On Your Own: How to Manage the Finances of Single Retirement

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Single rocking chairIt's a tough time to be growing old.

Between battles over Medicare and Social Security, disappearing pensions, and a Wall Street meltdown that decimated the investment portfolios of millions of Americans, the path to a secure retirement is more tenuous than at any time since the 1960s. And thanks to advances in health care and smarter lifestyles, those shaky finances are having to sustain us for longer.

"It's not uncommon for a retiree to live 20 to 25 years after retirement," says Caroline Delaney, executive vice president at Hillis Financial Services -- a far cry from the four years that the average retiree could expect to enjoy 50 years ago.

To make things worse, a growing number of baby boomers have to factor in an extra complication: They're facing the difficulties of retirement and old age without a partner by their side.

Planning Ahead

When it comes to the health problems that arise in old age, married retirees can usually rely on their spouses for support. But for singles, long-term care can be more problematic: "Many divorced couples have grown children who can help them out," notes Jack Hillis, president of Hillis Financial Services. "But they often don't like to impose on their kids."

This becomes a particular issue when it comes to end-of-life decisions. "Typically, a married couple will give each other the medical power of attorney, which gives them the right to 'pull the plug' in case of incapacitation," Hillis notes. "As single people approach old age, they need to find a trusted friend or child to take that responsibility."

Not surprisingly, many elderly people build a social circle to help them deal with the strains of old age. "More and more, we're seeing what we call a Golden Girls situation, in which elderly people move in together for companionship and to share expenses."

But while living together can save money on household expenses, it doesn't do much for health care costs. People who live into their 80s, Hillis says, face a 50% chance of needing some form of long-term care -- and, without a spouse or companion, the price of help can add up quickly. Hillis encourages his clients to begin preparing for these costs early: "For people in their 50s who are still single, we suggest that they look at long-term care insurance."

Lifelong Singles

Hillis notes that, depending on their circumstances -- and their spouses' level of life insurance -- widows and widowers may not face major economic hardships. But for lifelong singles, a comfortable retirement requires a great deal of planning.

"Singles need to accumulate as much equity as a married couple," says Delaney. This is largely due to the nature of retirement costs: "Many expenses are fixed," she explains. "They are the same, regardless of whether you're married or single."

With this in mind, Hillis suggests that lifelong singles should begin seriously planning for retirement in their 30s, when they are likely to have more than sufficient income. "Singles often don't have many of the high initial expenses -- like college educations for children -- that married couples have to cover," he explains. "We suggest that they plow money into their 401(k)s and work on [moderating] their spending. They have to realize that they can't spend all their money on expensive toys."

Real estate can be a great investment, Hillis notes. In addition to providing a place to live, it can also provide equity for use in retirement. "Someone who has rented needs to build up other assets," Hillis emphasizes. "This is why they need to start retirement planning as early as possible."


Divorced from Your Assets

While retirement is tough for the never-married, it can be even more brutal for the divorced. Even under the best of circumstances, Hillis notes, a marital split wreaks havoc on finances: "Divorce is the opposite of compound interest. Your finances are cut in half." For couples who divorce later in life, however, it can be particularly devastating. "If you divorce in your 40s, you have plenty of time to plan," Hillis notes. "But when you divorce later, there's less time to prepare for retirement."

Among baby boomers, this problem continues to get worse. Boomers made up a large part of the record wave of divorces in the late 1970s and early 1980s, and are still dissolving their marriages at a stunning rate. Almost a quarter of today's divorces are "gray divorces" -- the dissolution of couples who had been legally bound for 20 years or more.

In addition to slashed assets, many of these divorced retirees and soon-to-be retirees also have to deal with their own financial ignorance. "In many marriages, there is one spouse who handles all the family finances, and the other is in the dark," Hillis notes. "We advise that both spouses should know about their finances and be familiar with their financial advisers."

Across the board, Hillis and Delaney note, education is vital. Facing old age alone can be a scary prospect, but extensive planning, a clear understanding of finances, and a realistic perspective about retirement and health care costs can make it easier -- and a lot more comfortable.

For a bullet-point rundown of the experts' suggestions, depending on your current age, click over to: Single Retirement Tips: How to Prepare for a Solo Old Age.

Bruce Watson is a senior features writer for DailyFinance. You can reach him by e-mail at bruce.watson@teamaol.com, or follow him on Twitter at @bruce1971.


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39 Comments

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ha6ai

A useless "article". The best planning for retirement is voting out Obama and Obamacare.

And thanks a bunch AOL/HuffPuff for the arrogant smarmy photo of Obama! (We know how devoted you are to being a progagandist for BHO.)

June 23 2012 at 5:54 AM Report abuse +3 rate up rate down Reply
boowah

My mother predeceased my dad by 9 years, leaving me to care for him! I did the best I could, but I still resented him for not eating when he became sicker, thinking that if he would only eat, he would become stronger and be able to help me keep him home. Finally, he became just dead weight, and I couldn't even lift him on an off the Port A Potty. My brothers and I had a Nursing Home planned for him, but he passed a week before the move. I was actually greatful that he never had to go, but I still regret the fact that he knew my intentions for him before he died. He actually mentioned to me that he wouldn't be a burden on me much longer! That's the last thing I wanted him remembering me for.

June 20 2012 at 4:41 PM Report abuse +1 rate up rate down Reply
JAL

For those who want to take a serious look at long term care insurance, consider some basic advice about it:
Most important is to buy this insurance when you're healthy. The healthier you are the lower your premiums.
Buy a policy that meets your state's guidelines-that's called a "Partnership-qualified policy".
Buy a policy that has a "Policy Limit" that is equal to the amount of your net worth that you want to protect for yourself, spouse, or heirs.
Lastly, shop around. LTC insurance premiums vary a lot from one company to the next. Get quotes from at least 7 of the top companies before choosing a policy.

www.LTCShop.com

June 20 2012 at 4:17 PM Report abuse rate up rate down Reply
chris1011

Your biggest problem righties is that Americans see Romney as a phoney. Read it and weep suckers: http://blogs.wsj.com/washwire/2012/06/20/poll-shows-obama-with-big-national-lead/

June 20 2012 at 4:00 PM Report abuse +1 rate up rate down Reply
n5monthsocrapleft

PRESIDENT BUSH HAD A 4.9 UNEMPLOYMENT RATE N A 14000 "PLUS" STOCK MARKET ON FEB~20~08 N OUR RETIREMENT PLANS INCREASED ,NOW THIS MUSLIM CLOWN TANKED OUR RETIREMENT PLANS N ALL OF AMERICA IS "ON THERE OWN" WITH THIS MUSLIM CLOIWNS RECORD UNEMPLOYMENT N 23 MILLION AMERICANS "STILL" OUT OF WORK TODAY~~FLY YOUR AMERICAN FLAG UPSIDE DOWN FOR THE DEATH OF AMERICA TILL THIS MUSLIM CLOWN N HOLDER ARE REMOVED IN HANDCUFFS. ! ! !

June 20 2012 at 4:00 PM Report abuse +2 rate up rate down Reply
n5monthsocrapleft

THE FBI WILL SOON BUST INTO THEW WHITE HOUSE N LOCK THIS MUSLIM CLOWN N HOLDER UP. ! !~

June 20 2012 at 1:19 PM Report abuse +5 rate up rate down Reply
2 replies to n5monthsocrapleft's comment
whackjobtwo

BIRTHER CLOWN:.......... IT WILL NEVER HAPPEN.......LOL!!!!!! IT WAS ME GEORGE BUSH WHO STARTED FAST AND FURIOUS.

THEW?.......YOU MUST BE EATING TOO MANY OF RICK PERRY'S COW PIES THEY MUST BE ROTTING OUT YOUR BRAIN............HEE>>>>>>>>>>>HAW!!!!!!!!!!!

June 20 2012 at 3:11 PM Report abuse rate up rate down Reply
Oh Great One!

Why are you blathering on about politics when the story is about managing your retirement? Just shut it and go to another forum.

June 21 2012 at 8:32 AM Report abuse rate up rate down Reply
Master Chief

Hey! I need this. It like a foreverlalone retirement plan. Helping the ugly people! I like it!

June 20 2012 at 12:22 PM Report abuse -1 rate up rate down Reply
john6638

SZure are alot f complaits from the peanut gallery.I retired in 2008 and I enjoy myself and do things I never had time for and yes I'm a liberal with money.So all you crybabies take note the republicans wrecked the economy and then blame the democrats.then the democrats spend money like drunken sailors and blame the republicans for it .Take so advice and save your money,live below your earning level and try to get out of debt.

June 20 2012 at 11:53 AM Report abuse +5 rate up rate down Reply
cpo1514

Huffy.... any advice for the Libs that are destroying the retirement??? Say no contributions-no payments. Say.. not a citizen- no payments, thought not....

June 20 2012 at 10:47 AM Report abuse -3 rate up rate down Reply
n5monthsocrapleft

MUSLIM CLOWN N DUMMYCRAPS HAVE BEEN NOTHING BUT OBSTRUCTIONISTS FOR THE LAST 3 1/2 YEARS ON THE ALL AMERICAN TAX PAYERS BACK. ! ! ~~>ROMNEY / 2012 BRINGING PROSPERITY BACK FOR ALL AMERICANS TO AMERICA. !

June 20 2012 at 10:35 AM Report abuse +3 rate up rate down Reply
1 reply to n5monthsocrapleft's comment
whackjobtwo

BIRTHER CLOWN:......IT WAS THE RETHUGLICANS WHO BLOCKED THE AMERICAN JOBS ACT LAST FALL WHICH WOULD OF PROVIDED MILLIONS OF INFRASTRUCTURE JOBS ALL ACROSS OUR NATION. WHEN IT COMES TO OBSTRUCTING THE RETHUGLICANS HOLD THE RECORD. THEY'VE USED THE FILIBUSTER AGAINST OBAMA A RECORD NUMBER OF TIMES. THE RETHUGLICANS EVEN BLOCKED EQUAL PAY FOR WOMAN. NO WONDER MORE WOMAN VOTED FOR OBAMA IN 2008 AND AGAIN IN 2012 MORE WOMAN WILL VOTE FOR OBAMA THAN MITT ROMNEY.

BIRTHER CLOWN:.....ARE YOU ENJOYING THOSE COW PIES FROM RICK PERRY?

June 20 2012 at 3:04 PM Report abuse +1 rate up rate down Reply