Retirement Planning for Singles: 3 Musts

If retirement planning had a soundtrack, a great candidate would be "Love and Marriage," the old Sammy Kahn lyric, made famous by Frank Sinatra:

Love and marriage, love and marriage
Go together like a horse and carriage ...

So much planning advice focuses on married couples--and no doubt, that's where some of the most valuable retirement benefits can be found. Think Social Security spousal benefits, joint and survivor pensions, or beneficiary rights for 401(k) and IRA accounts.

But how about retired singles? Their numbers will be increasing in the years ahead--about one third of adults ages 46 through 64 were divorced, separated, or had never been married in 2010, compared with 13% in 1970, according to demographers at Bowling Green State University.

And they will face tougher challenges achieving a secure retirement than married people. Living expenses are higher as a proportion of income--the cost of shared housing, food, utilities, and transportation are easy to manage when spread over two income streams. Single people also can't take advantage of the tax breaks available to joint-filing married couples. All of that puts a drag on their ability to save for retirement.

"There certainly are economies of scale for married people," says Catherine Collinson, president of the Transamerica Center for Retirement Studies. "I know that as a single person myself--it's difficult to cook for one without having ingredients that have to get tossed out."

Single women have an especially steep hill to climb. They tend to outlive men, which means they need to stretch retirement savings further. Yet they earn less than men; the median pay for a woman in 2013 was $39,157, just 78% of the median $50,033 earned by men, according to U.S. Census Bureau data. That gap translates into lower retirement saving rates and lower credits for Social Security and pension benefits.

"Women do earn less than men, and that means they need to plan more aggressively for retirement," says Manisha Thakor, CEO of MoneyZen Wealth, an independent RIA firm specializing in planning for women.

Collinson's organization has studied the retirement gender and marriage gaps, and the numbers aren't encouraging. Consider the following responses by workers over age 50 to a recent Transamerica survey:

• Fifty-two percent of single women expect Social Security to be their primary income source in retirement, compared with 38% of single men--and just 33% of married couples.
• Forty-eight percent of single women expect their standard of living to decline in retirement, compared with 39% of men and 37% of married women.
• Fifty-six percent of single women expect to work past age 70 or to never retire, compared with 51% of single men. The numbers are far lower for married people--39% of women and 46% among men.
• Single women have median retirement savings of just $35,000, compared with $70,000 for single men and $153,000 for married women.

How can single people flip these figures? One obvious piece of advice: Save as early, and as much, as you can for retirement. But experts also offer the following suggestions.

1. Have a Plan
Transamerica's survey research shows that married couples tend to be more engaged in planning for retirement. Seventy-four percent of married workers describe themselves as "very involved in monitoring and managing their retirement savings," compared with 62% percent of unmarried workers. Seventy-six percent of married workers discuss saving, investing, and planning for retirement with family and friends, compared with 66% of unmarried workers.

"Marriage seems to have a very positive effect on saving and planning activity," Collinson says. "It might be that they have more ability to save, but they also are more engaged in planning. You'll never reach a destination if you don't have a roadmap," she adds.

2. Focus on the Guarantees
For women, greater longevity offers good reasons to focus on maximizing guaranteed income from Social Security and defined-benefit pensions. It also offers a rationale to consider certain types of annuities.

Never-married singles can boost Social Security income through a delayed-filing strategy. That's not to say filing early is never the right move--it makes sense if you're in poor health or have a dire need for the income and can't work or draw on savings. But more often than not, women will come out ahead waiting at least until their full retirement age (currently 66), or closer to 70, the last age when additional credits are available.

"When I'm talking with women about their plans, I always tell them that they have to give me a good reason not to delay filing," says Thakor. But divorced retirees may be able to file for spousal or survivor benefits on the record of a former spouse.

Social Security's rules require that you are currently single, and had been married to your ex at least 10 years; at least 62 years old, which is the minimum Social Security eligibility age; and not already receiving a benefit greater than the divorced spouse's benefit. You can file for spousal benefits even if your ex isn't receiving his or her own benefits--so long as your divorce has been final for two years. Eligibility for an ex's benefit is lost if you remarry, and you can't file for benefits on your new spouse's earning record until you've been married to that person at least one year (Here's a summary of the divorced spouse rules, courtesy of SocialSecuritySolutions.com).

If you're fortunate enough to have a traditional pension coming, make sure to do the basic maintenance chores to ensure you get what's coming to you. Keep good records of your employment history with the plan sponsor, along with all correspondence, notices, and documents related to the plan. Keep a copy of the summary plan description, which is available from your employer. Also, ask the plan administrator if there are any restrictions on your ability to work after you start collecting benefits, or if part of your Social Security benefits will be subtracted from your pension. A list of pension-counseling services is available from the Pension Rights Center.

Immediate income or deferred annuities offer another possible path to boosting guaranteed lifetime income, Thakor says, adding that the usual buyer concerns about tying up funds may not apply for single people. "For single people who aren't worried about leaving a legacy to a spouse or children, the idea of an immediate fixed annuity can be a little more palatable than for couples."

3. Weave a Health-Care Safety Net
In a health emergency, spouses and children often are the first line of defense. Single people without kids may lack that natural support network--so take the time to build one. "Thinking proactively to build out your network of friends and family can be very important," Thakor says. "Talk with your other single friends about creating a community to help one another out if something hits."

The health safety net question naturally leads to the topic of a plan for financing any long-term care need that might arise. One option is to self-fund; industry experts say that in order to have a 95% chance of having sufficient resources to self-fund a long-term care need, you should be able to set aside $500,000 to $750,000 in retirement assets just for that purpose.

The other option is a long-term care insurance policy. Unfortunately, single women purchasing individual policies will find that policy prices have been rising. The industry has been moving toward differential pricing based on gender; Industry leader Genworth has rolled out gender-based pricing in 42 states, with more launching later this year.

"Single people could consider long-term care insurance, but if they can afford it, they probably don't need it, and if they need it, they probably can't afford it," says Jan Cullinane, author of The Single Woman's Guide to Retirement (AARP/John Wiley).

Cullinane is a fan of creative alternatives for singles that offer the added benefit of social support: NORCs (naturally occurring retirement communities) with support services; senior co-housing; a roommate who lives rent-free but helps with daily tasks; the Green House model that provides the services of a nursing home in a single-family residence; or a CCRC (continuing care retirement community).

Mark Miller is a retirement columnist and author of The Hard Times Guide to Retirement Security: Practical Strategies for Money, Work, and Living. The views expressed in this article do not necessarily reflect the views of Morningstar.com.