While being single can mean more freedom and fewer compromises when it comes to making decisions, it can also require a great deal of responsibility—particularly as it pertains to saving and retirement planning (or “life planning,” as I call it). In some cases, being single is a choice, while in other instances it can result from a sudden tragedy such as an unexpected death or divorce.
Without a spouse or partner to rely on, it is up to you as an individual to ensure that you can generate enough income to cover living expenses and debt payments. Also, it is all on you to build a “rainy day” emergency fund.
So if you are currently single, it is crucial that you plan ahead. The good news is that there are strategies available for creating a more secure financial future, and working with a financial-planning professional who is experienced in this area can help you sort out the options.
Financial Planning for Singles
Disability Insurance – As the sole income earner, the first thing you need to do is make sure you have disability insurance (DI). Should something happen to you, whether it’s because of an accident or a medical condition, disability insurance will kick in after a waiting period if your doctor diagnoses you as being unable to work. Typically, DI will pay approximately 60 percent of your current income (until your normal retirement age) so that you can meet some of your living expenses. Obviously, as a single person without a partner’s earned income to fall back on, disability insurance is critical. If you work for a corporation that offers DI, you can usually sign up for it during open enrollment. If you are self-employed or work for a small company, you can still get coverage, but it can be less cost-efficient so you should explore other avenues such as the group-rate coverage offered through professional trade groups.
Long-Term Care Insurance – Because disability insurance only covers you until age 65 (and in some cases age 70), if one needs care beyond age 65 it could present a huge risk to your retirement nest egg. That is why it is important to look at long-term care (LTC) insurance. Like any insurance that requires underwriting, it is imperative to start looking into this while you are still “young and healthy.” I have had clients in their 30s who have suffered with strokes and accidents. It used to be a rule of thumb that planners don’t talk to clients about LTC planning until their late 50s or early 60s, but that is now an obsolete concept. The sooner you get coverage, the better—mainly due to the preferred rates you will receive as a healthy young person. With LTC insurance, should your doctor confirm you are unable to perform two out of the six “daily living activities”—bathing, dressing, transferring, continence, eating, and toileting (with cognitive impairment also considered)—this coverage helps you pay for care and equipment such as wheelchairs and ramps. There are complexities with LTC insurance, so finding the proper policy type for you is important. For example, there are huge differences between “reimbursement” policies and “cash indemnity” policies, and a traditional LTC policy is different than a hybrid policy. Those who have a spouse or partner can usually get a couples discount.
Unfortunately, singles and those who are HIV-positive will not receive the best rates, but there are ways to structure a policy to still receive some kind of benefit. Your financial-planning professional can help you find the right policy to fit your situation and cash-flow needs.
Legal Documents – It is essential that singles have their legal documents in place. I know a lot of people who joke and say “Who cares? I’ll be dead.” Well, I’m here to tell you that you should care. Do you want the State of Texas to dictate what happens to you, or how your assets will be divided up? Wills and trusts help direct things like a traffic cop does, so you can decide what happens and how you want things to go. Also, as a single person, if you become incapacitated or develop a cognitive impairment, you will need someone you trust—whether a close family member or a trusted friend—to have “power of attorney” and help manage your affairs on your behalf. It would be prudent to put this plan in place while you are healthy and of sound mind. Even though we all tend to think that we’ll deal with this later, the time to think about it and plan is now. You never know what can happen, and we should all want to “hope for the best, but plan for the worst.”
Life Insurance – Many times, people think that life insurance is unnecessary for a single person who is not married and doesn’t have children or other dependents such as an elderly family member. Life insurance, if designed properly, can still function for your benefit. There are different types of life insurance, and if structured properly, policies can act as a tax-free source of retirement income. Additionally, there are riders that can be added to the base policies that may be beneficial. For example, one could obtain long-term care coverage through a life-insurance policy. It all comes down to the design, and what makes sense for you. A qualified financial planner can be a big help in this area.
Creating a Customized Plan
There are many different kinds of financial tools and strategies available for single individuals, because everyone’s short- and long-term objectives are unique. And since not all planning techniques will be right for everyone across the board, it is essential to discuss your current situation, as well as your future financial goals, with a professional who can create the right plan for you. Working with an advisor who is also well-versed in financial planning issues for the LGBTQ community can help to ensure that your plan is up-to-date, based on your personal circumstances, and can respond to changing legislation in the future.
This article appears in the September 2021 edition of OutSmart magazine.