How to Plan for Retirement as a “Solo Ager”

How to Plan for Retirement as a “Solo Ager”

Baby Boomers who are single and childless, known as “solo agers,” face unique retirement planning challenges that need to be addressed.

Americans’ approach to aging has rapidly changed in recent years. This is the result of the aging Baby Boomer population, who are entering their 80s and 90s within the next few decades, and longer life expectancies. Medical advances are leading to healthier and more active lifestyles in retirement.

There are societal policy implications with these demographic trends, from long-term care to strains on public pensions. And increased divorce rates and lower birth rates are colliding to create financial challenges for a growing number of Americans, called solo agers. The term solo agers was coined in 2010 by Dr. Sara Zeff Geber, in part as a rejection of the “elder orphan” descriptor. An organizational behavior expert, Dr. Zeff Geber defines a solo ager as a Baby Boomer without children or grandchildren, either by design or circumstance.

Unique Retirement Challenges Solo Agers Face

It’s estimated that 20% of Baby Boomers are childless. Others have children living hundreds of miles away, although this trend has been declining in the U.S. over the past two decades. Still, many older Americans choose solo aging out of a desire for greater independence.

Solo agers face challenges that their peers with the support of their close family don’t have, namely planning for incapacity and bequeathing assets, according to financial planners and retirement specialists.

In her new book, Essential Retirement Planning for Solo Agers: A Retirement and Aging Roadmap for Single and Childless Adults, Dr. Geber shares her advice for a fulfilling retirement financially, physically and socially for solo agers. These considerations go beyond typical retirement and estate planning and planning now is key.

How to Plan for Incapacity

Planning for incapacity is not a fun topic, yet it is one of the biggest risks anyone faces, especially for surviving spouses and solo agers. It also requires a bilateral approach: financial and social. The first steps are to create a will, power of attorney and health care directives.

The second step is to name a corporate trustee to handle financial affairs in either incapacitation or death. Many people choose close family or friends, but unless they’re younger, these may face the same age-related challenges. In many cases, a trusted professional such as an attorney or financial advisor can help find a corporate trustee to serve in this capacity.

The social approach is less tangible, making it more difficult. This involves determining who will look out for the solo ager’s physical, emotional, social and even spiritual well-being in the event of incapacitation. Just as with finances, the solo ager’s typical social circles may be confronting their own impairments. And, unlike the financial approach, the attorney or financial advisor cannot be expected to take on the role of social caregiver.

A financial planner can help solo agers list some choices, such as nieces or nephews or other trusted kin, or suggest trusted members from houses of worship or community organizations.

Distributing Assets: A Will Is Not Enough

Deciding “who gets what” is difficult for solo agers. Next of kin is a typical choice, but another option is to select a beloved charity, particularly one that a retiree has been giving to throughout their lifetime. A combination of both family and charitable allotment is also common.

This pre-planning is important. A will is not enough. Many fail to understand that contractual investment assets – IRAs, 401(k) plans, annuities and life insurance – will not necessarily pass according to their will. People need to make sure their elected beneficiaries on contractual assets are in line with both their wishes and their wills.

It can also be tough for solo agers to stay on top of changes to their assets. For example, if a designated beneficiary dies first, the beneficiary elections on assets such as IRAs and 401(k) plans could result in assets going to next of kin, or to the state in the absence of next of kin, elected beneficiaries or a will.

The charitably-inclined solo agers will also want to be aware of the qualified charitable distribution. Depending on individual circumstances, some solo agers are projected to have required minimum distributions that exceed their annual income need. With recent changes to the tax code, it has become more difficult to claim a tax deduction for charitable contributions due to the higher standard deductions.

Solo agers who are charitably inclined and don’t need all their required minimum distribution could make a qualified charitable distribution from pre-tax IRA assets, whereby the income is never picked up on their tax returns.

Plan Ahead for a Fulfilling Retirement

Solo agers may not have the luxury of depending on their close family to help them in their golden years, so planning ahead for retirement is crucial. While a financial planner is a great resource, retirees who are single and childless owe it to themselves to take the first steps towards a fulfilling retirement by thinking about their long-term financial, legal and social needs.