While most of us tend to think of retirement as a joint financial planning process, the reality is that many people – whether as a result of death, divorce, or choosing to remain single – will ultimately need to plan for a single retirement. The unique circumstances and challenges faced by those retiring alone warrant careful attention, which we explore in this article.
Dual-income couples who are planning for a joint retirement enjoy a number of financial advantages that single pre-retirees generally do not. Couples, whether both earning an income or not, benefit from shared living costs such as accommodation, utilities, rates and taxes, food (to a degree), cleaning and garden services, connectivity, entertainment subscriptions, and sometimes even transport. Where both partners earn an income, they enjoy the added advantage of being able to save towards a shared retirement goal while benefiting from the economies of scale built into their lifestyle.
By contrast, those relying on a single income face greater vulnerability in the years leading up to retirement. A period of illness, disability, or job loss can significantly disrupt savings, making risk planning essential. In particular, single pre-retirees need adequate income protection and/or lump-sum disability cover, keeping in mind that they do not have a spouse’s income to rely on if tragedy strikes. They must also establish a tax-efficient balance between saving through approved retirement funds and building discretionary investments to ensure they maintain liquidity and flexibility during retirement. Over-reliance on compulsory retirement products can create cash flow challenges later in life.
It is also worth noting that the retirement industry – including retirement villages, lifestyle complexes, and marketing material – predominantly targets couples, making it more difficult for single retirees to visualise what their retirement may look like. As retirement planners, it is important to recognise this bias and explore the specific needs of those who are either planning to retire alone or find themselves alone by the time retirement arrives.
When it comes to retirement living, single retirees must give particular thought to their accommodation needs, especially if their physical and/or mental health deteriorates. Couples can often rely on each other for assistance in the early stages of ill-health, whereas single retirees need more structured planning for incapacity. In this regard, single people should consider the following:
- Power of attorney: Without a spouse or life partner to assist with administrative matters, it may be necessary to grant a trusted friend or family member power of attorney, especially if managing affairs in person becomes physically difficult. It is important to select someone reliable and to be clear about the scope of the mandate – whether it relates to managing bank accounts, investment portfolios, the sale of property, or other transactions. (It should also be noted that a power of attorney lapses if a person loses mental capacity, meaning a more permanent solution, such as curatorship or administration, may eventually be required.)
- Living will and medical proxy: If you are critically ill and unable to communicate your wishes, a spouse invariably fulfils the role of medical decision-maker. Single retirees should formally set out their preferences in a living will and appoint a trusted medical proxy to liaise with healthcare professionals. This document ensures your wishes regarding life-sustaining treatment are respected.
- Frail care or assisted living: Single retirees may require assisted living or frail care sooner than couples simply because there is no partner to help with daily care. These services can be expensive, and waiting lists for reputable facilities can be lengthy, so it is worth planning and budgeting well in advance.
- Support network: A strong and accessible support network is essential. Friends, neighbours, family members, or community groups may play a greater role in providing emotional support, assisting with emergencies, or helping with logistics. When choosing retirement accommodation, consider the proximity and reliability of your support network.
- Remaining socially engaged: While couples benefit from each other’s companionship, single retirees must intentionally plan for social engagement. The workplace often provides daily interaction and stimulation, and retiring from it can leave single individuals feeling disconnected. Clubs, volunteering, hobbies, exercise groups, and community involvement can all help maintain social connections and emotional well-being.
Single retirees also face a distinct set of estate-planning requirements, especially when it comes to distributing wealth after death. Whereas most married couples bequeath their estates to each other, single retirees need to think carefully about how their assets should be passed on and to whom.
Married couples benefit from Section 4q of the Estate Duty Act, which provides that assets inherited by a surviving spouse are deductible for estate-duty purposes. Because single retirees have no access to this deduction, reducing estate duty may be an important objective – and, in this regard, several planning strategies are available.
Living annuities, for instance, are a powerful estate-planning tool because the proceeds do not form part of the deceased estate and therefore do not attract estate duty or executor’s fees. On death, the remaining value is paid directly to the nominated beneficiaries. Unlike life annuities, which terminate on the death of the annuitant, a living annuity allows beneficiaries to elect either a lump sum (taxed as a retirement lump-sum death benefit) or a continuation annuity in their own names.
Documenting and communicating your estate plan and end-of-life wishes is essential, especially for single retirees. Once you have signed your Will, ensure that someone you trust knows it exists and where the original is stored. Delays in estate administration frequently occur because family members are unaware that a Will exists or cannot locate it. Remember that dying without a valid Will means your estate will be distributed according to the rules of intestate succession. For example, if you have no spouse or dependants, your parents will inherit; if your parents are deceased, your siblings will inherit; if they have passed on, their descendants will inherit – and so forth. A well-structured Will ensures that your assets are inherited by those you intend.
If you are approaching retirement alone, partnering with a trusted financial advisor can provide invaluable support. A skilled advisor can help you navigate the financial, estate-planning, and long-term care considerations unique to a single retirement, giving you the structure and confidence you need to retire independently and securely.
Have a great day.
Sue
