If you're single, you may need to work even harder than married couples on your retirement planning strategy. Unlike couples, singles don't have the advantages of dual incomes, benefits and retirement plans, nor do they have partners available to jointly discuss retirement planning. Plus, according to the American Academy of Actuaries, living expenses for singles are about 40% higher per person than for couples, who can share housing and other expenses.
Plan Early, Save Often
Begin planning by determining your retirement income needs. Although many experts recommend that you'll need 70% to 80% of your pre-retirement income, some suggest you may need as much as 100% if you want to maintain your pre-retirement lifestyle. In addition, health care expenses are taking a greater bite out of retiree incomes than ever.
Your CalSTRS or CalPERS pension is unlikely to be enough to support your lifestyle. In fact, according to CalSTRS, the percentage of salary the CalSTRS pension replaces is, on average, 60% to 65%. In 2011, the average monthly CalPERS pension check for an employee who left after 20 years of service at age 60 was just $1,193.
Take these steps to help ensure you are on the right path:
- Step 1: Use the retirement expense calculator to estimate your retirement income needs.
- Step 2: Estimate your defined pension benefit from CalSTRS or CalPERS.
- Step 3: If you are a CalPERS member eligible for Social Security, you should receive an annual estimate of your Social Security benefits. If you a CalSTRS member and are eligible for Social Security benefits from other job earnings, you should also receive an annual statement, and it should include some information explaining that your benefits may be reduced by the Windfall Elimination Provision (WEP). You can calculate the benefits using the WEP calculator.
- Step 4: If you have any pension benefits due you from previous employment, estimate them. In addition, if you are divorced and entitled to any of your ex-spouse's retirement benefits, add them here.
- Step 5: Add the numbers from steps 2, 3 and 4.
- Step 6: Subtract your estimated expense from your projected income. Any shortfall must be made up with your savings. The "How much Can I Save in My 403(b) or 457 Plan?" calculator is a useful way to help forecast income from your potential savings.
Consider using the 403(b) and 457 plan options offered by your district to work on saving the difference.
Don't Forget Insurance
Your ability to continue funding your 403(b) or 457 plans as a single person depends on your ability to earn income. Consider protecting your future financial interests with supplemental long-term disability insurance. You'll find more information here.
You may also want to investigate purchasing long-term care insurance, if you believe it's unlikely there will be someone available to care for you if you can no longer perform the regular activities of daily living. The costs of a long-term care policy are significantly lower when you're young.