Singles shouldn't delay financial planning

Personal Finance

February 13, 2000|By Eileen Ambrose

TOMORROW is Valentine's Day, and unfortunately for singles seeking mates, Cupid doesn't work on deadline.

That means the soul mate who someday will share a home, kids and retirement with you might appear next week, next year or next decade. Then again, Mr. or Ms. Right might not show up at all.

Unromantic as it may seem, singles should not ignore the prospect that they could remain a single-income household for longer than they want or even for life, experts say.

Indeed, the number of singles is rising. As of 1998, 46.5 million adults in the United States had never been married, and that number is expected to grow to at least 51 million by 2010, according to the U.S. Bureau of the Census.

"Although people are getting married later and starting families later, the truth of the matter is there are still singles who are holding off planning their financial lives on the thought that one day they will find a mate," said Beth Kobliner, author of "Get a Financial Life."

By delaying financial planning, singles waste precious time. Singles may lose years of salting away money in retirement accounts and the tax advantages that go along with that, Kobliner said.

Time is especially critical for women because they have greater savings needs. Women tend to earn less and live longer than men and are more likely to be caregivers of elderly parents.

Tiina Keder of McLean, Va., isn't taking any chances. The 31-year-old would like to get married but hasn't found the right person yet.

"I'm going along as if there is not going to be another income coming in. It's a right assumption to make. You can't as- sume you will get married," she said.

Keder, a manager at MCI WorldCom Inc., took control of her financial life early. She began investing with an inheritance from her father at 21 so she could pursue an MBA at Rutgers University in 1994 and come out debt-free.

She isn't relying on Social Security for her retirement but on her own savings and investing. She contributes the maximum allowed to her 401(k) and invests outside the plan, mostly in blue-chip stocks. In addition, she invests 10 percent to 20 percent of her portfolio more aggressively in options.

Keder lives in a condo she recently purchased in McLean and owns a townhouse in New Jersey that she rents to diversify her income. And with a 91-year-old grandmother, Keder realizes she, too, may need to provide an income for herself for many years. "I have a lot of investing ahead of me," she says.

One of the advantages of being single is it's easier to focus on laying down a financial foundation for yourself, Kobliner says.

"If you decide later you do want to start a relationship with someone else, you want to make sure you're financially secure," she said. "If that relationship doesn't work out, you'll still be set financially."

To begin laying down the foundation, experts suggest:

Sock away three to six months' worth of living expenses for emergencies, such as a job loss, because you don't have another's paycheck to fall back on, said Barry Glassman, a financial planner with Cassaday & Co. in McLean. Rather than tie this money up in the stock market, put it in a money market account that provides easy access and earns a higher interest rate than checking or savings accounts, he said.

Protect your income with disability insurance, which typically pays up to 65 percent or 70 percent of your salary until age 65 if you're injured and unable to work for an extended period, said Scott Kahan, president of Financial Asset Management Corp. in New York.

Large employers often offer disability insurance to workers. If your employer doesn't or the coverage is minimal, consider buying a policy or additional coverage on your own, Kahan said.

Don't buy life insurance if you don't need it. Life insurance basically provides income for those dependent on your paycheck if you die. "Many times single people don't need life insurance if they don't have anyone who is dependent on their income," Kahan said.

Besides, singles often have enough life insurance through work to cover funeral and medical expenses upon death, he said.

Invest in your employer's 401(k) plan, if available, Kobliner said. Contribute at least enough to receive your employer's full match, she said.

If you're self-employed, consider setting up your own retirement account through a Keogh, Simplified Employee Pension or a SIMPLE Plan, Kobliner said.

Once you're invested in a 401(k), consider setting up a Roth IRA, Kobliner suggested. The big advantage is the money can grow tax-free provided you hold the account for at least five years and, in general, you are 59 1/2 or older when withdrawals are made.

Singles with adjusted gross income under $95,000 can contribute up to $2,000 a year. Contributions are phased out for those with incomes between $95,000 and $110,000.

"If you do those two things (the 401(k) and Roth IRA), you're in good shape and you certainly are a good catch," Kobliner said.

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