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Retirement income planning for singles

In 2021, there were approximately 37 million single-person led households in the United States. This is up from 2020, when there were 36.2 million. The reason behind this growth in singles can be varied, but primarily these individuals represent widows (or widowers), divorcees, or those who have never been married. In any case, though, retirement income planning for singles has become extremely important.

In fact, even for those who are married – and plan to remain a couple for life – at some point, one of the spouses or partners will pass away, leaving the other one solo. In these cases, a shift must also take place in terms of changing income and expenses going forward.

Singles and Retirement Income Planning

As a single individual, you could generate income from one or more different sources. These could include:

  • Defined benefit pension plan
  • Social Security
  • Interest and/or dividends from personal savings and investments
  • Portfolio drawdown
  • Annuities

Defined benefit pension plans generally provide a set amount of income for the remainder of a retiree’s lifetime. These plans were popular offerings by corporations and other employers in the past. However, given that people are living longer today (on average) and that the brunt of the risk was taken on by the employer, rather than the employee, many companies are no longer offering defined benefit plans.

Social Security is another possible source of retirement income for single individuals. If you have never been married, then the amount of your benefit will be based on your own personal work record.

However, if you are single because your spouse has passed away – and both of you were receiving Social Security retirement benefits – you will be able to retain the larger amount of benefit. But the smaller income payment will cease.

As an example, Jack and Lynda are both in their mid-70s. Jack’s income from Social Security is $2,000 per month. Lynda was a stay-at-home mother and spouse, so she is eligible for Social Security spousal benefits. In this case, then, she receives 50% of Jack’s monthly amount, or $1,000.

If Lynda passes away before Jack, her $1,000 will cease, and Jack will continue to receive the larger amount, which is his $2,000 benefit. However, if Jack predeceases Lynda, she will be allowed to keep the larger benefit – Jack’s $2,000 per month – but her benefit of $1,000 will stop.

Many people are not aware that Social Security pays retirement benefits that are based on an ex-spouse’s work record, provided that certain factors have been met. For instance, if you are divorced (and you are not currently married to someone else), you may receive Social Security via your former spouse if:

  • Are age 62 or older
  • The marriage lasted for at least 10 years or more

Note that you can file for these benefits, even if your ex-spouse is not yet receiving his or her Social Security (but they are eligible to file).

If you have personal savings and/or investments, it may be possible for you to receive interest and/or dividends from these investments as a portion of your retirement income. You could also use a portfolio “drawdown” strategy, whereby a certain percentage of your portfolio is accessed and used for your expenses in retirement.

It is important to be careful when using a portfolio drawdown strategy, though, as there is a risk of running out of assets while they are still needed. This risk, however, could be solved by using an annuity for at least a portion of your retirement income needs.

Annuities typically offer several different options for income payout. For instance, you can usually choose to receive cash flow for a pre-set period of time, such as 10 or 20 years, or you could instead choose to continue generating an income from the annuity for the remainder of your lifetime – regardless of how long that may be.

The dollar amount of income payments from annuities depends on several factors, including the amount of money that is in the annuity contract, as well as the age and gender of the annuitant (i.e., the income recipient).

For an individual who chooses the lifetime income option, the fear of running out of money while it is still needed can be alleviated – which can be particularly important for a single individual in retirement.

Need More Information on Planning for Retirement as a Single Individual?

Knowing that you have enough income in retirement can help you to have a more comfortable and worry-free time where you can enjoy traveling, relaxing, or spending time with the people you love.

For a single individual, developing an income strategy is a key component of a successful retirement, as you have to be sure that your needs are taken care of. Because of that, working with a retirement income specialist is highly recommended.

At Annuity Gator, our focus is on educating people about how annuities can generate a lifetime income stream in any type of market or economic environment. But these financial vehicles are not right for everyone.

If you would like to learn more about whether an annuity is right for you, feel free to schedule a time to talk with an Annuity Gator professional. You can reach us at (888) 440-2468 or by sending an email with any questions that you may have by going to our secure online contact form. We look forward to hearing from you.

Retirement income planning for singles

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