5 Key Questions to Consider to Prepare Yourself for a Solo Retirement

Shifting demographics, changing lifestyle preferences, and evolving societal norms are undergoing a significant transformation. According to a Pew Research Center analysis spanning the years 2010 to 2018, a noteworthy 27% of adults aged 60 and older in the United States find themselves living alone. This percentage surpasses the global average, with only 16% of adults in 130 countries surveyed experiencing a similar solo living arrangement. Additionally, U.S. adults in this age group are more inclined to live as a couple without young children at home compared to their global counterparts. These statistics highlight a growing trend where more individuals are opting for a solo retirement, diverging from the traditional notions of big families. Changes in lifestyle, mindsets, and perspectives contribute to the increasing likelihood that many people will find themselves navigating retirement without a partner. This shift impacts social as well as financial dynamics and brings forth the need to plan for a solo retirement journey.

As times evolve, it becomes imperative to ponder over specific questions that can significantly shape your retirement. A financial advisor can help you create a solo retirement plan. This article will discuss five key questions on solo retirement planning that you may carefully consider to ensure you are well-prepared for the unique challenges and opportunities that lie ahead.

Five key questions to ask before retirement if you are planning for your golden years alone

Question 1: Do you have enough savings?

Starting a solo retirement journey brings both challenges and opportunities, especially when it comes to financial planning. As a single person, you only need to save for yourself, which lowers your financial obligations. However, this apparent financial relief also comes with a trade-off, i.e., lower income. Unlike households where both partners contribute to the financial pool, those embracing a solo retirement plan are tasked with solely earning for themselves. Couples often enjoy a better lifestyle, as the combined income allows for a more comfortable existence. The ability to make more and save collectively removes the pressure on each individual to save a substantial amount on their own. It also facilitates the division of financial goals, so each partner can focus on specific objectives.

For example, consider a scenario where a couple is planning for both homeownership and retirement. Each partner can concentrate on a specific financial goal in a dual-income household. For instance, one partner might channel their efforts and income toward saving for the down payment on a home, while the other can dedicate their resources to building a robust retirement nest egg. This collaborative approach streamlines the financial planning process and allows for a more strategic allocation of resources. A shared financial objective provides a safety net for unforeseen circumstances. If one partner faces a temporary setback in their earnings due to job loss or poor health, the other’s income can help compensate for the shortfall. This joint effort creates a financial cushion and ensures that the household remains on track to achieve the family’s collective goals even in the face of individual challenges.

Conversely, individuals planning for solo retirement may find themselves in a different financial situation. With no partner to share the financial burden, the responsibility of earning, saving, and investing falls squarely on one person’s shoulders. While this autonomy offers a sense of control, it also enhances the need for careful financial planning. The absence of a shared income necessitates a more comprehensive approach to savings to cover all your needs, including daily expenses, like gas, groceries, and utilities, to long-term goals, like home ownership and retirement. Without the luxury of shared financial responsibilities, meticulous budgeting and disciplined savings become paramount. Unlike the collaborative strategy seen in dual-income households, solo savers need to strike a balance between short-term needs and long-term objectives, all while navigating the complexities of a single income stream.

If you are venturing into retirement without the support of a partner’s income, implementing effective savings strategies becomes imperative. Therefore, you must assess your lifestyle needs, understand your preferences, and craft a budget that aligns with your solo living arrangements. It is essential to identify necessary expenses and discretionary spending and allocate resources accordingly. To save enough, you must earn enough. Make sure to explore multiple income streams, such as investments, part-time work, or side ventures, to supplement your primary income. Income diversification can provide you with a financial safety net and mitigate the impact of economic uncertainties. Diversification should also extend to tax. Taking advantage of tax-efficient investment options and retirement accounts helps maximize your savings. For instance, you can use a traditional solo retirement 401k and a Roth Individual Retirement Account (IRA) for tax diversification. Understanding the tax implications of different investments and ensuring you have a mix of different options can help you retain more of your income for future use. In addition, assess your financial situation periodically and adjust your savings strategy based on any changes in your income, expenses, and economic conditions. Remember, flexibility is crucial in adapting to evolving financial landscapes.

Question 2: Do you have an emergency fund?

As you approach retirement, the question of financial preparedness extends beyond basic savings. This seemingly straightforward question can have profound implications when venturing into solo retirement. Financial emergencies can strike at any stage of life, and retirement is no exception. One of the stark realities of solo retirement is the absence of a financial safety net provided by a spouse or dependents. When faced with an emergency, individuals living alone lack the option to turn to family members for immediate financial assistance. While married couples may have the ability to pool their resources or lean on their grown-up children, solo retirees must confront financial challenges independently. For instance, by the time you retire, your children will likely have established their careers and families. In such a case, they can possibly help you out if you are in a financial emergency. However, in the absence of children to share financial burdens, solo retirees would have to navigate emergencies with the limited resources at their disposal.

The use of an emergency fund extends beyond the retirement phase. Even before retiring, unexpected events such as job loss, medical issues, or unforeseen home or car repairs can disrupt your financial stability. An emergency fund can serve as a financial cushion during these turbulent times and offer you a means to cover essential expenses when your traditional income sources are compromised. It also ensures that your retirement preparation is not stalled due to short-term liabilities.

When it comes to solo retirement planning, having an emergency fund acts as a shield that protects you from the adverse impacts of several unforeseen events, such as a sudden health crisis, a need for urgent home repairs, or coping with a market downturn. The emergency fund provides a financial fallback that prevents you from resorting to drastic measures like taking loans. Taking loans in retirement or leading up to it can have profound and lasting implications on your financial well-being. With no traditional income sources, such as a regular salary or business income, relying on loans to cover emergencies can worsen your financial strain. Loan repayments, with accrued interest, can deplete your retirement savings and compromise the longevity of your pension accounts and other investments. Moreover, the psychological toll of debt in retirement cannot be overstated. The stress of managing loan repayments can diminish the joy and relaxation that retirement is meant to bring. Financial obligations can significantly weigh down the freedom to explore new experiences, travel, and pursue personal interests.

When preparing a solo retirement plan, it is important that you assess the adequacy of your emergency fund. The ideal size of an emergency fund varies based on your circumstances, but you can follow specific benchmarks. For example, financial experts often recommend an emergency fund equivalent to at least six months’ worth of living expenses or income for individuals still in the workforce. This can provide a financial cushion during periods of job loss or other unexpected financial setbacks. In retirement, the focus shifts from income replacement to sustaining a comfortable lifestyle with existing savings. During this phase, you can keep an emergency fund equivalent to at least six months’ worth of your living expenses. This financial safety net can eliminate the need to dip into your long-term savings to cover unexpected costs. In retirement, health-related emergencies can be a significant concern. Therefore, you may want to assess if your emergency fund is adequate to handle unforeseen medical expenses, including deductibles and co-payments.

An adequately funded emergency fund contributes to the longevity of your retirement savings. It ensures that you avoid the need to tap into your long-term investments or take loans. This way, you can preserve your retirement nest egg and sustain a comfortable lifestyle. A well-maintained emergency fund also empowers you to adapt to changing circumstances without compromising your financial security. It offers the flexibility to address unexpected challenges, such as fluctuations in living costs or unanticipated expenses related to health or personal circumstances.

Question 3: Are you retiring in the right city?

Retiring in the right city is a nuanced decision. You must consider various factors before arriving at a conclusion. For solo retirees, this choice goes beyond aesthetics and climate preferences. It involves evaluating the social dynamics, accessibility, service availability, tax considerations, healthcare access, and safety.

The choice of location can hold profound implications on your quality of life during retirement. Retiring in the right city involves more than just a scenic backdrop or nostalgic connections. It involves the social dynamics that contribute to a fulfilling retirement experience, particularly for individuals navigating this phase alone. Social engagement is important for your overall well-being and can enhance your retirement experience. Community centers, clubs, or local events can offer a retiree-friendly space and frequent chances for social interaction. They can help combat feelings of isolation and contribute to a vibrant and active lifestyle. For solo retirees, developing new friendships and maintaining a robust social network becomes crucial in ensuring a fulfilling and meaningful retirement.

In the absence of a partner or family nearby, transportation becomes a lifeline for solo retirees. As individuals age, mobility can become a significant concern. The right retirement city should offer viable transportation alternatives, especially for those who may no longer drive. Evaluating the availability of public transportation, ride-sharing services, or community-sponsored transportation options is essential. This can ensure that you can maintain independence and access essential services without relying solely on personal vehicles. The ability to navigate the city easily also allows you to engage in social activities, access healthcare facilities, and meet daily needs without difficulty.

Retiring in the right city also involves evaluating the availability of quality service providers. Mundane tasks such as taking out the trash, cleaning, doing the laundry, changing light bulbs, or preparing meals can become more challenging as you age. A retiree-friendly city should have reliable and accessible service providers who can assist with these everyday tasks so you can maintain your independence. Access to such services enhances the quality of life and contributes to the overall well-being of solo retirees. With adequate help, you can focus on enjoying your retirement years without being burdened by the demands of home maintenance and chores.

While you look at the social and practical aspects, you cannot overlook the financial considerations. One of the key elements to assess whether a city is right for you or not is the tax landscape. Different states have varying tax structures, including income tax, property tax, and sales tax. Understanding the tax implications of your chosen state is essential for effective retirement planning. Apart from taxes, you must consider the overall cost of living in a particular city. This includes housing costs, healthcare expenses, and general living expenses. The goal is to strike a balance between a city that offers the amenities and services you desire and one that aligns with your financial resources.

For instance, while big cities may boast advanced healthcare and service facilities, they often come with downsides, such as inflation, higher pollution levels, and increased crime rates. For solo retirees, striking a balance between access to quality healthcare, affordability, and a safe living environment is paramount. Some retirees may like to prioritize proximity to top-notch medical facilities, while others may prioritize safety. Make sure to consider several health and safety factors, such as standard of living, crime rates, air quality, and the availability of healthcare services in the chosen city. If you have specific healthcare needs, proximity to specialized medical facilities must also be in your decision-making process.

Question 4: Do you have a long-term care plan in place?

Long-term care includes a range of services designed to meet healthcare and personal care needs over an extended period. For solo retirees, planning for long-term care is particularly important in the absence of a partner or immediate family. Long-term care can include non-skilled personal care assistance to meet your health or daily living needs, disability, or the challenges that come with aging. This assistance often includes support with Activities of Daily Living (ADLs) such as taking a bath, using the toilet, sitting, eating, etc. Long-term care may also involve addressing memory loss, confusion, or disorientation issues in certain cases.

With the increasing trend of people living longer, the likelihood of requiring assistance with everyday tasks is becoming more pronounced. Unlike dual-income households, solo retirees lack the built-in support system that a partner or immediate family can provide, making proactive long-term care planning all the more crucial. Without a well-thought-out solo retirement plan, the expenses associated with long-term care could potentially deplete your savings accumulated over the years. As a solo retiree, the responsibility of securing adequate care and addressing associated costs rests squarely on your shoulders as you have minimal or no family support in your older years. Long-term care costs can vary widely based on factors such as the level of care required, the duration of care needed, and the geographic location. From in-home assistance to assisted living facilities and nursing homes, the expenses can accumulate rapidly. This makes it essential to plan for long-term care. Planning for long-term care is not just a financial imperative. It is also a means of lowering emotional and financial stress in the future. Early planning allows you to make informed decisions about the type of care you prefer, the location of care, and the necessary financial resources to sustain it.

Long-term care insurance is a critical component of an effective strategy. It provides coverage for a range of services and offers financial protection against the costs associated with extended care needs. Acquiring long-term care insurance early ensures that your coverage is in place before any health issues arise. Maintaining good health and well-being as part of your long-term care planning is also essential. Adopting a healthy lifestyle, staying physically active, and proactively addressing potential health concerns can contribute to minimizing the need for extensive long-term care services. Along with being healthy, do consider making early home modifications to enhance safety and accessibility. Simple changes, such as installing handles and ramps or adapting living spaces to accommodate changing mobility needs, can contribute to a more comfortable and secure living environment.

Clearly articulating long-term care preferences becomes paramount for solo retirees who may lack immediate family support. It is important to establish legal counsel for long-term care. This includes creating advance directives, such as a healthcare power of attorney and living will, to guide medical decisions in the event of incapacity. Communicating these preferences with trusted friends and financial advisors can ensure that someone is aware of and can advocate for your wishes when needed.

Beyond the financial and legal considerations, long-term care planning should also address the emotional aspect of aging and potential health challenges. Having a plan in place allows you to communicate your preferences for care. This ensures that your decisions align with your desires. This proactive approach also preserves personal autonomy and provides you with a roadmap during challenging times.

Question 5: Do you have social support?

Much like your finances require constant attention and careful management, your social life also forms an essential part of your retirement plan. Solo retirees need to follow a proactive approach to social engagement, maintaining existing relationships, and seeking out new connections. It is essential to ensure you have the right social support in retirement and plan for social engagements to keep yourself busy and connected.

Numerous studies highlight the multifaceted benefits of maintaining strong social connections during retirement. Social engagement is linked to better mental health. Regular social interactions can reduce the risk of depression, anxiety, and cognitive decline. Having a network of friends and family provides you with emotional support during challenging times. Embrace the newfound freedom of solo retirement with diverse experiences and connections. You can plan exciting travels, join travel groups, etc. You can also immerse yourself in volunteering and contribute your time and skills to meaningful causes. Retirement is a great time to pursue your passions and interests. You can join clubs, classes, or online communities that revolve around shared hobbies. Attend cultural events, educational programs, etc., to socialize with individuals who share similar interests. Staying connected, exploring new interests, and actively engaging with the world allows solo retirees to build a network of support that enhances overall well-being and makes the golden years truly golden.

To conclude

In an era where solo retirement is becoming increasingly common, addressing these five key questions can help you be financially and mentally prepared for a secure and fulfilling retirement journey. Having a robust solo retirement plan addresses these fundamental questions and helps you begin the retirement of your dreams. It can help to hire a financial advisor to help develop a personalized plan for attaining your goals.

Work toward securing a fulfilling solo retirement with professional guidance on your side. Use our free advisor match service to unlock personalized insights to empower yourself on this solo venture. Simply answer a few questions about your financial needs, and our match tool can help connect you with 2 to 3 advisors suited for meeting your financial goals.

To learn more about suitable retirement planning strategies for your unique financial requirements, visit Dash Investments or email me directly at dash@dashinvestments.com.

About Dash Investments

Dash Investments is privately owned by Jonathan Dash and is an independent investment advisory firm, managing private client accounts for individuals and families across America. As a Registered Investment Advisor (RIA) firm with the SEC, they are fiduciaries who put clients’ interests ahead of everything else.

Dash Investments offers a full range of investment advisory and financial services, which are tailored to each client’s unique needs providing institutional-caliber money management services that are based upon a solid, proven research approach. In addition, each client receives comprehensive financial planning to ensure they are moving toward their financial goals.

CEO & Chief Investment Officer Jonathan Dash has been profiled by The Wall Street Journal, Barron’s, and CNBC as a leader in the investment industry with a track record of creating value for his firm’s clients.