Data from the Social Security Administration indicates that non-married people face a much tougher retirement than married people do. According to the chart below, the median income for non-married seniors in 2013 was about one-third that of married seniors, with a typical single senior's income clocking in at a mere $18,643 per year.
That's a substantial gap in income that the single retiree faces. In addition, that average income level -- below $19,000 per year -- is low enough that, if you're single, it should serve as a wake-up call to get your retirement plan in order before it's too late.
Why singles face an uphill battle for retirement
As a single person, you face many challenges that make it tougher for you to get your retirement plan working for you. You need to understand those challenges, and do what you can to ready yourself for the eventual day you're no longer working for pay. Key challenges you face include:
Single-income: As a single person, you don't have a spouse who may also be earning income to help cover the household's expenses. That means the entire burden falls on your shoulders. In addition, should you lose your job, even temporarily, your household income will likely fall to almost nothing until you find a replacement.
Higher taxes: At any given income level, single people typically pay more in federal income taxes than do married people who file jointly. On top of not having someone else to share the financial burden with, you won't keep as much of your income to help you cover those costs, or save for the future.
Lower homeownership rates: Married people are more likely to be homeowners than single people. Owning a home provides a forced savings mechanism via the mortgage, which translates to a potential pot of money that can be spent in retirement if the home gets sold to enable a retiree to downsize. Mortgages also end when they get paid off, freeing up cash flow to invest without a fundamental change to the homeowner's lifestyle.
Less room to shelter money in retirement accounts: With married couples, each party can generally contribute to an IRA, even if only one member of the couple works. On top of that, if both members have access to retirement plans through work, the total they can sock away in a tax-advantaged manner can be twice as high as what a single person can contribute to qualifying retirement plans.
Lower Social Security benefits: For a married couple, the general rule is that each spouse is entitled to the higher of either his or her own benefits or one half of his or her spouse's. In addition, because of the "bend points" in Social Security benefits, it's very likely that a married couple where both spouses worked will be eligible for higher benefits than a single person, even if the single person earned as much as both spouses combined.
What can you do about it?
As a single person, there's a lot stacked against you when it comes to planning for your retirement; but that doesn't detract from your need to plan in the first place. Indeed, it's probably more important that you plan for your retirement because you face such headwinds. Still, being single does give you some advantages that you can leverage to help you save for a far-more comfortable retirement than you'd get on the $18,643 a typical single retiree sees.
You can live on less: As a single person, you can live without some of the extras you might find yourself buying in the name of marital harmony if you were married. You can live in a smaller, less-expensive space, do without "small luxuries" like cable TV, or a thermostat set for comfort instead of savings. You can also live with a roommate to split expenses to help assure your money goes further.
You can invest what homeowners spend on repairs, maintenance, and upkeep: While a homeowner's mortgage payment does act like a forced savings account, the mortgage is only part of the costs of homeownership. As a rough rule-of-thumb estimate, people spend about 1% of the value of their homes in a typical year in home upkeep costs. That's money -- likely several thousand dollars per year -- that you're not spending if you don't own a home, and can use to invest.
You can still shelter a significant amount of money in retirement accounts: The 2016 limits for a person under 50 are $18,000 in a 401(k), or similar work-sponsored plan, and $5,500 in an IRA. If you're 50 or over, those limits rise to $24,000 in a 401(k), and $6,500 in an IRA. While that's less than a married couple could potentially contribute, it's still a significant amount of money. It's certainly enough so that if you keep it up throughout your career, you have a great chance of beating that $18,643 a year typical income of a single retiree.
Get started now to improve your future
While the road to a comfortable retirement is tougher for a single person than for a married couple, you still have a path to get there on your own. However, the more challenging path means that the sooner you get started, the better your chances are of navigating it successfully. The time you put into planning, and the money you sock away starting now, can go a long way toward assuring you can retire more comfortably than the typical single retiree.