Single? You need a plan of your own

The system just isn't set up for households of one. That means planning is even more important for you.

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By Jean Chatzky, Money Magazine editor at large

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Editor-at-large Jean Chatzky appears regularly on NBC's Today. You can contact her at money_life@moneymail.com.
Not set up for the solo life
Only one in eight singles has a big enough emergency fund.
6Minimum months of living expenses a single person should set aside
13%Single people who have saved at least that much
27%Single people who feel "financially secure"
Source:Harris Interactive; Packaged Facts.

NEW YORK (Money Magazine) -- Question: How many single people do you know?

Answer: More than you used to. (And chances are greater than ever that you're one of them.)

In the 1950s, married couples made up 80% of the country's households. Today they account for a hair over 50%, and singles are poised to take the lead soon, according to the Census Bureau. What gives?

Divorce, which is how about half of all marriages end, plays a big part. And people are marrying later or just aren't marrying at all. Nearly a quarter of the population older than 35 is divorced or has never tied the knot.

That's an increase of 16% in the past decade.

Being on your own has its upsides, no doubt, but getting you to focus on your finances isn't one of them. That tends to happen around "couples" milestones.

Get married: Merge your financial lives. Have a child: Buy life insurance and start saving for college. Stay single: ummm.

Just as with married couples, though, the older a single gets, the more assets he or she accumulates. And if you're single, you have an even greater need than a couple to put a plan in place that will protect what you've got, including your earning power. After all, there's no spouse who'll automatically inherit property or who can make up for some of your lost earnings if you get fired or become sick.

If you're without mate or plan, here's what to do:

Stash more cash

Step one of financial planning for couples is to put a three- to six-month emergency cushion in place.

Singles, says San Francisco planner Sabrina Lowell, need a cushion of six to 12 months. The further up the career ladder you are, the more you need to set aside.

"Ask yourself," she says, "Would it be easy or difficult to land that next job?"

Saving that much money sounds daunting, and the fact is that fewer singles than married folks have set aside enough cash to last them even a few months.

But remember that a month's worth of emergency cash is not equal to the amount you spend today. It's what you would need to meet your fixed expenses and keep yourself fed. In an emergency you can forgo the extras for a while.

Get the right insurance

A disability policy? Absolutely. Long-term-care insurance? Maybe. Life insurance? That depends.

The asset singles most need to protect is their earning ability, says Robert Armstrong, president of the American Academy of Estate Planning Attorneys. The way to do that is with disability insurance. But only about half of employers offer it, and the individual market is small, mainly because policies are so pricey.

A 40-year-old man making $100,000 a year would spend $1,500 to $2,300 annually for a policy that would pay 60% of his salary up to age 65.

A 40-year-old woman would pay even more, since she can become pregnant and women have longer life spans.

You'll get a better deal if you are able to purchase coverage through your employer and then cover the gap between that amount and 60% of your pay (insurers won't go higher because they want you to return to work) on your own.

Long-term-care insurance is a complicated affair. Generally speaking, it makes sense for singles over 50 who have investable assets between $300,000 and $1.5 million and who can afford to pay the premiums for decades to come.

If you have fewer assets, a nursing-home stay of any length will exhaust them and Medicaid will start to pay your bills. If you have more than $1.5 million, you can fund your own care. (For more, see Facing Up to the Costs of Long-Term Care)

Finally, there's life insurance. It's a no-brainer for couples, but singles really need it only if they have children or older parents who are counting on their income. In that case, a term policy is a better value than pricier whole life coverage.

Put the right documents, and people, in place

If you're married, many things happen the way you'd want them to in an emergency even if you haven't done all the right paperwork. Should you end up in the hospital, the spouse by your side will be consulted on your care. If you die and have no will, your spouse will inherit everything.

If you're not married, though, your belongings could end up in the hands of your parents even though you'd rather siblings or someone else got them. People you'd want making decisions on your behalf may not even be called. (Note: This can also happen if you're in a long-term relationship but aren't married.)

The solution is to make your wishes clear ahead of time. As soon as you've accumulated assets that you want to end up in a particular place, get a will and a living trust. You also need a living will telling a doctor or hospital directly what types of extreme measures to keep you alive you do and don't want taken.

Most important, you have to give someone power of attorney to make medical or financial decisions on your behalf. You needn't select a single person for both roles.

"For finances, you want someone with a good sense of business," says Armstrong. "When it comes to health care, you want someone who has the time to look after you if something happens and who shows compassion and care."

Don't forget the tax man

Unfair as it may seem, married folks have the ability to pass their entire estate to a spouse tax-free while singles get no such break. This is something you have to consider if your estate is worth more than $1 million. (The estate-tax laws are in flux, but as of today, you'll owe taxes on an estate larger than $1 million in 2011.)

If you don't want to pad the government's coffers, take advantage of a few simple strategies. For example, you can give $12,000 a year tax-free to as many people as you like, and you can leave 401(k)s and IRAs (the most heavily taxed assets) to charity.

One last thing: Make sure you name beneficiaries for those accounts. If not a charity, then a parent, a sibling or a trust for a niece or nephew.

"Often single clients will say they don't have anyone to give it to, so they don't fill the beneficiary designations out," Lowell says. "That's a headache waiting to happen." To top of page

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.