Retirement is a big deal for anybody, and that's especially true for single
people who may be retiring with just one income and who may have
built up a nest egg solely off their own savings. So,
we know that single people can and do retire comfortably. In fact,
one quarter of people over age 60 are living alone in their household,
and that number is slightly higher for women, and that's, of course,
due to women's longevity. So what we're going to talk about here is
retirement for single people. First, we'll go over some averages to give
you a rough idea of what the landscape looks like for single people,
then we'll get into how much money you might need as you go
into retirement, then we'll talk about some tips that can help improve the
chances of retiring comfortably. Let's start with the average retirement
income for single people. So it's $42,000 on average for an individual in
retirement, and that comes from the US Census Bureau. The median is a
little bit lower at $27,000. So a friendly reminder of how this works:
The median is the middle, so if you line up all of the
survey results, people telling you what their income is, for example,
that arrow points at the middle observation, which would give us the median
down at the bottom. But if we go to the average,
that is going to get skewed by, in this case, wealthy people,
for example, they have a very high income. When it comes to Social
Security, the average is about $1,500 a month or $18,000 per year.Your level
depends, of course on your earnings, if you had higher earnings during your
working years, then you tend to potentially have a bigger benefit than that,
and it could be lower, and then of course, your claiming age is
also an important thing. If you claim early at age 62,
you get a reduced benefit. That's likely to bring down the amount you
get. Next, we have pensions, some people get an income from a job
they worked at. That might be in the public sector as a teacher,
a firefighter, that sort of thing, or even in the private sector,
you could have a pension from your job, and those incomes just are
all over the board, it could be high, it could be low,
but these are different sources of income that people might have in retirement.
This is just a friendly reminder that this is just one video and
it may cover some interesting information, but it's not specific to you
so I hope you'll do a lot more research, hopefully check with some
professionals and get some individualized advice, and that way you can improve
the chances of things going well for you. So now let's talk about
how much you might need as you go into retirement. Unfortunately,
there's no single answer on what you need because it depends.
So the first step is to figure out what sort of income you're
going to need, and I've got other videos on that, I'll put links
in the description to get you some more information, but you can look
at replacing a portion of your income, or you can just say,
I want X amount of dollars per year, or you can go with
other approaches, but first we need to know how much income you are
hoping for. Next, we tally up your income sources, so that might be
some guaranteed income that comes in from Social Security, for example,
or from your pension at your workplace, but that forms a base of
income and that might or might not cover what you need.
But it gives us a base and then if we need to fill
that in, we can supplement withdrawals from your retirement savings, so
that might be out of your IRA, your 401, 403, these accounts that
you have built up over time can provide supplemental income to help fill
the gap between that guaranteed income you get and the amount you actually
want to spend. There are a number of ways to figure out how
much to withdraw and to set up different strategies, there might be bucking
strategies, there might be withdrawal strategies like the 4% rule. Or if
you don't like that, make it the 3% rule to be safer,
or take out more if you think that's not enough and you're selling
yourself short. Ultimately, there are a number of ways to approach this,
so you just pick one that works well for you, and again,
I can point you to some resources on figuring that out.
And finally, you will want to look at taxes and inflation,
so during your retirement years, it's reasonable to assume that prices may
increase on many of the things you buy, so we want your income
to be able to increase as well, Social Security typically does rise,
but maybe not at the same rate as the things you're buying,
so your withdrawals may need to account for that. Plus we've got taxes.
You typically will owe taxes if you're taking distributions or you're taking
withdrawals from pre tax retirement accounts. If you have a pension that
might be taxable as well. We just want to look at all of
these things and figure out what your ultimate money left over to spend
each month is going to be. For an over simplified example,
let's just look at Jane Doe. She's 60 years old, she's single,
she wants to retire in about five years, she makes about 80,000 a
year and has 700,000. A lot of people retire with less than that,
a lot of people retire with more. I'm going to bring up my
financial planning software that I use with clients, and we'll just go over
kind of why there's no single answer on how much you need.
Now, if you can tell me exactly how long you'll live and what
the markets will do and what inflation will look like, we can tell
you exactly what you'll need. But there are a lot of unknowns, so
a lot of times we start with a probability of success and I'll
go over what that means, and then we look at little tweaks and
how different changes might affect that probability of success, so working
an extra year might bring her from... Let's say 75%
to 84% likely to succeed. Now, success and failure are pretty complicated.
They don't necessarily mean that you go completely broke, but you may need
to make some adjustments, so let's talk about what does the success mean?
We, again, cannot predict the future, so we say, Let's look back and
say, You get dealt 1,000 hands. You're playing a game of cards and
you get 1,000 hands. Some of those are good and some of those
are bad, so the very good ones tend to be up here,
near the top. And you actually end up with a lot of money
left over. Some of them are not as good and you end up
running out of money early. The median is, again, that one that's right
in the middle when we line them up in order for best to
worst. And so you might say, you're probably not going to get the
best, you're probably not going to get the worst, although anything is possible.
So that's how we go with this likelihood of success.
Now, maybe she doesn't want to work an extra year, so we can
look at different ways of accomplishing things here.
By the way, we've built in some long term care in case she
does get sick and needs that at the end of life.
She's looking to spend about 4,000 a month, that's after some health care
costs that are going to inflate each year, and she's saving a decent
amount in some 401K and taxable accounts. Let's say she goes ahead and
maxes out that Roth, is it going to make a big difference?
Not really, 'cause she only has five years left. So what we do
here is we start looking at all of these different variables and playing
with the pieces and figuring out what does it take to make her
successful at her retirement, or at least successful enough that she's comfortable
making that transition. So here are some tips to improve your chances.
The first is to plan for long term care. If you're living on
your own, you don't have somebody in the house who can help you
do things, and it's arguable if even a couple is capable of managing
this on their own... I mean, if you think about a couple,
is one of the people physically able to move the other person around
and do they have the skills to provide health care, and the time
and the energy, frankly, to provide all that type of care?
So it's important for everybody, but it's especially important for single
people to plan for this care. So you can look at getting insurance,
you can look at budgeting for some costs, like we showed you in
the software, you might want to budget for a much bigger number if
you go into memory care or something like that with 24 hour supervision,
it can get really expensive quickly. And you can explore different living
arrangements, maybe doing things with friends or certain communities that
might be a good fit for you. Next is to avoid leaving money
on the table so if you were previously married and your spouse passed
away or you've been divorced, you may be eligible for benefits.
That's maybe from Social Security, you can potentially get a survivor's
benefit, or if you were married for at least 10 years and you've
been divorced, you can potentially get spousal benefits on your ex spouse's
work record. It's just important to explore all of these to see if
there are any resources available for you. Next is to make a plan,
and I am of course biased as a financial planner, but I think
it is really helpful to go through the process, and the main goal
isn't to get a big document that tells you what your financial plan
is. Instead, really, the benefit is going through that process and learning
a lot about your finances as you do it, and in that process,
you get an idea of what the risks are, how you're doing,
you might get confidence and clarity on whether or not you can go
ahead and retire, if you should do certain things or not.
It's just a very valuable process for a lot of people,
but I'll leave that for you to decide. If you found this video
helpful, please leave a quick thumbs up. That gives me feedback that this
is something you might enjoy more of, so thanks for watching and take
care.