The single woman’s guide to saving for retirement

Find out why single women need to prepare for retirement before married couples do.

26 Sep 2019

Questions you can ask your UBS Financial Advisor

  • Why do single women need to prepare for retirement before married couples?
  • When should single women start saving for retirement?
  • What specific considerations should single women take into account when planning for retirement?

More women are staying single. However, retirement advice is often directed at couples, versus at unmarried people, meaning that single women often don't get the tailored advice they need.

This matters, because the Employee Benefit Research Institute (EBRI) found that single females have about twice the retirement savings shortfalls than single men have—$72,883 versus $37,690. "Not only are single females more likely to have retirement deficits, their retirement deficits are likely to be significantly larger than those of other cohorts," the EBRI report finds. Generation X women—the generation in between boomers and millennials—is at particular risk of running out of money, the EBRI notes.1 “This is especially troublesome because women typically live longer than men. They already need to have more saved up because they'll have more years in retirement to fund," says Ainsley Carbone, Total Wealth Strategist with UBS.

Single women can help to mitigate shortfalls by approaching retirement savings in a way that caters to their specific situation, not a couple's situation.

Don't wait for a significant life event—start planning for retirement today

Marriage is a significant life event, and one significant life event tends to bring up thoughts of others. This is one reason why married people may start thinking about retirement earlier than single people. "I would encourage women not to wait until they have a significant life event such as marriage to start saving for retirement, and instead, to start as soon as they can," Carbone says. “For instance, if you're at the beginning of your career, and your employer offers a 401(k) plan, that's a perfect and convenient opportunity to start your retirement savings."

The earlier you start saving, the better. You don't just have the advantage of time, you also have the power of compound interest on your side. Assuming a 4.5 percent rate of return, if you start saving $5,000 a year at age 25, by the time you are 65 years old, you'll have $240,000 more than you otherwise would have if you waited until age 35 to start saving $5,000 a year. Every year makes a difference and the longer you wait to start, the more you'll have to save later on2*

*For illustrative purposes only. Important: The projections or other information provided in the Modern Retirement Monthly,  Three common mistakes in retirement planning November 7, 2017,  regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results.

Build in more safeguards

“When you are part of a couple, you may have two paychecks to rely on. But when you are single, you don't have that inherent cushioning," Carbone says. Take matters into your own hands and take the necessary steps to build in your own cushioning.

For example, if you have a high-deductible health plan, you can save in a triple tax advantaged account for unexpected health expenses (contributions are pre-tax, earnings grow tax-free, and distributions used for qualified medical expenses are free of income tax). “Since HSA funds can rollover from one year to the next, they can be incredibly helpful when it comes to saving for healthcare costs in retirement," Carbone says. 

Keep your long-term goals in mind

You are the sole decision-maker of your wealth, which is empowering. It's also a big responsibility. “Be disciplined about your financial plan and always keep your long term-goals in mind," Carbone says. Your goals—such as when you hope to retire and what kind of lifestyle you want in retirement—will determine what kind of investment approach you take.

If you're having a difficult time clearly identifying your goals, you can work with a financial advisor who can help you prioritize your objectives and select appropriate investments that align with what you're trying to achieve. In addition to helping you identify your needs, a financial advisor can help identify certain hurtles that could potentially hold you back from meeting those needs. For instance, one challenge single investors face is when it comes to long-term care.  "Many retirees receive care from their spouse, if you live alone, you'll want to think about what type of care you may need down the road and how you'll pay for it," ," Carbone suggests. A financial advisor can help walk you through those types of scenarios.

Once you have a better understanding of your future objectives, you can start putting a price on those goals to determine how much you need to save. One mistake single people often make is thinking that because they are just one person, they only need to save half of what a married couple might save. The equation is more complicated than that, and a financial advisor can help you extract a realistic target so you can develop an action plan as to how you may get there.

Practice careful estate planning strategies

Estate planning strategies tend to be another activity couples have on their radar, but it's vitally important for single people, too. “You can start by asking yourself: What will happen to all that I have if I pass?" Carbone says. If the answer isn't in line with what you had hoped, make the necessary adjustments to ensure your wealth transfer plan reflects your latest wishes.

Think not just about your life, but also your legacy. With careful planning, there's no reason you can't potentially enjoy a long and well-funded life, and leave this world having made an impact.


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