Whether you're single by circumstance or by choice, not being part of a couple can pose a number of financial challenges. Not only might you lose out on certain tax benefits, but you'll be limited to a sole income to cover life's expenses.
That's why it's critical to protect yourself from financial upheaval, both now and in the future. With that in mind, here are four key money moves to make.
1. Have more emergency savings
Generally speaking, working Americans are advised to have enough money in an emergency fund to cover three to six months' worth of living expenses. The logic is that doing so will tide you over during an extended period of unemployment, or provide adequate cash for a hefty unexpected bill. If you're single, however, you may want to aim a bit higher by stashing nine to 12 months' worth of expenses in the bank.
The reason? If you're single, and you lose your job, you won't have the option to jump on your partner's health plan. Similarly, if you get hurt or fall ill and can't work for a number of months, you might have zero income during that period, whereas members of couples can turn to each other to pick up the financial slack.
Though socking away that much cash takes time and discipline, if you start cutting small expenses, like a few restaurant meals or non-essential clothing purchases here and there, you can slowly but surely build your reserves. Similarly, you might consider temporarily working a side gig, which will allow you to bring home extra cash without having to worry as much about lowering your bills.
2. Ramp up your retirement plan contributions
Saving for retirement can be a challenge on a single income, but if you don't want to risk running out of cash as a senior, you'd be wise to work on increasing your retirement plan contributions, with the goal of eventually being able to max out your IRA or 401(k).
Currently, workers under 50 can put up to $18,000 a year into a 401(k), and $5,500 a year into an IRA. If you're 50 or older, these limits increase to $24,000 and $6,500, respectively. Now if you're in, say, your 20s or 30s, you may not be in a position to part with that much cash, but as you get older and your salary increases, it pays to, at the very least, allocate your raises toward retirement, especially during periods when your living expenses remain stable.
Imagine you're 30 years old earning $50,000 a year, and that your salary goes up by 3% annually. Let's also assume that starting at age 30, you're able to save 5% of your salary for the remainder of your career. If your investments generate a somewhat conservative 6% average annual return, by the time you reach age 67, you'll have about $485,000 in retirement savings, which is a pretty respectable sum for a single person -- especially since you won't have to split that balance with someone else as a senior.
3. Buy long-term care insurance
One benefit of being part of a couple is having someone on hand to help out when you get sick. This can be especially crucial during retirement, when you're more likely to encounter health issues that compromise your ability to care for yourself. If you're single, however, you may not have access to the same sort of live-in helper -- unless, of course, you're willing to pay for one.
That's why it's crucial to start thinking about long-term care decades before you expect to retire. It's estimated that 70% of seniors will end up needing long-term care, and you're more likely to get approved for long-term care insurance or qualify for discounted premiums if you apply when you're younger.
For example, more than 50% of applicants in their 50s manage to snag health-based discounts on their premiums, but that number drops to 24% among applicants in their 70s -- so the sooner you start planning for long-term care, the better.
4. Fight for a raise
Though we all want to earn more money, boosting your salary becomes all the more crucial when you're single -- namely because the more you make, the easier it'll be to build a strong emergency fund, pad your IRA or 401(k), and afford those long-term care premiums.
But more so than that, increasing your salary will also result in higher Social Security payments during your senior years. That's because your benefits are based on your earnings history, and so the higher your income is throughout your career, the more you'll get out of Social Security when it's your turn to collect.
Of course, negotiating a raise can be challenging, but if you approach it the right way, you're more likely to come away successful. To start, do some research to see what your position commands in your area. If folks with similar titles in your city are generally earning $10,000 more than you, that data alone gives you a leg to stand on. From there, it's really a matter of highlighting your accomplishments at work and giving your employer fewer excuses to deny you the salary bump you deserve.
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While we all have our share of money-related challenges, single folks often have it worse. If you're going at life alone, it pays to be extra vigilant about all things financial to eliminate whatever worries or disadvantages you might otherwise encounter.
