7 Ways Retirement Planning Changes When You're Single

It can sometimes feel like everything is created with couples in mind — including retirement planning. When every article, tip, and suggestion for retirement starts with the assumption that you are married, you might be forgiven for assuming that retiring solo is just a matter of cutting retirement planning advice in half.

But there are specific challenges and concerns (not to mention benefits!) that single retirees need to prepare for before they hang up their careers. Here are seven ways that preparing for retirement is different for singles.

1. You need to have adequate disability insurance

Relying on no one but yourself can feel pretty liberating. Not only do you answer to no one but yourself, but you also get to enjoy the fruits of your own labor without having to compromise.

The downside to this, however, is figuring how you will protect yourself in case your income runs dry. While anyone who relies on income from their job should carry adequate disability insurance, this is even more important for single workers who may not have another safety net to catch them if a disability makes it impossible to work. You need to protect yourself, your income, and your assets from the possibility you may be unable to work, even before you start the nitty-gritty of retirement planning.

Even if you have disability insurance through work, that may not be adequate to protect you from a loss of income. Make sure you know exactly how much your work insurance covers and for how long, so that you are not left without an income if it's not enough. Also, don't assume that you are immune to potential disabilities just because the most strenuous thing you do at work is operate the copy machine. Illness is behind the majority of long-term absences from work — and anyone can get sick at any time.

2. Prepare for your health care needs

Health care costs are a major concern for all retirees, since this is one aspect of your retirement budget that you may not have control over. According to a 2016 Fidelity study, a 65-year-old couple retiring in 2016 would need $260,000 for health care to cover their medical and health care needs for the rest of their lives.

That dollar figure is frightening no matter your marital status, and it's important that single people recognize that their costs may be higher than just half of a couple's health care costs. That's because many married couples can help each other to remain independent in ways that single retirees would need to pay for. For instance, you may need to pay for someone to help you at home or for entry into a retirement community sooner than a married couple would need those things.

While long-term care insurance has often been touted as a method of mitigating these expenses for both married and single retirees, the cost of this kind of insurance has become prohibitive. To prepare for the possibility of bad health in retirement, singles should also explore creative solutions to long-term health issues. For instance, taking in a rent-free roommate who helps with daily tasks is not only money-saving, but also offers social support. Planning ahead for potential solutions to health and mobility issues can provide you with some imaginative solutions that money can't buy.

3. Assign a power of attorney

It's easy to assume that you can skip the whole issue of legal planning if you are single and childless, but that's not necessarily true. For instance, do you know who will take care of your health care or financial decisions if you should become incapacitated? You need to assign a power of attorney to make sure that your wishes are followed if you cannot make your own decisions.

Your power of attorney also needs to know where to find your important papers and should be kept apprised of any changes in your life or directives. This is the person who will pay your bills and handle your advanced directive if you fall ill. You can either pick someone in your life whom you trust, or hire a professional whom you trust to fill that role.

4. Invest in tax-deferred retirement vehicles during your career

Single workers miss out on a number of tax breaks that are offered to married couples. According to Jane Hodges writing for The Wall Street Journal, "Without child tax credits, a spouse exemption, and no one with whom to realize the benefits of filing jointly, singles can take a pretty big tax punch during peak earning years."

For this reason, single workers have a particular need to invest in tax-advantaged retirement vehicles, such as 401(k) and traditional IRA accounts. These vehicles allow you to make pretax contributions, which lowers your taxable income while also helping you prepare financially for retirement.

5. Consider rolling over into a Roth IRA before age 70½

Of course, Uncle Sam will still want his cut of the income you put in tax-deferred retirement accounts, which can cause a nasty tax surprise for singles post-retirement. That's because withdrawals from tax-deferred retirement accounts are taxed as ordinary income, and single retirees still do not have access to the tax breaks offered to married couples.

This can become a serious problem for some single retirees as of age 70½ because of the required minimum distributions on tax-deferred accounts. Traditional IRAs and 401(k)s require that retirees begin withdrawing a minimum distribution (based on a percentage of total assets) at age 70½, which means you might be facing a surprisingly high tax bracket upon reaching age 70½. You may also be forced to take more money from your accounts than you want or need because of the required minimum distribution.

To protect yourself from this potentially painful tax bite, consider rolling over a portion of your assets from tax-deferred funds to a Roth IRA account before age 70½. Since Roth accounts are funded with after-tax dollars, you will have to pay ordinary income tax on your rollover. However, this will allow you to decide when you will pay those taxes and give you more freedom to keep your money invested if you don't need it.

6. Hold off on Social Security for as long as you can

Options for optimizing Social Security benefits are much simpler for singles. Basically, the only way to get a higher monthly benefit if you are single is to wait. The longer you can wait to receive your benefits between age 62 (the earliest you can take benefits) and 70 (when the benefits stop growing), the more money you will see with every monthly check. Even if you cannot wait until age 70, or your full retirement age (currently age 66), know that each month you delay taking your Social Security retirement benefits means a little more money in your checks.

It's also important to remember that the federal government does not necessarily define single the same way you do. If you are divorced but were married for at least 10 years, then you are eligible for spousal benefits based on your ex's income record. However, you will collect your spousal benefits concurrently with your retirement benefits, so you will only see an increased benefit if your ex-spouse made a lot more money than you did.

7. Embrace the opportunities

While the IRS and Social Security Administration may both make marriage look like the better option — at least financially — it's important for singles to remember how many more opportunities they have available to them than do married couples. That's because a footloose and fancy-free retiree has far fewer obstacles to retirement than does a married couple.

For instance, retiring abroad can be a very economical (not to mention fun) choice, and it is much easier for a single retiree to pull up roots than it is for a couple. Similarly, traveling in retirement can be much cheaper for one, since you do not have to compromise on where you are willing to save money.

Single retirees can also explore alternative living options, like living with several friends — there's an excellent reason why all the Golden Girls were single, after all — or taking in a younger boarder or roommate, or even moving to a cheaper state. Making these decisions solo means you can find the living situation or opportunity that best fits your needs, wants, and temperament.

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