Singles, Couples Need to Plan Differently for Retirement

The same basic principles apply to retirement planning for single people and couples, but there are important differences when it comes to implementation of the principles, CPA Mike Piper writes on his blog, Oblivious Investor.

Piper writes the same portfolio construction/management, general tax-planning and insurance-planning principles apply. But, when it comes to implementation, there are two key differences -- singles’ length of retirement will likely be shorter and there are fewer discrete stages of retirement to plan for as a single person.

Piper says when it comes to the shorter time horizon, a given withdrawal rate from the portfolio is safer for a single person than for a couple of the same age, funding basic needs with a bond ladder of a given length is safer for a single person than for a couple of the same age, and self-insuring for long-term care requires a significantly smaller amount of savings for singles.

Piper says when it comes to spending, there’s a sudden change for a couple when one spouse dies and spending decreases, obviously there will be no sudden change for a single person. When it comes to income planning for a couple, there will be decreases when each spouse retires, increases when each spouse begins claiming Social Security, a possible increase when one spouse switches from a smaller benefit to a larger benefit and a decrease when a spouse dies and the smaller Social Security benefit is gone.

Then there’s tax planning. When one spouse dies and another begins using single tax filling status, there will likely be an increase in tax rate -- obviously a single person won’t have to worry about that.