Income taxes and Social Security benefits are designed to favor married couples, so the simple fact is that singles ultimately need to save more for retirement. Navigating your golden years on a single income without married tax advantages requires unique planning strategies for FERS pre-retirees.
The Cost Of Living Single
To state the obvious, without a spouse providing additional income, you’ll be solely responsible for all expenses in retirement. A 2021 survey found that the average single person spends about $48,000 annually, of which $17,899 is spent on housing. In comparison, the average married couple spends about $76,000 annually, of which $24,811 is spent on housing, that translates to $12,405.50 each. This means married people living together spend nearly $5,500 less per year on housing expenses.
Social Security Benefits
If you’ve experienced a divorce or the loss of a spouse, you need to know the rules governing Social Security. Divorcees whose marriage lasted 10 or more years are eligible for benefits based on their ex-spouse’s earnings as long as they haven’t remarried before age 60. If you’ve never been married, delaying your Social Security until age 70 to maximize your benefit is something to consider. Regardless of your situation, you can only depend on one Social Security check so get the facts before you decide.
Anticipating Long-term Care Needs
The majority of the time, long-term care is provided by loved ones, but those living alone might want to consider a long-term care policy. FEHB and Medicare won’t cover the non-medical portion of care in a nursing home. If you need assistance with activities of daily living, like eating, bathing, or dressing, those costs will be out-of-pocket. When you consider that a nursing home can cost $10,000 monthly, it could quickly deplete your retirement savings.
Plan For Higher Income Taxes
Singles are likely well aware that they pay more in income taxes than married couples filing jointly and using the same table. You may expect to be in a lower tax bracket in retirement but without proper planning, tax time could lead to sticker shock. The majority of your federal retirement income is taxable and when you reach the point where you have to take RMDs, it could send your combined retirement income into a higher tax bracket. Reach out to an FRC® trained advisor to tailor a financial plan that meets your needs.
