More often than not, a single woman will need a retirement income plan that depends on no one but herself. 90% of women will ultimately live single lives and therefore will not rely on a spouse’s income, benefits, or shared savings.
What is a reliable income plan? It is a plan that relies on your spending needs, Social Security benefits, savings, investments, taxes, health care expenses, and the need for flexibility, as life is always dynamic.
Start With the Income You Need to Support Your Life
You are you, not a generalized sum of the female population. Therefore, it is important that you do not pay attention to the common numbers used for this issue. It is your responsibility to put the pencil to paper to determine what your numbers are, not what may work for the masses.
You need to determine two types of expenses in your life, core expenses (mandatory) and non-core (lifestyle) expenses. The core expenses are what you must provide for every month while the non-core are the expenses that are not vital to your existence.
Core Expenses
The following are the expenses that must be attended to on an ongoing basis:
Housing, food, utilities, insurance, transportation, taxes, healthcare, and any other ongoing expenses.
For those who were once living with another person, living alone does not equate to cutting your expenses in half. Living alone costs more than living with another person.
Lifestyle and Irregular Expenses
Your non-core or lifestyle expenses include:
Travel, hobbies, dining out, gifts, charitable giving, family support, home projects and any other items that would provide you with a better quality of life.
Don’t forget about the occasional large ticket items such as:
- New car
- Major home repairs
- Medical bills
- Relocation
- Supporting parents and/or children
Don’t forget about the effect that inflation has on your life. Inflation is like cancer, it does not kill you in the short-term, but over the years, it can certainly destroy your financial future. Goods and services in the future will cost more than they do now.
Build a Dependable Income Foundation
Identify which sources of income can safely provide you with a stable source of money that will be used for your core expenses.
Social Security and Pension Income
When you claim Social Security is a very important decision and one not to be taken lightly. Take it too soon and you could forfeit hundreds of thousands of dollars. This decision can be one of your most important financial decisions that you make.
If you were married and are now a widow or a divorcee, you need to know your options as they pertain to you. What are you entitled to under Social Security?
Although relatively rare today, pension income can be a great source of income when available. Know your payout options, survivor considerations and whether you can take a lump sum payout.
Portfolio and Other Income Sources
Sources of income include:
Investment accounts, retirement accounts, cash reserves, rental income, part-time work, annuity income and any other income not listed.
Each source of income could have its unique tax consequences and should be reviewed. In addition, each source of income needs to be evaluated on its ability to provide the income as well as how long it is expected to last.
Protect Against the Risks That Hit Single Retirees Harder
As a single woman, you have less margin for error when it comes to planning your financial future. You only have yourself to turn to when investments lose value, inflation eats away at your income, health care costs sky-rocket and you live longer than you expected.
Longevity and Market Risk
The greatest financial risk that any person faces, is the risk of outliving one’s money.
Tied to outliving one’s money is the risk that you start taking your retirement income withdrawals just when the investment markets are doing poorly.
Balancing investment return with investment risk is key to one’s long-term retirement survival. Always have 1-2 years in cash to help deal with a poorly performing investment market.
Health Care and Long-Term Care Risk
Understand what you are entitled to and when to apply for Medicare, supplemental coverage for Medicare, prescription costs as well as dental, hearing and vision costs. Are you aware of your out-of-pocket costs related to your health plans?
Long-term care insurance can cover certain healthcare expenses should you need it. There are various ways to pay for this type of insurance such as savings, home equity, family support, etc.
As a single person, you should think about who would make the important financial and medical decisions if you were not capable of doing so. This should be done in writing with the possible help of an attorney.
Create a Tax-Aware Withdrawal Strategy
Sooner or later, the government wants part of what you own and that includes your investments. Whatever the source of money that you use to provide income, don’t forget to factor in the taxes that are due on that income.
Retirement accounts are normally taxable (outside of a Roth IRA). Every dollar taken from your IRA is considered taxable as if you earned that amount of money. Other types of investments may be taxable to some degree. Never assume that you can take out money from anywhere, completely tax-free. Do your homework.
Account Types to Coordinate
Fully taxable accounts: IRAs, 401(k)s and other pre-tax accounts will be subject to income taxes when you withdraw from them.
A Roth IRA can be tax-free if certain conditions are met.
When reviewing your taxable accounts (non-retirement accounts), consider the tax consequences of dividends, capital gains, interest, cost-basis, etc.
Withdrawal Planning Considerations
There is a science when it comes to withdrawing money from your investments. Working with an accountant will help you formulate a strategy so that your withdrawals are as tax-efficient as possible.
As mentioned earlier, always have a cash reserve to handle your immediate income needs as well as dealing with an investment market downturn.
Keep Control, Protection, and Decision-Making Organized
As a single woman, it is very important that you have in place the necessary legal documents should you become incapacitated in any manner. The legal documents would give guidance in the areas of finance and health care.
Review estate planning documents such as wills, trusts, powers of attorney, health care directives, and beneficiary designations. When was the last time that you updated your will and/or trust? Has your life changed since then?
Does someone other than yourself know where your financial accounts are located, where your password(s) are, your insurance records, professional contacts, and instructions for important financial documents?
Review the Income Plan as Life Changes
Life involves changes and therefore your plans for retirement change as well. Revisit on an ongoing basis your need for income, your health, family needs, your investment accounts and your housing situation.
Have you reviewed your retirement plan after any of the following?
- Retirement
- Divorce
- Widowhood
- Inheritance
- Health changes
- Relocation
- Family needs
Any needed adjustments may include:
- Increasing/decreasing your retirement withdrawals
- Rebalancing your investments
- Reviewing legal documents
- Reviewing Social Security decisions
Your mission is to maintain your income while at the same time, looking into the future and be willing to be flexible.
Retirement Planning for Single Women FAQs
1. How much income does a single woman need in retirement?
A single woman generally needs about 75% to 85% of her pre-retirement income to maintain her standard of living. While specific financial needs vary by lifestyle and location, most single retirees require an annual income of roughly $40,000 to $60,000 to cover basic living expenses and healthcare.
2. When should single women claim Social Security?
For lifelong single women, claiming Social Security is entirely based on your own work record. Generally, waiting until age 70 yields the highest guaranteed lifetime payouts. However, the exact “best” age depends on your personal financial needs and life expectancy, rather than spousal rules.
3. How can single women reduce the risk of running out of money?
Single women can reduce the risk of outliving their money by building an oversized emergency fund (6 to 12 months of expenses), aggressively maximizing contributions to tax-advantaged retirement accounts, and proactively purchasing long-term disability and long-term care insurance.
4. What health care costs should single women plan for in retirement?
Single women retiring at age 65 should plan to save about $172,500 for out-of-pocket medical costs in retirement. Because women live an average of 3 to 4 years longer than men and generally require longer periods of long-term care, total projected lifetime health expenses often exceed $300,000.
5. Which accounts should single women withdraw from first?
As a general rule, single women, and solo retirees in general, should withdraw from after-tax cash and taxable brokerage accounts first, followed by tax-deferred accounts (like traditional IRAs and 401(k)s). Tax-free accounts (Roth IRAs and Roth 401k) should be preserved to grow untouched for as long as possible.
6. What estate planning documents should single women have in place?
As a single woman, without a spouse to automatically manage your affairs or make medical decisions, a comprehensive estate plan gives you full control over your future.
Every single woman should secure five core documents:
- A Will or Trust
- Financial Power of Attorney
- Healthcare Proxy
- Living Will
- Beneficiary Designations
Get Help Building Retirement Income You Can Rely On
Retirement planning for single women should connect income sources, spending needs, investments, taxes, health care, housing, and estate planning into a coordinated plan.
Planning can test retirement income, withdrawal strategies, Social Security timing, tax scenarios, health care assumptions, and long-term care needs.
Keep in mind what Winston Churchill said decades ago, “Plans are of little importance, but planning is essential.”
The goal of a retirement plan and its continued planning is to build a retirement income plan that supports independence, stability, and flexibility over time.
How We Can Help
For over 40 years, Retirement Solutions has specialized in assisting single women view their financial future with anticipation, rather than apprehension.
To help you determine whether we can assist you, we invite you to download any of the free reports that pique your interest.
We also offer a no-obligation, no-cost 15-minute telephone conversation to determine whether we can be of assistance to you.
Simply click the “Let’s Discuss Your Financial Future” link in the upper right corner of the Home page of the Retirement Solutions website.