It’s true — two are better than one, especially during retirement.
According to the Social Security Administration, almost half of unmarried retirees rely on Social Security for 90 percent or more of their income. With the average social security benefit payment being only $1262 a month, that’s a scary reality. Could you live on $1,262 a month?
Most people can’t.
Married people do better. Only 23 percent of them rely on Social Security for the majority of their income whereas 46 percent of single people do rely on Social Security. If you are single, don’t worry: it’s not the end of the world. This post will reveal why married people have more money in retirement and how you can use their strategies to improve your retirement income.
Loss of Income
A loss or reduction of wages is a reality for many people at some point in their working lives. Married people with dual incomes can often offset such losses. Nothing beats having another income if one spouse loses a job or becomes ill and can’t work. Unmarried people that experience financial setbacks often find themselves at a loss. This loss of income can be substantial. Missing a few weeks of work due to illness can cost someone earning an average salary of $50,000 nearly $2,000.
How can a single person guard against loss of income?
- Purchase disability insurance
- Have an emergency fund equal to six months of living expenses
- Look into loss of income insurance if you are an entrepreneur
- Have a long-term care policy
- Live below your means
The Expense of Single Life
At first glance, you might think that married life is more expensive than single life, but you are half wrong. Initially it might be, but overtime it’s less expensive. Married people benefit from sharing expenses whereas a single person is responsible for 100 percent of expenses. The system, as one of my clients says, is “set up for married folk.” Married people enjoy savings from family and discount plans that are generally not available to single people. They save money when they purchase auto insurance, cell phone plans and even health care.
How can a single person reduce their expenses when they make purchases?
- Join a discount or membership organization
- Partner up — get on a family plan with a relative or close friend and share the bill
- Buy bundled services from one carrier
Take an Interest in Credit
Everyone has his or her own credit record, but when it comes to getting access to credit and enjoying good interest rates, married people cope better. All things being equal (credit and debt), a single person with a similar investment portfolio as a married couple may pay a higher interest for a loan than a married couple. Bankers look at risk. The more people that share the risk increase the likelihood that a bank will fund and give credit to them. Even paying one point more in interest can make a difference in retirement.
Take a look at this:
A 35-year-old person buying a home today with a 30-year $165,000 mortgage loan can save or lose a significant amount of money based on the interest rate they pay.
|Loan Amount||Interest Rate||Monthly Principle and Interest Payment||Total Payments over 30 Years||Interest Paid over 30 Years||Difference|
Which interest rate would you rather pay?
Thirty years from now, most 65-year-old people would rather a $35,000 or more savings than be at a loss from paying a higher interest rate.
How can single people gain access to better interest rates and credit terms?
- Pay bills on time
- Keep credit balances below 40 percent of credit limits
- Only apply for credit that is genuinely needed
The final thing that married people do that many single people don’t is create financial planning early in their working years. Let’s face it; they have no other choice. If they want to have kids, they need to prepare for them. Financial goals like buying a large house and financing school are just some of the financial realities that couples experience, although there are more. Most single people defer financial planning because significant financial realities are not at the forefront of their minds. Like their married counterparts, they should also have a financial plan that identifies and plans their financial goals early in their working years. Things like retirement, emergency funds and health care should not be left up to chance but instead become a choice. They must be planned for because eventually they will occur to all, single and married. People that develop financial plans early save money. The more you save, the more you earn. Get started saving today and be wealthier in retirement.
The information in this article is provided for education and informational purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness or fitness for any particular purpose. The information in this article is not intended to be and does not constitute financial or any other advice. The information in this article is general in nature and is not specific to you the user or anyone else.