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Retiring Single: Case Studies

When it comes to saving for retirement, the usual planning basics apply whether you’re single or married: You need to save diligently, invest in a diversified portfolio and maintain an emergency fund.

Of course, planning for one tends to involve fewer variables than planning for two, but going it alone can be difficult in other ways. A big one is not having a partner to use as a sounding board, whether you’re trying to decide between different investment options or just looking to discuss the emotional aspects of your plans, says Jason Yeager, a Schwab Financial Consultant in Denver.

“Married couples bring different perspectives to the relationship, and they may have alternate views about money and investing,” he says. “Single people, on the other hand, are relying on themselves for all decision making.”

If you’re planning for life on your own, you’re far from unique. A sizeable share of the retirement-age population is likely to end up living by themselves. Some 36% of women and 19% of men over age 65 live alone, according to a 2014 Census Bureau report.1

We asked Jason how some of his clients have navigated the challenges associated with a solo retirement, whether they were divorced, widowed or single by choice.

Retirement after divorce

When it comes to divorce, the headache of dividing up financial assets tends to exacerbate an already tense and emotional experience. Divorce often upsets carefully laid retirement plans—plans that must be reconstructed on an entirely new foundation.

While every case is different, Jason counsels clients not to make decisions in the heat of the moment. “You have to create a little distance,” he says. “That will help you remove some of your emotions from the decision-making process.”

Heather A., 59, came to Jason for guidance during her divorce. “She knew she was entitled to half of the assets in her ex-husband’s retirement accounts and wanted to spend some of that money on a new house,” he says. But when Jason went over Heather’s finances with her, he saw that such a purchase would leave her with little to invest for retirement.

“She wanted a house similar to the one she had during her marriage but she didn’t realize how much that would set her back,” he says. “She also assumed her expenses would be half of what they were when she was married, but they were working out to be closer to 70% of that.”

Jason helped her work through her budget, expenses and debt, and figure out how much income she could expect from her retirement savings. He also referred her to Schwab’s financial planning team for an analysis of what she could expect from Social Security. “After running the numbers, they determined that she would receive a larger benefit if she collected based on her husband’s work experience rather than her own,” he says.

Married individuals are allowed to claim a benefit based on their spouse’s earnings if that benefit is bigger than what they’d receive on their own. These spousal benefits still apply after a divorce.

Even with that larger benefit, however, Jason still was concerned that Heather’s spending habits might hurt her ability to save. “One of the biggest challenges newly single people face is living within their means,” he says. “Heather was used to a certain lifestyle, but she was going to have to be more frugal in order to make her retirement portfolio last.”

Jason and Heather meet regularly to review her savings, spending and investment timeline. “We still have a lot to work through,” he says, “but she’s starting to see how her idea of retirement might need to change now that she’s single.”

Related video: "Modern Family Finances: The Single Parent"

Retirement for a surviving spouse

The bereavement process that one goes through when losing a spouse makes the transition to a solo retirement that much harder.

Jason had been working with clients Sarah and Joe C. for five years before Joe’s failing health forced him to start thinking about how Sarah would manage after he was gone. “He had been dealing with serious health issues and knew his time was coming,” Jason says. “He was adamant about making sure his wife was taken care of.”

The first thing Joe and Jason did was give Sarah a crash-course in investing. “Before his illness, Joe managed all of their finances,” Jason says. “He knew Sarah wasn’t prepared to go it alone, so we set up regular conference calls to educate her on the basics of investing, as well as get her up to speed on all of the couple’s financial and investment accounts.”

Sarah and Joe’s kids also were consulted during the planning process. “We wanted everyone to be on the same page so we could avoid surprises and the kids could help mom out, if needed,” Jason says.

It’s been about five years since Joe’s passing, and Sarah, now 79, still keeps in regular contact with Jason. 

“Joe tried to put as much as he could on auto-pilot for her, but there’s always something to keep an eye on,” he says. “We touch base regularly to make sure she’s still getting the income she needs from her investments, and we always make sure she’s withdrawing enough from her accounts to avoid penalties.”2

Retiring solo—by choice

For Jason’s client Larry B., 68, financial planning has always been a solo affair. He’s never been married and doesn’t have any kids, so he’s had to make decisions about his finances entirely on his own. He’s become a very savvy investor and has built quite an estate along the way. But now that he’s getting older, he’s starting to think about his health and his legacy.

“Larry’s parents are gone and he doesn’t have siblings, so there’s no one left to manage his estate or care for him if he becomes ill,” Jason says. “His friends are his family, so we’ve spent a lot of time discussing which of them he can trust with these important responsibilities.”

“For single people with significant assets who can’t or don’t want to put the burden of these decisions on their families or friends, establishing a trust can be a great solution because it allows them to specify exactly how their assets should be disbursed after they’re gone,” he says.

A living trust is a private contractual agreement that specifies how your assets will be distributed after your death. With this structure, you transfer ownership of some or all of your titled property (which can include investments, real estate, bank accounts and vehicles) and personal property (for example, jewelry, antiques or furniture) from your name to the trust.

After the transfer, you maintain the same access to and control over the assets as you did before you put them in the trust. You can buy, sell and trade assets, and freely move them in and out of the trust.

Unlike a will, trusts don’t have to go through probate, the name for the legal process used to value your estate, settle any debts, pay taxes and transfer assets to your heirs. That means the assets held in a living trust go directly and immediately to your heirs upon your death. And because living trusts are private documents, they are generally more difficult to challenge than a will. Keep in mind that Schwab does not provide estate planning services. You’ll need to work with an estate planning attorney to establish a trust.

1Samantha Cole, Daniel Goodkind, Wan He and Loraine A. West, “65+ in the United States: 2010,” United States Census Bureau, 6/2014.
2People age 70½ and older are required to withdraw a minimum amount (called a “required minimum distribution” or “RMD”) from certain retirement accounts. Failure to do so could result in a 50% excise tax on the amount not distributed as required. See IRS Publication 590-B, “Distributions from Individual Retirement Arrangements (IRAs),” for more information.

 

What you can do next

  • If you need help planning for your future, scheduling a personal retirement consultation with your investment professional is a great place to start.
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Important Disclosures

The names of the clients mentioned here have been changed to protect their privacy.

The Personal Retirement Consultation is complimentary, although the implementation of any recommendations made may result in trade commissions or other fees, charges or expenses. The consultation is available only to clients with at least $25,000 in assets at Schwab or prospects with at least $25,000 in assets available to bring to Schwab. Individualized recommendations are available only to Schwab clients and are limited to assets held in a Schwab retail brokerage account. Information provided to prospects, or pertaining to assets held outside of Schwab, as part of the consultation are examples of the kinds of recommendations available on assets held at Schwab. These examples do not constitute recommendations, solicitations, or investment advice.

This information is not intended to be a substitute for specific individualized tax, legal or investment planning advice. Where specific advice is necessary or appropriate, Schwab recommends consultation with a qualified tax advisor, CPA, financial planner or investment manager.

There are eligibility requirements to work with a dedicated Financial Consultant.

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