Singles, especially those without children, might think that they don't need to have an estate plan. However, it is important to remember that estate planning is for when you are incapacitated, as well as asset distribution.
While some tasks for estate and retirement planning for singles are the same as for couples, a recent article in Forbes, “5 Financial Planning Strategies For Singles,” notes that singles need to prepare for medical and financial emergencies. While a spouse is not a guarantee that these issues will be handled to a person’s liking, a single adult needs to be more self-reliant and that means planning in advance.
Start saving for retirement now. Many of us will bank on Social Security along with our own personal savings in retirement. Some may have a pension or will possibly continue working in retirement. Whatever the exact plan, a good retirement savings objective is 15% of your salary and include your employer match, if you get one in your 401(k) plan. If you don’t have a plan through work, consider starting a personal IRA.
Prepare for the unexpected. Singles don’t have the luxury of second income as a fall back, so build up an emergency fund that can cover three to six months of expenses. Singles should aim toward the six-month cushion, so any unexpected expenses can be paid off without having to use your credit cards or retirement savings. Keep the money in a liquid account.
Consider insurance. Life insurance can be a replacement income for those who depend on you. With no dependents, it might not be needed, but consider a small policy to cover funeral expenses.
Estate planning. Perhaps you think you don’t need an estate plan because you’re single. However, you should have certain documents prepared, if you become incapacitated, so a trusted friend can make health and financial decisions on your behalf. This document is called a health care proxy or a durable medical power of attorney. You need this, along with an advance health care directive and a durable power of attorney for financial and legal matters.
For single parents of minor children, a will should be used to designate a guardian for them. Make sure that your beneficiary designations are up to date, since most of your assets are likely in your own name. The beneficiary designations will be in force, regardless of any wishes expressed in a will. You should also review your life insurance policies and retirement accounts. You might consider titling some of your accounts to “transfer on death” to ensure a relatively smooth transfer to another person.
Talk with an experienced estate planning attorney, who will be able to help you set up an estate plan to protect you and any heirs. Don’t forget to speak with family members or trusted friends, so that they know your wishes.
Reference: Forbes (July 5, 2017) “5 Financial Planning Strategies For Singles”