As career women, many of us are very much aware of the importance of saving and investing for retirement. Whether you are just starting your career fresh out of college, or starting over after experiencing a setback in your career or finances, being prepared for that day you step away from the workforce should be adequately approached. As many people are facing retirement on their own, due to death of a spouse, divorce, or choosing to not marry, the difficulty with saving for that day may increase.
According to a recent Wall Street Journal article, a study by Rand Corp. shows that singles are at a much greater risk of not saving enough for retirement than married couples. Based upon the study, 20 percent of married couples won’t save enough for retirement, whereas 35 percent of single men and 49 percent of single women will face retirement “financially unprepared.”
How is this so? Well, for one, single people are more responsible for living expenses which in turn nip away at what can be saved or allocated towards retirement. Housing costs tend to take up more of a single persons income as they are not sharing expenses with a loved one. Suggested solutions to decreasing expenses were downsizing and/or living with a roommate. I, for certain, made a horrible decision of purchasing a home, taking on enormous expenses related to its upkeep when it was not necessary. I advise my younger sister who is now itching to move out on her own that having your own place is not really necessary, especially if it cuts into how much you can save. The truth is most young professionals are rarely home, so allocating so much of your finances to housing before you have a family is a waste of money.
Additionally, single people often miss out on some of the tax breaks afforded to their married peers, such as spouse exemption and child tax credits, and pay more for long-term care insurance in the absence of a spouse as a caretaker. “To lessen the tax bite, I advise my single adult clients who own their own businesses or have side businesses and freelance income to set up a solo 401(k),” says Dean Ferraro, an enrolled agent with Authoritax, a Mission View, Calif., company that prepares tax returns and represents taxpayers in IRS audits.
Standard financial-planning models suggest that retirees may withdraw 4 percent of their portfolios starting at 65, with certain adjustments, and not outlive their means. For single women in retirement, according to the article, it may make more sense to start with a lower withdrawal—maybe 3.5 percent.
Rashida Maples, Esq. is Founder and Managing Partner of J. Maples & Associates (www.jmaplesandassociates.com . She has practiced Entertainment, Real Estate and Small Business Law for 10 years, handling both transactional and litigation matters. Her clients include R&B Artists Bilal and Olivia, NFL Superstar Ray Lewis, Fashion Powerhouse Harlem’s Fashion Row and Hirschfeld Properties, LLC