Retirement planning with no children

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If you’re single, or a childless couple, your retirement planning is greatly simplified, right? There are no kids, so you don’t have to worry about saving for college vs. saving for retirement, leaving an inheritance, and estate taxes. Not so fast, say financial advisors and people who have looked at the numbers. Retirement planning may be more complicated for singles than it is for couples.

For one thing, singles have only their own incomes to count on for retirement savings. Also, their expenses are proportionately higher than for couples. Two people don’t use twice as much utilities and food as one person. In fact, studies indicate that singles spend much more per capita on food, housing, and apparel than couples. Singles are also less likely to be homeowners and to do significant financial planning and saving for retirement.

But singles and childless couples who don’t plan ahead for their senior years face the same dire prospects in retirement as others, including how to handle living expenses and steep healthcare and long-term care costs. They can’t count on children to help them with caregiving and finances, and if they don’t do proper estate planning, they will leave a mess for their friends or relatives to clean up.

Here are tips for singles and childless couples to prepare for their senior years.

Save for retirement. This is at least as important for singles as it is for everyone else. A study by the Rand Corporation found that singles were twice as likely as couples to outlive their savings. This is especially the case for women, who tend to live longer and have less Social Security benefits. Annuities, and deferred income annuities in particular, may be worth consideration for those who are concerned about running out of money in old age.

Singles and childless couples should also know about Social Security. There are various strategies that singles, widows and widowers, and divorcees can use to maximize their benefits.

Have a will, living will, and durable power of attorney made up in advance. Without kids, it’s possibly not as obvious who should manage your healthcare and end-of-life decisions if you become incapacitated, and who should be the executor of your will. You may want to pick another relative or close friend, assisted by your attorney, accountant or financial advisor. Your relative or friend will ensure your wishes are carried out, while the advisor provides the financial and legal expertise. If this arrangement is not possible or feasible, a professional estate administrator is another option. The advantage of this person is that they’re experienced in managing a variety of estates and are objective since they’re not emotionally invested in the process.

The legal documents that manage your end-of-life decisions and estate are:

  • Durable power of attorney: This gives another person the power to make decisions on your behalf if you become incapacitated. You can have different documents for health, legal and financial areas, with different people designated for each.
  • Advance medical directive, a.k.a. “living will”: This defines your wishes regarding end-of-life care, including the use of resuscitation and artificial life support.
  • Last will and testament: This specifies your estate executor(s) and how you want your assets distributed upon your passing.

The total cost of having all of these documents created by an attorney is typically around $1,000 to $2,000. If you don’t have a will, it’s best to have one made. In some states, the process of distributing your assets without a will in place is more orderly than in other states, and the distribution of your assets could take six months or more.

An another method is to set up a revocable trust, in which your assets are owned by the trust which you control. If you die or become incapacitated, a person you designate becomes the trustee to manage the assets. This is another way to ensure your assets are distributed as you wish without going through a lengthy probate.

 

 

 

 

 

 

 

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