When it comes to retirement planning, single people have different considerations—and challenges—compared to couples. For one, you must entirely lean on your own resources and finances to build your nest egg. You aren't splitting costs on housing, bills or groceries, nor can you hop on your partner's healthcare benefits—all of which can help reduce your overall living expenses and leave more money for savings.
Ultimately, you are solely responsible for saving and preparing financially for your retirement, and you won't share a spouse's Social Security benefits, pension or retirement savings. It may be challenging, but saving for retirement as a single person is doable!
If you're a household of one, here's how you can go about planning for your retirement.
1. Understand the Retirement Landscape for Singles
Single households in America are growing in number, with one-person households making up over a quarter (27.6%) of all U.S. households in 2020.1 To help you get your head around how singles in the U.S. face when it comes to saving for retirement, here are a few quick facts:
- • The average single person in the U.S. spends about $48,000 annually, whereas married couples spend an average of $76,000 each year.2
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- • Married folks under 35 have a median wealth 9.2 times that of single women, and 3.1 times more than single men.3
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- • 31% of Gen Zers and 23% of millennials didn't save anything for retirement in the past two years. This may be due to high living costs, inflation, new expenses and stagnant or reduced income.4
Looking at it on a per-person basis, being solo costs more. In turn, it might be harder to save for retirement because, during your working years, your living costs are higher. Having the resources to properly save for your retirement means having solid financial pillars now.
2. Employ Budgeting and Saving Strategies
For starters, creating a comprehensive budget will help you "free up" funds to put toward your nest egg. This includes minding all your expenses, including recurring ones and those due once a year. By tracking your income, expenses and goals, you can spot areas where you can find "extra cash" so you can save more for retirement. That way, even without a partner to share expenses, you can consistently stash money into retirement accounts.
For single folks planning for retirement, having a budget is like having a road map for your money. It helps you figure out where your cash is going. That way, you can steer more funds toward your nest egg. It's generally recommended to put aside at least 15% of your pre-tax income for retirement.5 You can factor in your current saving and spending levels and lifestyle preferences when you leave the workforce. That, along with some simple math, can help you figure out how much to save each month for your golden years.
3. Explore Employer-sponsored Retirement Accounts
As a solo operator, it's crucial to prioritize saving for retirement early. Unlike couples who can rely on shared resources, singles lack the option to access a partner's benefits. Plus, married couples are more inclined to have established 401(k) or IRA accounts compared to singles.6
Consistently allocating funds to a retirement account not only contributes to your financial goals, but also often comes with tax advantages. A good place to start is a 401(k) or other employer-sponsored plan, like a 403(b) or 457(b) plan. Contributions made into a 401(k) plan are pre-tax dollars. Plus, you can often set up direct deposits for your retirement contributions, which makes it even easier to save regularly. If your employer offers a match, aim to put in enough to get the full match.
4. Choose the Right Savings Vehicle
Picking the right retirement savings plan is a mission-critical. That's because it directly impacts how much cash you'll have stashed away when retirement years roll around. Your choice dictates how fast your money grows and how much you'll have to play with when you're not working anymore.
For instance, tax-advantaged savings accounts like 401(k)s or IRAs offer special tax benefits that can supercharge your savings. When you contribute money to these accounts, you often get to deduct that amount from your taxable income—which means you pay less in taxes right now. Plus, the money you earn from investments in these accounts can grow tax-deferred, allowing you to accumulate more over time. When you eventually withdraw the funds during retirement, you might be in a lower tax bracket, resulting in additional tax savings. Essentially, a tax-advantaged savings account serves as a powerful tool to maximize your retirement savings while minimizing your tax burden along the way.
Another option is to open an IRA CD, which is essentially an interest-earning CD within a retirement account. You select the CD term, and the money saved can help you with your retirement goals. For example, some IRA CDs feature terms that range from three months to 60 months.
5. Maximize Your Retirement Contributions
Look at all your retirement account options—especially accounts that have tax benefits—and save as much as you can. Besides saving regularly, commit to saving a portion of any larger chunks of cash you might receive throughout the year, such as a job bonus, sales commission or tax refund.
Lastly, if you're 50 or above, taking advantage of any catch-up contributions will help you save even more for retirement and reach your target savings date more quickly. Catch-up contributions are available for a handful of retirement accounts, including 401(k), 403(b), 457(b), SIMPLE IRA, SIMPLE 401(k) and IRA.7
6. Invest, Invest, Invest
Investing can offer a way to make your money do more for you in the long run. Instead of just parking your cash in a regular savings account, where it might not earn much interest, investing opens up the potential for better returns. Since about 1800, stocks have consistently returned an average of 6.5% to 7% per year (after inflation).8
For single folks navigating their finances solo, investing offers a chance to build wealth and work toward future goals. While there's always a bit of risk involved, building a diversified, risk-appropriate investment portfolio of stocks and bonds can help singles make their money go further and secure a more financially stable future.
7. Get Your Head Around Tax-efficient Retirement Planning
Thinking about taxes might not be the most exciting part of retirement planning, but it's a smart move, especially for singles looking to make the most of their money. Tax-efficient retirement planning is like finding ways to keep more of your paycheck for yourself. By strategically choosing retirement accounts and investment options, you can minimize the taxes you'll have to pay, leaving you with more funds to support your lifestyle in retirement.
For singles, this can be crucial because you don't have a partner to share tax benefits or split financial responsibilities. So, imagine tax-efficient planning as a way to ensure you're not handing over more of your hard-earned money to the taxman than necessary. It's like setting up your finances in a way that lets you keep as much of your money as possible for the fun stuff in retirement, whether that's travel, hobbies or just enjoying life on your terms. Speaking to a financial planner can help.
8. Consider Healthcare Costs and Plan for Long-Term Care Needs
Healthcare is a big chunk of retirement expenses. In fact, a single person age 65 in 2023 may need approximately $157,500 saved (after taxes) to pay for their healthcare expenses in retirement.9 For single individuals, there's no partner to share the load.
It's not just about doctor visits; it's also about planning for the possibility of needing extra care as you age. Long-term care costs, like assistance with daily living activities or attending an adult day care, can add up. Including these in your retirement plan is akin to having a sidekick that ensures you're ready for whatever challenges come your way.
For singles gearing up for retirement, considering healthcare and long-term care costs is like creating a powerful financial strategy to protect yourself and enjoy your golden years with confidence. To save for these significant expenses, consider stashing funds into a health savings account, where you can tap into eligible medical expenses when you retire. And looking into long-term care insurance can help you cover those hefty costs should you need assistance in your later years.
9. Factor In Social Security and Other Income Sources
Another essential part of your retirement planning is folding in your Social Security benefits. When you're single, you're relying solely on your earnings to get you through your entire life, and Social Security can make up a fair share of your retirement income.
Set up an online account with the Social Security Administration and download your most recent statement. You can see how many Social Security credits you've accumulated thus far and gauge how much you can anticipate receiving during your retirement years.
10. Get a Handle on Estate Planning
Estate planning ensures that your hard-earned assets and belongings are distributed according to your wishes, providing a sense of control and security. For people without a partner to automatically inherit assets, it becomes even more critical. It's like crafting a personalized legacy—deciding who gets your favorite things and making the process easier for your family. Estate planning also involves naming beneficiaries and can help minimize taxes, ensuring your assets go where you want them to, rather than to the government.
If you don't create an estate plan, your assets can go rogue and enter probate, which is a time-consuming, stressful and costly legal process. Also, listing your advance medical care directives can offer peace of mind.
When it comes to estate taxes, work with a professional well-versed in estate planning and estate taxes to figure out how to go about minimizing them. There are different tactics for lowering your estate taxes, and working with a professional can help you go over your options and come up with a customized game plan.
The Bottom Line: Future-proof Your Retirement Savings by Taking Steps Today
Half of older women living alone and 42% of older men living alone have annual incomes below the Elder Index—the income needed for older adults to meet their basic needs.10 That's why it's crucial to start building a solid nest egg as early as possible to support yourself during your golden years. While being single comes with additional financial considerations and a set of challenges, having an awareness of them and taking steps today will help you save for the nest egg that can support your financial and lifestyle goals.
Reach out to a retirement specialist or financial planner to get a greater understanding of your financial situation and how to achieve your financial goals. That, combined with making the most of Synchrony Bank's full suite of financial products and services, can help you secure a comfortable retirement.
Jackie Lam is an award-winning, L.A.-based money writer whose work has appeared in Salon.com, Refinery29, Time, Forbes, CNET, Business Insider and BuzzFeed, among others.
READ MORE: The Ultimate Guide to Calculating Your Retirement Savings
Sources/references
1. Anderson, Lydia et al. Home Alone: More Than A Quarter of All Households Have One Person. U.S. Census Bureau. June 8, 2023.
2. 2021 Consumer Expenditure Surveys. U.S. Bureau of Labor Statistics. September 2022.
3. Sullivan, Briana, Hays, Donald & Bennett, Neil. The Wealth of Households: 2021. U.S. Census Bureau. June 2023.
4. Royal, James. Nearly 1 in 3 Gen Z workers are not actively saving for retirement, and it could be a half-million-dollar mistake. Bankrate. December 5, 2022.
5. How much should I save for retirement? Fidelity Viewpoints. January 31, 2023.
6. The Relationship Between Retirement Savings and Marital Status Among Young Adults. Social Security Administration. June 2013.
7. Retirement Topics - Catch-Up Contributions. IRS. August 29, 2023.
8. Gupta, Vartika et al. Prime Numbers: Markets will be markets: An analysis of long-term returns from the S&P 500. McKinsey & Company. August 4, 2022.
9. 5 ways to help protect retirement income. Fidelity Viewpoints. June 30, 2023.
10. Mutchler, Jan E., Velasco Roldán, Nidya & Su, Yan-Jhu. Late-Life Gender Disparities in Economic Security: Evidence from the 2022 Elder Index. Center for Social and Demographic Research on Aging Publications. October 2023.
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