Written By: Elissa Wurf PhD, CPA, EA
Nearly half of Americans over the age of 15 (49.9%) are currently single, according to data from the 2018 Census on America’s Families and Living Arrangements. When you add in the 1.5% of people who are married but whose spouse is absent, more than half of Americans are in some way living on their own.
Of single Americans, the majority have never married (65% of the 49.9%, or 32.3% of the total), while 20% of the unmarried are divorced (9.9% of the total). Since very few married couples pass away simultaneously, many married people may eventually find themselves single, either by way of divorce or death.
While the financial planning concerns of singles and marrieds are generally the same, unmarried people — and especially unmarried women — may be more vulnerable, requiring special care in financial planning.
Because there is only one person who is legally responsible for a single person, singles are more vulnerable when it comes to maintaining cash flow. If a married person becomes temporarily (or permanently) disabled, there is a second spouse who can work. But when a single person cannot work, they must rely on insurance of some form—their job’s short-term or long-term disability policies, Social Security Disability if they qualify, or individual disability insurance. Despite a greater need, unmarried people are less likely to purchase long-term disability or long-term care insurance, and they are less likely to establish an emergency fund.
According to TD Ameritrade’s “Singles and Money” study[i], married Americans feel more financially secure than unmarried Americans. This perception is based, in large part, on reality. Here are some revealing statistics:
|Married Americans||Unmarried Americans|
|Percent of take-home pay saved||15.6%||11.7%|
|Dollar amount saved for retirement monthly||$970||$740|
|Own their own homes||90%||58%|
Saving is another area in which unmarried women lag behind both unmarried men and married individuals; unmarried women save only about 42% of what men save, while married women save 73% of what men save. Unmarried women with children have a particularly hard time saving.
Married people are much more likely to be home owners, and home ownership facilitates financial stability by providing leverage, possible tax deductions, and, in some cases, an additional resource to rely upon for retirement. Married people have an advantage in home expenses as well—a mortgage, utilities, furniture, pet care, and many other expenses cost the same whether you are married or single. Of course, a single individual will pay more on a per-person basis for these basic expenses.
Not only are married people more likely to be investing, they also believe they are more knowledgeable about it. There is a gender difference as well: Men believe they are more knowledgeable about investing than women believe they are, and tests of financial literacy show that they are indeed somewhat more knowledgeable[ii]. This fosters greater confidence among men. This confidence, however, can in some cases become overconfidence, which, in turn, can lead to poorer performance in actual investing.[iii] Women who invest in stocks tend to do more research and are more likely to stay the course, which leads to their outperforming men[iv]. However, unmarried women are less likely to believe that they have the knowledge to invest, and are thus less likely to do so.
Retirement and Social Security
Married people (and in many cases, previously married people) also have advantages when it comes to claiming Social Security. While Congress eliminated some of the filing strategies that married people were previously able to take advantage of (“File and Suspend” was eliminated in April 2016, and very few people still qualify for “Restricted Application”), married people can still claim a “Spousal Benefit” on their spouse’s record. It is important to note that divorced spouses may share some of this benefit as well; if they were married to a spouse for more than 10 years, they can claim a benefit on their ex’s record. Members of married couples may still be able to leverage the Spousal Benefit to maximize their benefits, and, when a spouse or former long-term spouse dies, their partner will be eligible for a Survivor Benefit, which is advantageous if the decedent’s benefit was larger than the survivor’s benefit. Consult your Financial Strategist to see if any of these strategies apply to you.
Finally, when it comes to estate planning, those who are unmarried—whether always unmarried, or the second-to-die of a married couple—must pay particular attention to their estate documents. Married couples who have wills typically leave their spouse the bulk of their estate (with children and grandchildren being the contingent beneficiaries). Even if a married person dies without a will (“intestate”), the intestate succession laws of a state specify that the decedent’s estate will go to the surviving spouse and children, although there are variations between states in the amount that each will receive. The intestate succession laws apply to unmarried people too, and specify that only blood relatives inherit, with priority given to surviving parents and children. No state laws specify that an unmarried domestic partner, friend, or charity inherit, so if unmarried people want to pass their assets on to anyone who is not a blood relative, a will and/or trust is required.
Wills also specify the Executor of your estate. For married couples, this is typically the surviving spouse. If a married person dies without a will, the surviving spouse is likely to be appointed as a Personal Representative by the courts. State laws specify priority for appointing Personal Representatives, and a surviving spouse is typically at the top of the list. Some states go into detail in providing a list of who, in priority order, may serve, while others merely indicate the order as Surviving Spouse, Other Heir, and Any Other Person. If you are single and your closest blood relative would not be a good executor, you need to ensure that your documents are in order.
Summary: Things to Focus on in Planning for the Single Person
While the following items are important for all people, they are even more important for those who are unmarried:
- Establish an emergency fund.
- Consider a housemate if your circumstances are tight.
- Get disability insurance while you are working, and consider purchasing an individual policy in addition to what may be provided for you by your employer.
- Consider buying long-term care insurance or a hybrid long-term care/life insurance product.
- Prioritize saving and investing, particularly for retirement.
- Make sure your estate documents (will, financial and health care powers of attorney and proxies) are in order, and that your beneficiary designations are complete and up to date (see https://agilipersonalcfo.com/beneficiary-designations-2/).
[i] Singles & Money: Attitudes toward retirement, investing, and financial security, TD Ameritrade 2017, https://s1.q4cdn.com/959385532/files/doc_downloads/research/2017/Singles-and-Money-Survey.pdf
[iii] Barber & Odean, 2001