retirement expenses were around $72,000, including healthcare, travel, and college savings for her grandchildren. She also wanted to budget for a new car every seven years.
Challenges and Solutions ✔️
Initially, Beth’s retirement plan showed that she might run out of money by her early 80s. However, her financial advisor proposed a different approach:
Beth considered selling her California home, downsizing in Tennessee, and using the proceeds to buy a new home.This strategy increased her liquidity and reduced property taxes, state taxes, and her overall cost of living.
➡️ Adjusting Contributions: Beth redirected her Roth IRA contributions into her 401(k) to take advantage of pre-tax deductions.
➡️ Social Security Strategies: Beth explored spousal and survivor benefits based on her previous marriage, increasing her income floor.
➡️ Investment Allocation: With her reduced expenses, Beth adjusted her investment portfolio to align with her new retirement goals.
Beth’s case study illustrates the importance of reassessing your retirement plan when transitioning from marriage to singlehood. By understanding your unique financial situation and objectives, you can make informed decisions that optimize your retirement lifestyle.
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retirement planning for Singles: Don’t Make These Mistakes
retirement planning is crucial for everyone, regardless of their relationship status. However, singles often face unique challenges when it comes to preparing for their golden years. Without a partner to rely on financially, it becomes even more essential to make informed decisions and avoid some common retirement planning mistakes. In this article, we will discuss a few key errors that singles should be aware of and provide tips on how to avoid them.
Mistake #1: Neglecting to start saving early
One of the biggest blunders singles can make is delaying their retirement savings. With no partner to share expenses with or rely on for financial support, it becomes imperative to save diligently from an early age. Start by creating a budget and setting aside a portion of your income specifically for retirement. The power of compounding interest means that the earlier you begin contributing, the more your savings will grow over time.
Mistake #2: Not having an emergency fund
Singles must have an emergency fund in place to protect themselves from unexpected expenses. Without a partner to lean on financially during tough times, having at least six months’ worth of living expenses saved up can be a lifesaver. This fund will provide a safety net and prevent you from dipping into your retirement savings when unexpected costs arise.
Mistake #3: Failing to diversify investments
Many individuals, both singles and couples, make the mistake of investing too heavily in a single asset class, such as stocks. Diversifying your investments across various asset classes, such as stocks, bonds, and real estate, can help minimize risk. By spreading your investments, you can potentially protect yourself from major losses if one market segment takes a downturn.
Mistake #4: Underestimating healthcare costs
Healthcare costs are one of the most significant expenses retirees face. Without a partner’s health insurance coverage, singles must plan diligently for healthcare expenses in retirement. Consider estimating these costs and factoring them into your retirement savings goals. Account for not only monthly premiums but also potential out-of-pocket expenses, prescriptions, and long-term care costs.
Mistake #5: Ignoring estate planning
Estate planning is often overlooked, especially by singles who may not have a clear plan for the distribution of their assets upon their passing. It is essential to have a will, designate beneficiaries, and establish power of attorney to ensure that your wishes are followed. By taking care of these details, you can avoid unnecessary legal complications and ensure your assets are distributed as you desire.
Mistake #6: Overlooking social security strategies
Singles should carefully consider their Social Security claiming strategies. Without a spouse’s benefits to consider, singles have more flexibility in deciding when to start claiming. Waiting to claim benefits can result in a higher monthly payout in the long run. Consider your personal circumstances, such as your health, other sources of retirement income, and estimated life expectancy, to determine the best age to begin claiming Social Security.
retirement planning for singles requires careful consideration of their unique financial situation. By starting early, saving diligently, diversifying investments, budgeting for healthcare costs, estate planning, and optimizing Social Security benefits, singles can set themselves up for a secure and comfortable retirement. Remember, it’s never too late to start planning and making positive financial choices to ensure a prosperous future.
This was great! James, I really appreciate you making this video, and that you listen to your viewers. Thank you!
Is there a quasi-breakeven point when doing Roth conversions don't make sense? For example, my wife and I are 63 and retired. We have $372K in a traditional IRA at a national brokerage firm (with a 100% stock allocation) and guaranteed income (social security–that we claimed at 62–and three pensions that are adjusted for inflation and has survivors benefit at 50%) that covers all our expenses; including our home mortgage–with a 2.75% interest rate. We plan on withdrawing up to the standard deduction each year from our traditional IRA, rather than doing Roth Conversions.
Albeit, we have a contingency $250K term life policy with my wife as the sole beneficiary that’s earmarked to cover the cost of Roth conversions should I pass away before age 75. However, we have run the numbers and it seems like the breakeven point for doing Roth conversions for traditional IRA balances is $500K or more. At least that the case and our situation; thus, my question.
I've been single my whole adult life. I can tell you some of the things that I did:
1. Plan early. You should be planning your financial life no later than the very moment you have your first job. Don't worry about getting the plan right because plans will change over time. Start with solid financial basics, such as never carrying credit card debt (if you can help it), and go from there. If the credit card payment is not already in the bank, you cannot afford it.
2. Rethink the concept of college, learn a trade that everyone needs. If you plan a career in something like healthcare, then yes, you will need a degree. Go to Community College for every credit you can to save money. I did not have any student loan debt because I earned my Computer Science degree waaay back in 1994.
3. Have a great job and know when to move on when your current company is not great. The very first company I worked at was horrible and I was disrespected, so I moved on and got more money and respect at a new company.
4. Have a proper work/life balance. Too much eating out, expensive vacations or partying means you'll never save enough money. You also don't want to work all the time or sit at home all the time counting your money either.
5. Consume things like social media, alcohol, drugs or the evening news in small and proper doses and know your limits. These things can be very toxic to your long-term physical health and financial health! Pick hobbies that are more constructive and maintain your physical fitness.
6. When you start saving money from your job, build up a fund that could carry you through unemployment for at least 6 months.
7. Put 100% into your HSA, especially while you are still young. It's a triple tax advantage.
8. Open a brokerage account so you can put some money into market index funds.
9. Do not invest in crypto currency or any non-traditional investment that screams: SCAM! I stay away from crypto. I think it's a total scam. If you invest in crypto anyway, then no more than 10% of your entire portfolio.
10. Do not ever buy a new car until you have reached financial independence. New cars are literal money pits and will prevent you from saving up for a home.
11. Own a house at some point. Home costs today are insane, but I think a single person can still own a house provided they get roommates or save up an amazing amount before buying one.
12. Always be learning new things! Once you have a house, you might want to know how to properly and legally maintain it yourself to save some money long-term. Either that or befriend someone with good carpentry skills that is willing to teach you or allows you to help them do the work.
I prefer the traditional plan single (mostly recently divorced women) use: They move to Florida and hunt for a rich husband as a retirement plan. Unfortunately, that animal has long gone extinct. There are no good available men in retirement towns…. Which a supply chain abundance… All kidding aside, I hope more single women listen in to this advice. In my experience they are woefully underprepared and put more thought into their daily strabuck order than they do their retirement decisions.
I was thrill when seeing this video’s title. I lost interest as soon as I heard her information (divorced with $1 million home). Please, do a video that is true middle class and single!
Thank you for considering this group!!!!
Advice was good but the naming of this video was bad. It should have been "new" or "recent" singles. This was absolutory NOT a video for "single women" unless you have a predisposition where you believe that women still exist solely in the context of their Exs and kids. I'd like to believe that you aren't bias, but this video could be taken very much that way. I suggest renaming and changing the description. If you do see any differences that true "single women" need to plan for, that video would be a different one.
I just don’t see how you can have reasonable spending projections at the start of an inflationary decade. I would caution anybody that planned to go cash flow negative when you have no idea what your purchasing power will be in 8-10 years
I work massive amounts of OT at a Hospital, the most I ever earned was $62k most were in $50k or less? These numbers are so Shockingly High for me? These people are So RICH yet acting like they are barely scraping by? My Pension And SS will only be about $40K. What about people like like US Not just Rich People?
Couldn't she cover some of these like helping grandchildren with Life Insurance instead of monthly Contributions?
I appreciate the divorced with kids aspect of this scenario. One aspect you failed to mention, unless i missed it, was in order to draw on ex-spouse’s Social Security record, the ex-spouse needs to be of retirement age (62 or older). I married a younger man so I will now have to wait until I am 69 to draw ex-spouse benefits. Still worth it since I was a stay at home mom for most of my married life. I’d like to see a version with less assets (400K) and lower budget (36K annually). I also plan to relocate (From CO to FL) to cash out some of my equity and have a lower cost of living. Thanks for the video. -new follower
Why is this just single woman? What about single men?
Thank you for this video.
James, when you run these projections, do you take into account the fees you charge when showing the likelihood of success? Granted, I wouldn't expect to see the fees are a make-or-break factor, but it's still significant, especially on a multi-million dollar portfolio.
Thank you James–your videos have always been very helpful. I've learning a lot from them.
Nice job, James. I appreciate giving airtime to us single folks!
Very much enjoy your insightful, factual videos. Unfortunately many of my friends and myself don't have "Beth's" equity. Instead, approaching retirement as renters (without home equity) and with much smaller retirement/equity account balances. Can you provide guidance for single women (and men) in our 50's anticipating $1600-$2000/mo social security, no pension, only $60,000 current investments, and limited remainder for retirement savings from current paycheck. How best can we maximize and prepare for retirement in the next 10 years?
Thank you James!
Would like to see the same video with divorced or widowed men.
As a widower, this applies to me. I'm 60 now, but will be retiring at 61. Thanks!
We really enjoyed this video as I am significantly older than my wife. I just wish we could work with someone to run through these scenarios with us But videos like this and help with the plans. But videos like this are really helpful.
weird to go straight to an example with kids, ex husband etc. how about a truly single for life person. no need to be gender specific. i'm guessing some differential points would be thinking more about care with no kids to rely on in old age. not sure what other things to particularly think about as a lone wolf in life.
Why is the thumbnail and introduction to this video addressed to single women rather than to all singles? Even though the example was for a single woman, I did not see anything in the financial content of this video that could not apply to a single person of any gender.