Focus on Finance
Financial Planning For Singles of All Ages
Whether you're single, never married, divorced, or a widow, you don't have to fly solo when it comes to money management and financial planning. The idea that financial planning is only necessary when one "settles down" to marry and have children is a concept that's gone the way of discos and leisure suits.
There are very good reasons why single adults have even more reason to plan for their financial futures than their married counterparts. In case of illness or loss of job, 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 single adults, whose financial circumstances vary as much as married persons. If you fall into any of the following single categories, here are some things to think about:
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. Take advantage of your company's tax-deferred 401(k) plan if offered, 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-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-which, by now, may be substantial-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. Also, establishing a trust and estate plan is 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 essentially allows estates of $1.5 million or less in 2005 to avoid estate tax. The exemption increases in steps to $2 million in 2006, 2007, and 2008. Charitable trusts allow individuals to secure a current tax deduction for a charitable gift that will be made in the future.
Whether you're recently widowed; divorced; or just young, single, and enjoying your freedom, planning is important to your financial future. If you have any questions, please call your local financial representative for more information. TPW
There are very good reasons why single adults have even more reason to plan for their financial futures than their married counterparts. In case of illness or loss of job, 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 single adults, whose financial circumstances vary as much as married persons. If you fall into any of the following single categories, here are some things to think about:
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. Take advantage of your company's tax-deferred 401(k) plan if offered, 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-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-which, by now, may be substantial-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. Also, establishing a trust and estate plan is 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 essentially allows estates of $1.5 million or less in 2005 to avoid estate tax. The exemption increases in steps to $2 million in 2006, 2007, and 2008. Charitable trusts allow individuals to secure a current tax deduction for a charitable gift that will be made in the future.
Whether you're recently widowed; divorced; or just young, single, and enjoying your freedom, planning is important to your financial future. If you have any questions, please call your local financial representative for more information. TPW