Living in a dual-income household has its advantages, but it’s important to note that many single individuals can retire comfortably and lead fulfilling lives in their retirement years. Retirement planning principles remain the same regardless of whether you are single or part of a couple, although certain areas require extra attention. Here are some tips to enhance your prospects of achieving your desired retirement lifestyle.
What Is the Average Retirement Income for a Single Person?
To better understand what retirement might entail, it’s worth considering some statistics. However, it’s essential to remember that these figures are national averages, and your financial situation can vary based on your location. Moreover, comparing yourself to others can be detrimental to your well-being. What truly matters is whether you can meet your own financial needs and goals.
On average, a single person aged 65 and older has a yearly retirement income of approximately $42,000. In addition to Social Security and pensions, other sources of income can also be used to generate this income. The median income is slightly over $27,000 per year. It’s important to note that the average is higher because individuals with exceptionally high incomes can skew the average upwards. This data is sourced from the U.S. Census Bureau, as reported by pensionrights.org.
Social Security Income
For many retirees, Social Security represents a significant portion of their income. The average retirement benefit from Social Security amounts to $1,543 per month or $18,516 per year.
Pension Income
If you are fortunate enough to receive pension income, it can complement your Social Security benefits. You will receive an amount based on various factors, including your employment. For instance, teachers may receive annual pension payments ranging from $14,000 to $63,000, depending on their circumstances.
Withdrawals From Savings
If your Social Security and pension income are insufficient to cover your needs, you will likely need to supplement your income with funds from your retirement savings. Most people draw from their retirement savings, which are typically invested in IRAs, 401(k) or 403(b) plans, and other investment vehicles.
The amount you need to withdraw depends on your situation, but guidelines are available. While the idea of “living off the interest” may be appealing, it is often unrealistic due to low-interest rates in recent years. There is a rule of thumb known as the 4% rule, where you withdraw 3% to 4% of your retirement assets each year, adjusted for inflation. In the first year of retirement, if you have $500,000 saved and are comfortable with a 3% withdrawal rate, you could withdraw $15,000, adjusting it for inflation each year thereafter.
However, keep in mind that these rules are simplifications and do not account for all variables, such as taxes and individual spending patterns.
How Much Does a Single Person Need to Retire?
A comfortable retirement depends on many factors, including your spending habits, the length of your life, and the value of your investments. To provide more accurate projections, you can create a detailed financial plan. Consider using the “multiply by 25” rule as a rough estimate. For example, if you want to withdraw $20,000 annually from your retirement savings, you would multiply this by 25, resulting in a need for $500,000 in retirement assets. This rule offers a reasonable chance of sustaining your retirement lifestyle, but it does not come with guarantees.
Average Retirement Savings
On average, individuals aged 65 have retirement savings ranging from $221,000 to $273,000, with the median falling between $117,000 and $140,000. It’s important to note that survey results can be challenging to apply to individual situations due to variations among participants. Additionally, women often face more significant financial challenges in retirement planning compared to men.
Tips to Improve Your Chances
- Plan for Long-Term Care: Regardless of your marital status, it’s essential to consider long-term care options. Evaluate how you would handle care logistics and financing if needed. Explore long-term care insurance and potential safety nets, such as home equity. Retirement communities may also provide viable options for comprehensive healthcare.
- Don’t Leave Money on the Table: You may be eligible for retirement income benefits if you were previously married. Explore potential benefits through Social Security or consult a financial expert for guidance.
- Care for Yourself: While it’s natural to want to support loved ones financially, especially if you have children, it’s crucial to prioritize your financial well-being. Ensure you are financially secure before providing substantial financial assistance to others.
- Think About Decision-Making: Plan for situations where you might be unable to make decisions for yourself. Establish power of attorney and healthcare directive arrangements to ensure your wishes are followed.
- Cultivate a Network: Build a support network of friends and loved ones who can provide assistance and companionship as you age. Establish relationships with trustworthy professionals, such as contractors and auto mechanics, who can offer valuable services.
- Make a Financial Plan: Gain a deep understanding of your financial situation and explore different scenarios through a financial plan. Consider consulting with a fee-only financial advisor to minimize conflicts of interest.
In addition to these tips, following general retirement planning strategies, such as making informed decisions about Social Security, wise investment practices, and effective spending management, can help you achieve a successful retirement, whether you are single or in a relationship.