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Retiring Solo

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Most retirement planning literature portrays a retirement transition in the context of a couple or a family – but what about those who retire alone? What particular challenges do they face, and how must their preparation for retirement differ?
 
Retiring alone presents unique challenges. Singles who retire may lack a spousal and familial support network other retirees count on. If a lone retiree faces sizable medical bills, he or she can’t draw on the financial resources of a spouse. Unmarried, childless retirees also lack adult sons and daughters who might be able to offer them financial help or serve as executors of their estates one day.

Singles must plan ahead for them.The earlier, the better: A basic financial truth can’t be dismissed: single retirees will need to amass savings comparable to those of a retired couple.

Why? It is because many retirement costs are fixed. Hospitals, universities, banks, pharmacies, mechanics and home improvement specialists do not offer discounts to single parents or lone retirees nor does your county when collecting property taxes. Usually, a couple can absorb these costs more effectively than an individual.

Income taxes. Singles go into the 25% federal tax bracket at $35,350 of taxable income. Married couples don't get into the 25% bracket until $70,700 of income. Single filers will generally pay a higher effective tax rate compared to married filers.

Some steps to consider. Those looking at the possibility of a solo retirement may want to think about these factors...

The need to save early & consistently. Think about increasing your savings rate. It is possible: consider how much parents save for their kids’ tuition, food, clothing and child care, in the face of economic pressures that may exceed your own.

The possible need for long-term care coverage. According to NPR, only about 8 million of 313 million Americans have any long-term care insurance. The average private room accommodation in a nursing home is currently $87,000 a year. The 2012 Long-Term Care Insurance Price Index of the American Association for Long-Term Care Insurance (AALTCI) estimates that a single 55-year-old would pay an average of $1,720 a year for LTCI with an immediate value of $170,000 and a value of $354,000 at age 80 – a purchase that may very well be worth it given trends in American longevity. Many people investigate buying LTCI as they turn 50; you may want to take a look at it in your forties.1 

The value of a social circle. “Family” has many different definitions today – and increasingly, single retirees are creating family-like bonds by moving in with one another, and saving household expenses as well. This can be good for the soul, and some solo retirees with few or no living relatives go so far as to assign power of attorney to a close friend in case of emergency.

These are all crucial factors to think about if you find yourself thinking that you may retire alone. Contemplate them, and consider planning accordingly.

Kevin Kroskey

This article prepared in conjunction with Peter Montoya.
Citations.
1 - www.npr.org/2012/05/08/151970188/long-term-care-insurance-who-needs-it [5/8/12]

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Marketing Library.Net Inc. is not affiliated with any broker or brokerage firm that may be providing this information to you. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is not a solicitation or a recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

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