The math on how much singles need to save compared to couples

The math on how much singles need to save compared to couples

There’s an underlying assumption in a lot of personal finance that people are partnered up and thus able to share their financial resources. Home buying and retirement are two big examples of how default advice often assumes two incomes and two streams of saving. For some perspective on personal finance for singles, I recently got in touch with Jackie Porter, a certified financial planner (CFP) and co-author of Single by Choice or Chance: The smart woman’s guide to living longer, better. Here’s an edited version of a Q&A we did by e-mail:

Q: If a couple needed, let’s say, $1-million in savings for a comfortable retirement, how much would a single person need to live a comparable lifestyle?

A: The research suggests a single person needs 60 to 70 per cent of the combined lifestyle costs of a couple in retirement. Assuming a 4 per cent drawdown on $1-million dollars, that amounts to $40,000 per year for a couple. A single person by contrast would need to have saved $700,000 drawing down 4 per cent to have a comparable lifestyle of $28,000 (70 per cent of $40,000). Bottom line: It’s more expensive to be single, so you will need to plan carefully.

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Q: Given how expensive houses are in some cities, what do you advise single people about home ownership?

A: As a person who was single for many years, I know firsthand how expensive housing costs can be. So I encourage my clients to think through why they want to own a home. Especially because housing costs can take a big bite out of your savings and the housing market may not continue to rise exponentially. Consider sharing housing costs by renting out a portion of your home to subsidize your expenses or buying an investment property while continuing to rent in the city. This will allow you to build equity in a property with rental income using OPM (other people’s money).

Q: How important is it for singles to have an emergency fund?

A: An emergency fund is so crucial for a single person since they have no other income to rely on should they lose their job or face an illness. This has become all the more important in a pandemic. Singles should set aside three to six months of lifestyle costs and also maintain a line of credit as a backup. Rental income from a spare room or basement would also help, although I know some singles aren’t keen on this idea of sharing.

Q: Given that women so often outlive men, what’s your No. 1 piece of advice for senior women whose husbands handle the household investments?

A: Now is the time to get familiar with the financial decisions that are being made in your household, since at some point in the future you will likely be required to take the reins of your finances. Unfortunately, women who are not prepared to manage the finances are more likely to have negative financial consequences compared to women who lean in.

Q: What do you advise solo seniors with no children about finding an executor for their will?

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A: Having a community is so important when you are a single person. A number of the seniors I know have close friends or family as their executors, and they also commit to acting as their friends’ and family’s executor as well. Some of my single clients use professional executor services depending on the complexity of their situation.

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Rob’s personal finance reading list

Handy tax numbers for 2021

Key numbers if you’re looking ahead to your 2020 tax return or planning contributions to RRSPs and TFSAs for the year to come.

The year in online investing, plus a 2021 lookahead

A look back at the issues faced by online brokers in a challenging year where eager traders put enormous pressure on their websites. Several brokers offer details on improvements coming next year.

Clean your oven, save money

A lot of us have been cooking at home more in the pandemic, including baking. Here are some tips for cleaning the accumulated grime from your oven. There could be a payoff in lower electrical costs just for cleaning your oven door so it’s easy to see through. Every time you open the oven cooking, you lose heat.

How to transfer a 401(k) or IRA to Canada

Canadians who lived and worked in the United States often end up with U.S. retirement savings plans. Here’s some guidance on how to move these accounts to Canada.

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Today’s financial tool

Gifting Sense is a resource to help parents and educators teach kids to be smarter consumers – to think before they buy, in other words. Here’s a link to a tool parents can use with children to see if a purchase makes sense.

The money-free zone

As I type this, I’m listening Gil Scott-Heron’s album Pieces of a Man. Another record of the early 1970s that has a lot to say about today’s world. This record was featured last week in The Sunday Review newsletter from the music website Pitchfork, which highlights significant albums of the past.


What I’ve been writing about
  • Taking CPP early can cost you $100,000 and limit your long-term options
  • A new option for safely parking U.S. dollars and a 2.3% TFSA savings account (for Globe Unlimited subscribers)
  • ETFs are cheap, but you can still overpay on fees (for Globe Unlimited subscribers)

More Rob Carrick and money coverage

Subscribe to Stress Test on Apple podcasts or Spotify. For more money stories, follow me on Instagram and Twitter, and join the discussion on my Facebook page. Millennial readers, join our Gen Y Money Facebook group.

Even more coverage from Rob Carrick:

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Published at Tue, 15 Dec 2020 20:22:24 +0000

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