Canada is becoming a nation of singles. Not only are there more than 13 million single Canadians, but also they now outnumber their married counterparts.

And to top it off, thanks to the growing acceptance of alternatives to traditional marriage as well as the higher incidence of late-life divorce, the number of singles continue to rise. As a result, there is an increasing need for advisors to address the retirement challenges that this rapidly rising demographic faces. The earlier in life that you can help a client plan for a secure retirement in solitary splendour, the better, as expenses can be considerably higher than when they’re being shared with another person.

“The upside of being single is that people have more freedom and can do what they want, when they want,” says David Ablett, director of tax and retirement planning withInvestors Group Inc. in Winnipeg. “But they must also recognize and plan for the downsides and the challenges.”

The latest Statistics Canada data show that 51.5% of people aged 15 and over are unmarried, marking the first time that unmarried people have outnumbered married people since census information began to be compiled in 1871. For the first time, there are more families without children (42.7%) than with children (41.4%) — and 26% of families with children are headed by a single parent.

“The emergence of singles as a significant cohort has huge cultural, economic and social implications,” Ablett says. “During both their working lives and retirement years, single people are not able to rely on financial or other forms of support from a spouse.”

An Investors Group survey of more than 2,600 Canadian baby boomers between the ages of 40 and 60 reveals that many in that age group are concerned about who will take care of them in retirement, and 43% expect they will need to work longer because they are single. However, the ability to manage their personal finances without the interference of a spouse was cited as an advantage by 81% of singles surveyed.

The survey found that 28% of respondents plan to work past the traditional retirement ages of 60 to 65. For the majority of these people, it’s because they will need the income or the access to health benefits. The survey also found that 40% of single boomers don’t have a financial plan designed to meet the needs and expenses of being single.

Without backup from a second income, it can be more difficult for single people to save for retirement during their working years — as well as more costly to live in retirement. Expenses such as housing, utilities and cars can take a big bite out of income when only one person is paying for them. In addition, aging singles are more likely to need housekeepers, home health care and maintenance help than those who can rely on a spouse for assistance in some areas. A couple may be able to remain in their home longer because there are two people to help each other, while a single may need to move to an assisted-living facility at an earlier age. Financial planning strategies available to couples — such as income-splitting and spousal RRSPs — are also not available to singles.

“Being single changes the numbers,” says Doug Lamb, a certified financial planner with Toronto-based Spera Financial Inc. “It means that more assets are required for a reasonable retirement.”

Akeela Davis, CFP, registered financial planner and investment advisor with TD Waterhouse Private Investment Advice in Vancouver, estimates that a single person will need as much as 30% more retirement income than a couple to live a comparable lifestyle and meet the additional expenses of being single. If a couple is budgeting to live on $3,000 a month, she says, a single should budget for $4,000.

“Just like when you’re travelling,” Davis says, “there’s a singles’ premium to living alone in retirement.”

Increasing longevity also plays a role in retirement costs, with many people now living into their 90s. Because of the propensity of women to outlive men by an average of five years, chances are that many women clients will end up single if they are not single now. Of the 4,000 Canadian centenarians, 3,400 are women, according to StatsCan data. Research also shows that by age 80, one in three men and two in five women will spend time in a nursing home.

@page_break@“I like to plan for clients to be living until their late 90s, whether they are male or female,” Lamb says. “They can expect significant nursing costs in the last few years. You don’t want to end up cap in hand or a bag person when you’re 90.”

Planning for being single in retirement is best begun early in the working years, with maximum RRSP contributions. A savings plan with monthly contributions is helpful.

Linda Cartier, CFP, RFP and president of Financial Decisions Inc. in Sudbury, Ont., says that clients can also invest in the new tax-free savings account, which comes into effect in the new year, to take advantage of tax-free growth as well as penalty-free withdrawal. If clients cannot afford both TFSA and RRSP contributions, any tax refund created by RRSP contributions could be invested in the TFSA, she says.

The TFSA can also be used to supplement income from other sources in retirement, or to draw upon in a medical or financial emergency. Unlike income from pensions, RRIFs or other sources, withdrawals from a TFSA do not affect the client’s entitlement to any federal income-tested benefits, such as old-age security, guaranteed income supplement benefits, age credits or medical credits.

“It’s important to do the retirement income analysis when clients are in their 40s and 50s so adjustments can be made, not when they’re in their 70s and the options are limited,” Ablett says. “It’s a lot different being single at 40, when you’re making good money, than being frail and elderly with a limited social network and wondering how to pay the rent.”

It’s also crucial for singles to protect their income during their working years with disability insurance. Even if they are part of a group plan at work, disability benefits should be examined closely; if they are the least bit skimpy in providing a long-term and adequate income, they should be supplemented with a private plan.

“You don’t want a single person who is disabled to be forced to dip into RRSP funds,” Ablett says, “creating a tax liability and eroding future retirement income.”

It’s advisable to have liquid assets available — in the amount of three to six months’ worth of income — to survive an unexpected life event such as job loss or disability. Without a second income to create a safety net, self-sufficiency becomes essential, says Janet Freedman, RFP, fee-only financial planner and president of Finance Matters Ltd. in Toronto.

Freedman, who is divorced and single, was hit by an unexpected life event when she fell and broke her neck. She wrote about it in a book entitled Hit by An Iceberg: Coping with disability in mid-career. She also suggests long-term care insurance, to ensure that the costs of health care can be met in the client’s declining years.

Some advisors also recommend critical illness insurance, which provides a lump-sum benefit in the event of specific health crises, such as cancer, stroke or heart attack.

“Forget life insurance unless you have dependent children,” Freedman says. “Disability insurance is far more critical if you’re on your own. When the working years are over and the need for DI phases out, single people should look at switching to LTC insurance. If they are then hit with a disease such as cancer or simply become old and infirm, they don’t have to worry about paying someone to look after them or the costs of a care facility.”

The premiums for LTC insurance are expensive, particularly for clients who already have health problems, and some advisors suggest that clients “self-fund.” Davis suggests that those who don’t wish to purchase LTC insurance — or who don’t qualify due to existing health issues — should add another 20% to the income they are estimating they will need to pay basic costs in retirement and save accordingly. LTC insurance can be purchased when the client is as young as 40 years old, she says, and the premiums are much less expensive.

“Most of us plan to be healthy until the day we die, but that doesn’t usually happen,” Davis adds. “With no one to share expenses, you need the money to look after yourself or to bring in someone to help when you can’t move about. If you can’t drive, you’ll be spending money on cabs; if you become disabled, you may have to adapt your home or find assisted-living arrangements. If you have a pet at home and need to spend time in the hospital, you may have to find boarding facilities for them. The costs of living alone are insidious.”

To amass the savings many singles will need for retirement, single clients will have to find creative ways to reduce their costs both before and after retirement. For some, that may mean downsizing to a smaller and less expensive dwelling, or taking in a boarder or roommate in a larger home. A bit more “brown bagging” and cooking at home and less restaurant dining can also make a difference. Many advisors recommend clients move to an easy-maintenance home such as an apartment, condominium or senior’s community while the client is still sound in body and mind because of the difficulties of moving and adjusting to a new location at an older age.

The good news for singles without children is that they do not have the expenses of feeding, clothing and educating children, which frees up funds for retirement savings — provided that those extra funds aren’t directed toward a lavish lifestyle.

“Many singles will have to let go of the notion of retiring at 65,” Freedman says. “They may choose to work longer and phase out of their jobs, or retire from their primary career and then find other ways to create an income. Many people have useful skills and may find ways to earn extra money in their senior years through tutoring, writing, consulting or giving seminars.” IE