Listen up, singles! We need to talk about retirement. Yes, retirement.
Now, I know some of you are young, and you’re thinking you don’t need to worry about the future. You tell yourself you’ll get married, settle down, and then start saving. Or at this season of your life, you don’t have to worry about a spouse or kids, so you think it’s the perfect time to live for the moment. Adult stuff can come later.
Or maybe you’re newly single. Your life isn’t playing out like you thought and you’re struggling to put the pieces back together. You may be worried about providing for your kids. Or paying all the bills on one salary. So saving for the future is the last thing on your mind.
But regardless of your situation—and no matter how old you are—you need to pay attention to your future. Right now. Here’s why.
The Difference in 10 Years
Let’s say you graduate college at age 22 or 23. It takes you a couple of years to get settled into the job and company you like. At age 25, you decide to participate in your employer’s 401(k) plan. You designate $200 a month into an investment account that earns 10% a year. If you keep doing that from age 25 to 65, you’d wind up with $1.1 million. Yeah. You’d be a millionaire.
But let’s say you decide to wait until you’re 35 to start getting serious about your future. If you invested that $200 from age 35 to 65, you’d end up with just $434,000. Ten years of living for the moment cost you over $650,000. If you wanted to reach that million-dollar mark, you’d have to invest $500 a month.
Look at it another way. If you invested $500 a month beginning at age 25, you’d earn almost $3 million by age 65. Either way, the numbers don’t lie—investing early pays off. Literally!
Financial Strategies for Singles
I know retirement seems light years away. And I understand that singles face unique challenges in preparing for the future. You don’t share expenses like housing and food costs. But if you take your future seriously, you can take significant steps to lay the groundwork for an amazing retirement. The time to act is now, not later.
1. Make saving a priority. You can’t build wealth from disposable income left over after expenses. That retirement fund needs to be at the top of your list. Save as much as you can as early as you can. And keep increasing the amount as your career (and paycheck) grows. Work toward putting away 15% of your salary. That might not be feasible yet, but that’s the goal. If possible, set up automatic withdrawal so you don’t even see the money go into your checkbook. That removes the temptation to spend it elsewhere.
2. Get about disability coverage. Because you’re living on one salary, you can’t afford to lose your job—literally. That’s why short-term and long-term disability insurances are so important. Check with your employer about any coverage it offers as a benefit. Also talk to a few independent agents to get the best deal.
3. Find good long-term care (LTC) insurance. This is an absolute necessity. Not only does LTC insurance ease the costs of assisted living or in-home care, but it also gives you peace of mind to know that you won’t be a burden on family and friends. Start researching your options at age 55 and get coverage by age 60 when you’re still young and healthy. The longer you wait, the more expensive the premiums will be.
4. Build a support system. Build relationships with people are in a similar situation and who are working toward similar financial goals. These folks will help you make solid financial decisions. They’ll keep you from jumping off the investment roller coaster when it takes its dips and dives. They can also steer you away from five minutes of stupid that could derail your retirement planning.
5. Name your proxies. Who would make decisions for you if suddenly you couldn’t make those decisions for yourself? Nobody likes to think about that sort of stuff, but it’s important—especially when you’re single! You need to assign someone with the power of attorney to make financial, business or other legal decisions if you become seriously ill or incapacitated.
You also need to assign someone as the durable power of attorney (also called a health care proxy) who can make medical decisions on your behalf if you can’t state your wishes. This person would act on your behalf regarding life support, palliative care and hospice care.
To make some of these financial moves, you’ll need the help of professionals who are rock stars in their fields. They know the ins and outs of insurance, investing, health care laws and other legal minefields. Check out the Dream Team section on my website for a list of people in your area who’d love to work with you.
Being single has its challenges, but it has upsides too. You get to decide how and where your money is spent. You get to plan your future without any restrictions. And you can build a financial nest egg perfectly suited just for you.
So dream big, make a plan, and get to work!