In the past few years, the number of single people – those divorced, widowed, or never married – has risen sharply in the United States. Marital status may not seem like a significant factor in whether or not people are prepared for retirement, but it has actually proven to have a large impact on people’s possibility of retirement. Here’s how.
A 2013 study, published in a blog post, by Steve Utkus, who oversees the Vanguard Center for Retirement Research, revealed that singles have a lot less saved for their retirement nest egg than most experts expected.
While it makes sense that single people would have less saved for retirement because there’s only one person saving vs. two people in a dual-income marriage, the savings rate of married couples aged 65-69 was almost 10 times that of a single person in the median bracket.
Utkus went on to speculate one a few reasons why the savings of single people were so much lower than that of a married couple. One such reason was divorce.
“When a couple separates, assets are divided, and savings can fall due to legal and other costs.” Utkus writes. “If this were the main reason, we’d expect single-person figures to be just under half of those for married couples. But the gap is much wider.”
His second theory was that the cost of living without taking advantage of the sharing economy of a marriage causes too many single people to use more of their money for living expenses, leaving them less to save and invest for retirement.
Finally, Utkus also mentioned that those who experienced the death of a spouse could also have a large impact on these figures. This is especially true if the spouse who passed away was the main breadwinner of the family, or provided things like health insurance. Without the breadwinner, the other spouse was left to cover all of the family expenses, and obtaining health care via another source may also be a lot more expensive.
No Spousal Benefits
Not only do single people struggle with building a retirement savings nest egg vs. their married counterparts, they also are at a disadvantage when it comes to receiving spousal benefits.
We already discussed that widowers might be at a disadvantage if they have to seek other health insurance options, that may be more expensive, after the death of their spouse, but it doesn’t stop there. Widowers can be a sever disadvantage due to lost wages and other benefits too.
Single people who have never married will never receive the benefit of a spouse’s income, death benefits, or inheritance of their assets.
How Single People Can Build a Nest Egg
Even though single people tend to be at a disadvantage when it comes to preparing for their retirement nest egg, that doesn’t mean it can’t be done.
Fox Business recently interviewed three successful singles who were able to provide for their own retirements via different methods of building wealth and savings.
The keys to their nest egg success included things that are helpful even to married people – paying off debt, diversifying investments, maxing out retirement contributions, and not giving in to lifestyle inflation.
Being single doesn’t mean you won’t be able to retire with a sizeable nest egg, it just means you’ll have to work at it longer and more diligently than most married people in order to achieve the same level of success.