Financial Planning for Singles
As we prepare to face another Valentine’s Day, let’s not forget those who are single. The idea that financial planning is only necessary when one "settles down" to marry and have children is a concept that just doesn’t make good sense.
In fact, one could argue that singles have even more reason to plan for their financial futures than their married counterparts. In case of illness or job loss, the single doesn’t have a spouse’s income to fall back on. Also, singles may have to pay higher income tax rates than their married counterparts.
But there’s no standard cookie-cutter plan for singles, whose financial circumstances vary as much as married people’s circumstances. Here are some points to consider if you fall into any of the following single categories:
The Not-Yet-Married
If you’re young and marriage is still far from your mind, now is an ideal time to begin some serious thought about your financial future. Setting aside a percentage of your income for long-term needs is important even if your idea of planning ahead is deciding what party to go to this weekend. Take advantage of your company’s tax-deferred 401(k) plan or open an individual retirement account. Even if your contribution is modest, the magic of compounding and tax deferral will make your nest egg grow into a tidy sum over the long haul. Try to pay off any large debts, such as college or car loans, to establish a positive net worth.
The Never-Have and Never-Plan-to-be-Married
While people in this group may think life insurance is unnecessary, disability insurance is important. As you age, the chance of suffering a debilitating illness increases significantly, risking loss of income and major medical expenses. Also, as you get closer to retirement, your retirement assets need to be monitored more closely and possibly moved to more conservative investments. Finally, you should think about having a will drawn up and establishing an estate plan so your money goes where you want it to go after you die.
Divorced or Widowed
If you fall into this category, you have a strong need for both disability insurance and life insurance, especially if you have dependent children. You also need to think about your children’s future college costs and your retirement. Again, a will is essential, as is naming a guardian for your minor children. Establishing a trust and estate plan is also important.
Estate planning for singles can be complicated. While you won’t be able to take advantage of the estate tax marital deduction, you can make maximum use of the estate tax exemption and charitable trusts. The exemption currently allows estates of $1.5 million or less to avoid estate tax. Charitable trusts allow individuals to secure a current tax deduction for a charitable gift that will be made in the future.
Whether you’re widowed, divorced, or just young and single, planning for your financial future is of utmost importance. TPW
In fact, one could argue that singles have even more reason to plan for their financial futures than their married counterparts. In case of illness or job loss, the single doesn’t have a spouse’s income to fall back on. Also, singles may have to pay higher income tax rates than their married counterparts.
But there’s no standard cookie-cutter plan for singles, whose financial circumstances vary as much as married people’s circumstances. Here are some points to consider if you fall into any of the following single categories:
The Not-Yet-Married
If you’re young and marriage is still far from your mind, now is an ideal time to begin some serious thought about your financial future. Setting aside a percentage of your income for long-term needs is important even if your idea of planning ahead is deciding what party to go to this weekend. Take advantage of your company’s tax-deferred 401(k) plan or open an individual retirement account. Even if your contribution is modest, the magic of compounding and tax deferral will make your nest egg grow into a tidy sum over the long haul. Try to pay off any large debts, such as college or car loans, to establish a positive net worth.
The Never-Have and Never-Plan-to-be-Married
While people in this group may think life insurance is unnecessary, disability insurance is important. As you age, the chance of suffering a debilitating illness increases significantly, risking loss of income and major medical expenses. Also, as you get closer to retirement, your retirement assets need to be monitored more closely and possibly moved to more conservative investments. Finally, you should think about having a will drawn up and establishing an estate plan so your money goes where you want it to go after you die.
Divorced or Widowed
If you fall into this category, you have a strong need for both disability insurance and life insurance, especially if you have dependent children. You also need to think about your children’s future college costs and your retirement. Again, a will is essential, as is naming a guardian for your minor children. Establishing a trust and estate plan is also important.
Estate planning for singles can be complicated. While you won’t be able to take advantage of the estate tax marital deduction, you can make maximum use of the estate tax exemption and charitable trusts. The exemption currently allows estates of $1.5 million or less to avoid estate tax. Charitable trusts allow individuals to secure a current tax deduction for a charitable gift that will be made in the future.
Whether you’re widowed, divorced, or just young and single, planning for your financial future is of utmost importance. TPW