Single Household

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Biggest Challenge: Figuring out who will catch you if you fall

The single life, it seems, is trendy. A record share of Americans have never been married, according to Pew Research; among single adults ages 25 to 34, roughly one-third say they are not sure if they ever want to tie the knot. When that’s combined with divorced and widowed folks who haven’t gotten hitched again, 27% of households consist of one person, up 10 percentage points since 1970.

Financially speaking, living without a partner has perks. You get to decide whether to scrimp or spend, unfettered by your significant other’s desire for a Mercedes or a McMansion, and often without the draining expenses of kids. On the other hand, you lose out on some of the reduced costs built into couplehood, such as a shared home or car and amplified savings and Social Security benefits. “When I was married, both my spouse and I were able to save at a good clip,” says Donnell Butler, 41, of Lancaster, Pa., a dean at Franklin and Marshall College who has been on his own for four years now. “It’s much harder now that I’m paying for everything on my own.”

The toughest nut, though, is when things go wrong. Lose your job? “Single people have no backup income,” says Jan Cullinane, author of The Single Woman’s Guide to Retirement. Become ill or incapacitated, which gets more likely as you age? Without a built-in caretaker, you could be on your own.

The Solution: Line up a reserve team.

Err on the side of caution when it comes to your emergency fund, and aim to have enough to cover nine months to a year’s worth of living expenses. Disability insurance is critical. If you can’t get coverage through your employer, spring for an individual policy if possible. To lower the cost, opt for a longer period before you collect benefits—say, 180 days instead of the more typical 90.

You may also want to spring for a long-term-care policy, which would cover the cost of in-home care as well as a nursing home. “When there’s no obvious caretaker, people want to avoid being a burden,” says Covington, La., planner Lauren Lindsay. And be sure to grant someone you trust—say, a sibling or close friend—power of attorney and the right to act as your health care proxy if you’re not able to handle your finances or direct your own care.

And Don’t Forget…

Skip life insurance. No dependents? You likely don’t need a policy.

Pump up retirement savings. Unlike married couples, you won’t be able to tap a partner’s Social Security or pension. One plus: When your peers with kids are struggling to pay college bills, you’ll have bandwidth to funnel tons into your 401(k).

Build your legacy. Without clear heirs, you need a will to spell o ut what you want to happen to your home and other assets when you die. Otherwise the courts will make those decisions for you.

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