Are you navigating your financial future solo? When you’re single, life’s twists and turns can be more devastating than if you are building your wealth with a partner. Taking the helm solo requires special tools and strategies to help ensure you’ll reach your financial goals. Joe Anderson, CFP®, and Big Al Clopine, CPA, help to guide you through rough waters to safe harbor.
Navigating Retirement Solo:
- Map Out Your Journey
- Set Sail
- Prepare for Stormy Seas
- 0:00 – Intro
- 1:42 – Navigating Your Retirement
- 2:56 – Millennials’ Retirement Objectives
- 3:10 – Trapdoor: Self-Managed Portfolio
- 4:15 – Create a Budget
- 5:58 – Reduce Debt
- 6:53 – Fund IRA
- 7:38 – Download the Guide: Going Solo
- 8:32 – True/False: Most people in the Gen X generation have the recommended amount of money in emergency savings
- 9:28 – Gen X Retirement Objectives
- 10:10 – Emergency Fund
- 11:07 – Max-Out Match
- 13:11 – Evaluate Plan
- 14:53 – Download the Guide: Going Solo
- 15:38 – True/False: You can apply for Social Security on your former spouse’s record even if they are not retired
- 17:07 – Social Security Benefits
- 18:12 – Catch-up Contributions
- 19:01 – Asset Allocation
- 20:22 – Ask the Experts: I’m 46 and single, what if any life insurance type should I get?
- 22:04 – Pure Takeaway
- 22:25 – Download the Guide: Going Solo
Make sure to subscribe to our channel for more helpful tips and the latest episodes of “Your Money, Your Wealth.”
Joe: When you think of retirement, you think of the couple walking down the beach, right? But you would be amazed of how many of you will retire single. Do you know how many? Welcome to the show. The show is called Your Money, Your Wealth®. Joe Anderson here. CERTIFIED FINANCIAL PLANNER™. Big Al Clopine. He’s sitting right over there. Hello, Big Al.
Al: Hey, Joe. How are you doing?
Joe: We’re going to talk about a solo retirement.
Al: OK. Let’s bring it on.
Joe: You’re married.
Al: I am. And you, too.
Joe: I am. But you’d be amazed at this stat. 50% of people 55 to 65 will go into retirement single. But if you look at the stats here, right, people that were never married, 55 to 66 years old, 60% of those people have zero savings. But if you look at a married couple here, 35% of them have no savings. So, 40% of people have some savings for retirement that have never been married. But if you’re married, guess what? You have two people. That equals a little bit more savings. So, when you look at retirement, if you’re going in it alone, you have to have the right strategies in place. That’s today’s financial focus. When you’re thinking about this solo retirement, you’ve got to take the helm on your own. And who’s the best captain in the world? It’s Big Al. Big Al, let’s walk us through.
Al: All right. So, today, we’re navigating solo. You’re single going into retirement, and there’s different strategies depending upon what generation you’re in. So, we’re going to look at a couple things for 3 different generations. One is mapping out your journey. That’s always very important. Then you got to set sail. You got the plan, you got to get going. Then you got to be aware of stormy seas. Prepare for stormy seas because things can happen to interrupt your retirement. So, Joe, this will be kind of exciting. We’re going to go over each generation. I guess the millennials, Gen X, and baby boomers.
Joe: Yeah, each of them have a different set of planning. But you look at the sequence, it’s all relatively the same. But when you look at the ingredients, it’s going to be a little bit different. Let’s start out looking at retirement accounts with each of these different generations. Millennials, 50% have a retirement account. So, half don’t. Come on. So, that’s age 27 to 42. Come on. We got to get a little bit better than this. Generation X, 43 to 58, 56%. So, a little bit better. And then you got the baby boomers. So, almost 60% of those people have a retirement plan. But if you look at the flip side, al, I mean, those are pretty big numbers that don’t necessarily have a strategy.
Al: When I think about baby boomers, Joe, 40% or more not having a retirement plan going into retirement, that–and we know this is true because a lot of people end up living on Social Security, which means they’re going to have a greatly reduced lifestyle in retirement. So, basically, Joe, I think we want to go over strategy so it doesn’t happen to you.
Joe: Absolutely. Let’s start with the millennials. So, if you’re 30 to 40, roughly, right, a couple of really good things that you want to start looking at, right? Number one, just create that budget, all right, because you got cash flow coming in. Sometimes, right, more cash flow goes out and then people run into debt. You want to make sure that you create that budget and then manage your debt if you have it. And then start funding your retirement account. It’s really easy stuff, but it’s difficult to do. When you think about this age group, al, you want around 3 times your overall salary. So, if you’re making, you know, $50,000 a year, you want 150,000. If you’re making 100 grand a year, you need about 300,000 if you’re roughly in this age group.
Al: Yeah, and I think it’s a good rule of thumb is just use that as a guide to where you want to get to in this generation. So, let’s start with budgeting. And the way we think about it is, is needs, wants, and then savings, right? So, your needs. Think about housing, food, utilities, things like that. That’s probably should be somewhere around 50% of your income. Then you get into wants, like clothing, vacations, dining out. That could be 30%. But then you want to make sure you got a big amount like 20% for savings, emergency savings, retirement savings, paying off debt, things like that. If you can think about this in rough percentages, you’ll set yourself up for a better retirement.
Joe: One of the things that you want to make sure that you do, though, is there’s a specific order that you want to look at this. Most people start here and they work this way, right? It’s like, here, I’m going to pay my mortgage or pay my rent. You know, I got to feed myself and I got to keep the lights on. And then, oh, from there, maybe I go out a little bit. Hey, I’m working hard. I’ll go on vacation and maybe I need a new, you know, pair of shoes or a new suit. And then from there, whatever’s left over, I’m going to save. I would do the–kind of change this around a little bit. Pay yourself first, right? Fund that IRA, put money into the 401(k), make sure that you have that emergency account, right? Pay yourself first and then go here and then go here. Right? Because most of the time you get here and then you have zero left for this overall pool. If you start here, then go here, right, you’re going to probably have less than vacations, dining out, and clothing, but you’re going to have a larger nest egg, and I think that’s really the goal of what we’re trying to accomplish here.
Al: Well, I think that’s well said. Pay yourself first. That’s a very important concept. Because if you don’t, there’s generally nothing left over to save. Now, what gets in the way is student debt. About 15 million millennials have student debt, right? And the average, if you just take all the averages, it’s about 33,000 per person. Now, some are a lot lower. Some that went into medical school in some cases have hundreds of thousands of dollars. Joe, you do need to have a plan to get that debt paid off because that really can affect your retirement.
Joe: Right. I mean, just real simple, right? Let’s say you have a $33,000 loan. You have a 5% interest rate. So, you pay $350 a month over 10 years. It’s $42,000 of interest plus your principal payment, right, and you have everything paid off. Well, what if you just bump that up just a little bit more, right? You can pay $418 versus the $350. Well, “a,” you’re going to get this thing paid off a lot sooner, and then also you’re going to pay a lot less, you know, to interest. But so you take that $418 versus 350. But with that $418, then you continue to save that on throughout retirement, right? Then you have an automatic savings plan. So, taking care of debt. Looking at some numbers here. Hey, can you save a little bit more in interest? Can you increase that savings amount a little bit? But don’t stop there. Continue to go.
Al: Well, I think so, and I think this is a good illustration. Sometimes, by paying just a little bit more on your debt, you can reduce that term, right? This is true of mortgages, too. Paying a little extra in your mortgage, you can end up paying a lot less interest and have that loan paid off much quicker.
Joe: For instance, you got that $418. 6% interest rate over 30 years. It’s $422,000, right, so, you got that student loan paid off or whatever loan that you’re paying off. You keep that going out through retirement, you have a really good nest egg here, right? And then it didn’t really change any of your current outflows because you were paying that already to debt. A couple other things. With the SECURE Act, they have something that if you’re paying down student debt, they will match your 401(k).
Al: That’s a really good benefit for those that have student debt. And make sure you check with your employer on how that works so that you can get that student debt paid off even more quickly.
Joe: Hey, we’re going to switch gears when we get back. We’re going to go to Generation X, so, if you’re in that age group, you don’t want to miss this. If you need some more help with this, we got a guide for you. You know that. Go to yourmoneyyourwealth.com. Click on that Solo Retirement Guide. Yourmoneyyourwealth.com. Click on that special offer. It’s our gift to you this week. Check it out. We’ll be right back.
Joe: Hey, welcome back to the show. The show is called Your Money, Your Wealth®. Joe Anderson here, Big Al sitting over there. We’re talking about navigating your overall retirement solo. Half of people in retirement are actually single. Did you know that? There’s a little fun fact. So, being single in retirement means you probably have to do a little bit more planning. If you need some more help with this, we got a guide for you. You know that. Go to yourmoneyyourwealth.com. Click on that Solo Retirement Guide. Yourmoneyyourwealth.com. Click on that special offer. It’s our gift to you this week. Let’s see how you did on the true/false.
Al: Most people in Gen X generation have the recommended amount of money in emergency savings. I think virtually every generation probably doesn’t have enough, so, I’m going to say false. What do you think, Joe?
Joe: Yeah, absolutely. 53% of Gen X do not have enough saved in that old cash account. So, you want to roughly about 3 months’ worth of cash, you know, to cover those living expenses. But, you know, this is also false here, too, because it really depends on the line of work that you’re in.
Al: I think so, too. I think we commonly say 3 to 6 months, right? Some people might need longer, right, because they have unsteady work. Maybe they’re a contractor. They got a big job and then they don’t work for several months. So, just be aware of your situation and how much it’s going to make sense for you to have. But 3 months is kind of a minimum, I would say.
Joe: Let’s map out your journey for Generation X. So, let’s look at your emergency fund first, right? Do you have that 3 to 6 months, sometimes 12, sometimes smaller? Start trying to max your 401(k), right? And then take advantage of that max and then, you know, reevaluate or evaluate your overall strategy. You need about 6 times, right, your overall income in savings, right? In this age group. It’s a pretty big number.
Al: It is a big number and it’s not necessarily at age 43, but as you–as you’re closer to age 60, that would be your target. And, again, these are just guidelines to see how you’re doing, and I think when a lot of people look at it, Joe, they’re actually a little bit behind, which is why we try to do shows like this.
Joe: Let’s say you’ve got to build that emergency fund, Al.
Joe: So, let’s say you got two years to do it. You can save 25 bucks a week, right? That’s $2,600. Not bad. 50 bucks a week, it’s 52. 75, it’s $7,800, right? You know, you could build up cash. It’s not as difficult as I think a lot of people might think.
Al: Well, I think so. And it could be, like, $100 a month and you end up with a better emergency savings account.
Joe: All right, looking at retirement accounts. Ok? So, you got 401(k)s and IRAs. Try to max those things out. Contribution limits here are 22,500. So, if you’re over age 50, it’s 7,500. IRA or Roth contribution limits is $6,500. And then you get a $1,000 catch- up if you’re over that age 50. So, those are the magic numbers here. So, if you can max those things out, right, that is the key.
Al: So, many 401(k)s, maybe even most 401(k)s, have some kind of employer match. What you have, if you have a 401(k), you need to check it out to see what it is. But we’re going to go over an example of a 401(k) that has a 50% match up to the first 6% of your salary. So, if you put in 4% of your salary, that would be $3,200, and 50% match would be $1,600. Not bad. You got $4,800 going into your retirement. But if you could do 5% or 6%, look at 6%. $4,800 going in from you, $2,400 in for–from your employer. Now you’re 7,200. Now you’re making a bigger dent in that retirement. And, of course, what we want you to do is work up to about 20% of your income going into 401(k)s, iras, other kinds of savings accounts. As we just said, 22,500 is the most you can put in. Unless you’re 50 and older, then it’s actually 30,000. That extra $7,500.
Joe: You know, what gets confusing with a lot of retirement accounts is that, you know, if I save up to a certain limit, then they’re going to match and then they match 50% up to a certain limit and things like that. But if they looked at– if you actually looked at the dollars here, right, it would probably encourage you to save a couple of more bucks, because then the company throws in that much more. Right? Because we went through an illustration here of, like, 400 extra dollars. Well, $1,600 match versus a $2,000 match. You know, the company is giving you an extra $400 just by putting 1% more of your income in. And then plus, it’s pre-tax, or if you want to go roth, it’s after tax, right? So, that’s a–quite a bit of increase in overall savings that’s just going to compound over time. So, really understanding your 401(k) plan and understanding the match component of the plan, there’s billions of dollars that’s left on the table when it comes to company matches. Make sure you understand your plan so that you can catapult your overall retirement.
Al: Yeah, Joe, and this example, when you think about if it’s a 50% match, you put in a dollar, you get $0.50. That’s like a 50% rate of return on day one. So, make sure you take advantage of it.
Joe: Is your retirement plan on course? Let’s take a look at this example. Let’s say you’re 47 years old and you want to retire in 20 years. 67. Current spending, $80,000. That’s what you’re spending today and that’s what you wanted to continue to spend, right? You want to retire in 20 years from now. So, that 80,000 at age 47, when I turned 67, it’s 144,000. The same purchasing power of those $2.00. Let’s say I have $55,000 of fixed income. So, I want to spend 144,000. I have $55,000 coming in from Social Security. Right? So, I take 144,000 minus 55. I have 89,000 that needs to come from my overall portfolio. So, how big of a portfolio do I need to get $89,000? Well, there’s a rule of thumb that’s called the 4% rule. So, I can divide the 89,000 by 4%, right? So, that means I need 2.2 million. So, how do I get to 2.2 million? Well, I got 20 years to save. So, the faster you start saving or the quicker you start saving, the better off you are. So, if I have 300,000, I only need to save $34,000 a year, Big Al. No biggie.
Al: About 3,000 per month if you can swing it.
Joe: If I have 600,000, right, I need to save $8,200 per year. Right? So, that gets me to that 2.2 million. I know this is a little convoluted, but it’s just simple math. If I’m looking at how much that I’m spending today, I’ve just got to inflate those dollars. I’ve got to take a look in the future. What my Social Security is going to be, what my pension is going to be. So, I have $1.00– a need. I’m going to subtract that out from my fixed income sources, and then I’m just going to take that shortfall and divide it by 4% or just multiply it by 25.
Al: Yeah, I was going to say that, too, because many people have trouble with fractions, right? Or percentages. So, just multiply that 89,000 times 25.
Joe: So, if you want more help with this, go to yourmoneyyourwealth.com. Click on the special offer this week. It’s our Solo Retirement Guide. It’s our gift to you. You can download it for free right there on your computer. We got to take another break. When we get back, we’re going to wrap it up. Talking about baby boomers. What are the steps that you should take if you’re in that age group?
Joe: Hey, welcome back to the show. The show is called Your Money, Your Wealth®. Joe Anderson, Big Al. We’re talking about navigating your overall retirement solo. Going through different generations on the planning that you need to be taking a look at. We went through the millennials, we went through Generation X, and now we’re going to go through the baby boomers. But before we do that, let’s see how you did on the true/false question.
Al: You can apply for Social Security benefits on your former spouse’s record even if they have not retired. True or false? Well, that is true, Joe, but there is a lot of caveats there.
Joe: Yeah, a couple of things. So, let’s say you were married. You get divorced. Now you’re going into retirement. Can you claim that Social Security benefit on the ex-spouse? And the answer is yes. But you had to have been married to that spouse for at least 10 years. All right? So, you made it 10 years. You get a divorce, all right, and then you need to claim Social Security, and maybe the spousal benefit is going to be larger than on your own record. And the spousal benefit would be half of your spouse’s. You got to be at least Social Security claiming age, 62, right? You have to be unmarried to claim on your ex-spouse. The ex-spouse needs to be entitled to Social Security benefits. Doesn’t necessarily need to be claiming the benefits, but needs to be entitled. And then have to be divorced for at least two years. And if you kind of check all these boxes, yes. Then you can claim on your ex-spouse’s benefit.
Al: Yeah, and something else to consider, Joe, is if you claim early, like at age 62 or any age before full retirement age, which right now is between 66 and 67, if you claim early, you will get a reduced benefit for the rest of your life, even if you can later switch to your own.
Joe: Yeah. So, let’s say if you do claim at 62, let’s say the benefit is $1,000, right, if you claim at 62, you’re going to receive that haircut. It’s $700. And then you take that permanent haircut through the rest of your life. If you claim at age 70, you’re going to get that 77% increase throughout from your full retirement age. So, $1,000 here, $700 here, or 1,240 here, right? Because you get that 8% delayed retirement credit. So, understanding your Social Security benefits is absolutely key. So, when you look at kind of the schedule of what you need to be mapping out when you’re a baby boomer, number one on the list, al, is Social Security strategy.
Al: Yeah, and then number two would be catch-up contributions. If you’re still working, make sure you take advantage of them. If you’ve got a 401(k), 403(b), you can contribute an extra $7,500 like we talked about. Make sure you do that. If you have an IRA or Roth IRA, you can put in an extra $1,000.
Joe: Hey, new catch-up contributions coming into play here soon. We could really hit that throttle based on your overall retirement. So, 22,500 is the 401(k) max limit, plus you get the catch-up. So, depending on what age you are, you get a little bit of extra bump in the overall catch-up contributions. So, 22,500. Catch-up contribution from age 58 to 59 is $7,500. From 60 to 63, it’s 10,000. So, 64 to 70 and $7,500 again. So, over this time frame, starting with zero, you’re saving $22,500, right? And then you do the catch-up of 60,000 through this time frame. Another 130 or 210. Give yourself a 6% growth rate. Boom. 617,800, Al.
Al: Yeah. So, that’s if you max out for 12 or 13 years, but it shows you even if you start at nothing, right?
Joe: So, if we look at, you know, risk and expected return are related. So, higher the risk, right, the more return, but also, right, you could get capsized as well.
Al: Yeah. And, Joe, boomers are vulnerable to market downturns. Just look at this stat. About 59% of them are over allocated in equities. You may have a different asset allocation, right? Stocks and bonds for retirement versus working years.
Joe: So, if I got this big barge, it’s pretty hard for me to get capsized there, but I’m probably getting a pretty low return. So, those are like government treasuries. But, you know, the small speedboat would be like smaller companies, right? Because a lot of smaller companies fail, but the ones that make it, you get a lot higher expected rate of return. So, understanding kind of what collage of boats that you want to have or what asset allocation is really key, when you’re saving this much money, you want to make sure that you have the right strategy in place to get whatever target rate of return that you need. Hey, let’s switch gears a little bit here. Let’s go to ask the experts.
Al: “One-year CD rates are over 4%, but for the last 20 years, they were basically zero. What happened?” this is from Shannon. Well, Shannon, I’m going to give you my non-expert opinion here, which is simply this, right? So, we had very low interest rates for quite a while because we didn’t have a lot of inflation. The government was able to keep the interest rates low. We started to have inflation and the government’s best tool to combat inflation is increasing interest rates. And, as you know, inflation got really high. As of today, it’s waned a little bit. It’s still pretty high. But they had to increase interest rates to be able to combat inflation, and that’s what increased bank cd rates.
Joe: Yeah. Because the interest rate went up and, so, the amount that you’re paying for debt increased. And so, also, if you’re lending your money, which is a cd, you’re lending your money out, right, because you give your money to the bank. The bank just doesn’t put that into a vault, right? They turn that, lend that out for mortgages or boat loans. Right? But they’re going to charge 6%, but you’re going to be able to get 4%, and that 2% is the spread, and that’s how banks kind of make their money.
Al: Absolutely. All right. So, let’s go to number two. This is from Alex. “I’m 46 and single. What, if any, life insurance type should I get?” great question, Joe. I’ll let you answer that one.
Joe: There’s not a huge need for life insurance. I would say the bigger need for any type of insurance at 46 and single is probably disability insurance. You’re highly likely to probably get disabled than you are to die at that age. And your income is probably one of the biggest assets that you have, especially in that age group. You know, so, the baby boomers or the Gen Xers, you know, when you hit 45 to 55, that’s probably your prime earning years, or 45 to 60-ish, right, so, you’re making the most amount of money. You probably want to protect that income. If you don’t have any kids or a spouse, probably doesn’t make a ton of sense, in my opinion, to have life insurance. Let’s go to the takeaway, Al.
Al: All right.
Joe: We got to map out your journey.
Al: Yeah. For every generation. You got to know what you’re doing.
Joe: And then you got to start doing something, right? You got to execute, right? You just can’t sit in the dock. You got to get out there and then, you know, be prepared for stormy seas. Life isn’t always perfect, and so, you have to make sure that you’re prepared for that. If you want more help, you can get our guide. It’s the Solo Retirement Guide. Go to yourmoneyyourwealth.com. Click on that special offer and that’s our gift to you. Oh, that’s it. Such a shame the show has to come to an end.
Al: I wish we could do an hour.
Joe: I just wish we could have more boats, more stormy seas. Hopefully you enjoyed it as much as we did. We’ll see you again next time. Go to yourmoneyyourwealth.com. Thanks so much.
• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC. A Registered Investment Advisor.
• Pure Financial Advisors, LLC. does not offer tax or legal advice. Consult with a tax advisor or attorney regarding specific situations.
• Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
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