Retiring alone? Beat the odds by planning ahead

My gym buddy and I are about the same age and have our eyes on retirement in the next 10 years. We both have jobs we love and are fortunate to have a defined benefit (instead of a defined contribution) pension plan. She’s divorced. I’m married. We each have one child. We’re healthy. Life is good, and the future looks rosy.

What’s bothering my friend is that retiring alone seems scary. She’s not sure she knows what she needs to know and she’s not sure who to ask.

You can imagine how quick I was to tell her all about InvestRight.org and how our Guide to Investing could help her start asking the right questions—of herself, her advisor, and her investments.

Then I got to thinking: my retirement doesn’t seem scary because the rosy future I envision involves two people, hubby and me. According to a BMO report  published in January, statistics tell another story.

Whether alone through divorce or by outliving one’s spouse, “If you are part of a couple now, there’s a strong likelihood that you will find yourself single at some point during retirement.” Turns out my friend and I have more in common than the quest for strong bones and firm arms.

The report spells out simple steps we can take today to prepare for retirement. Three of them focus on the financial side of life:

Plan for retirement as soon as possible.  Canadian singles—male and female—are less likely to be informed about their financial well-being in retirement. When asked if they had gathered retirement information during the past five years, 60% of pre-retirees who knew their retirement date told surveyors “no”.

Build and sustain wealth. Hard as it is to picture oneself 10+ years in the future, it is sobering indeed to learn that odds are that one will have much less income at age 80 than at age 67. (Note to self: the decline is sharpest for the “suddenly single”.) And, 71% of the suddenly single say they didn’t have a plan to deal with their new life, and felt the pinch.

Understand income and expenses.  98% of a single person’s income goes to household expenses, compared to 81% for couples. It’s easy to dip into savings to meet spending demands during the earning years. Singles and future singles who manage their income and expenses today are less likely to outlive their money by drawing down their savings too quickly in retirement.

Here are three things you can do this week to get your head around retiring and improve your odds of retiring comfortably, alone or not.

1. Calculate your retirement needs. Your bank and many financial websites have retirement income calculators.

2. Read a book. One that came across my desk this year is The New Rules of Retirement by Warren MacKenzie and Ken Hawkins. It includes 38 rules, from Throw away the old retirement myths to Learn the seven steps to a perfect portfolio. With a list of “what you can do now” and a “bottom line” summary at the end of each rule.

3. Make an appointment with your investment advisor. And before you have it, spend some time with the InvestRight Guide to Investing.

Are you single and thinking about retirement? There are millions of Canadians like my friend from the gym who would love to hear how you’re approaching it. Let us know!