A reader says, “For your Let’s Get Rich With Pattu Podcast, can you make an episode on ‘Things that Single and Childfree People’ should take care of for their retirement? Additionally, given that many things are not to be taken care of for these people (Like children’s education, Marriage, etc.), how much is it that they need to save/invest to enjoy their life because the financial planning industry is more biased towards married people and those who want to leave an inheritance for their children”.
Whether you are married with or without children or are single, the rules of retirement planning are the same. Except under some special circumstances. For example, a person wanting to retire early with kids in school and money to be invested for college education or marriage. Parents of a child with special needs may need to account for related expenses after retirement, etc.
The retirement corpus required and, therefore, the investment required depends primarily on our current lifestyle and how we wish to maintain it after retirement (subject to the yearly review of the retirement calculation with fresh/updated inputs).
At freefincal, we often use this thumb rule: Aim to invest each month at least 75% of current monthly expenses that you think will persist in retirement. The review mentioned above is essential because our expenses are variable. We also recommend increasing the investment by at least 10% each year.
Like all thumb rules, this is a crude estimate. We strongly recommend using a comprehensive retirement calculator for a more accurate estimate, considering current expenses and sources of income.
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For those with children, hitting this 75% mark will be tough. So they will have to start with what they can and hope to do better in future – that is almost always the case with an increase in salaries.
For those who are single or married without kids, we recommend aiming for 100% of expenses (that will persist in retirement) right away and increasing it a little bit if possible.
More importantly, such individuals must ask themselves some tough questions:
- Who will take care of me if I am hospitalised? What arrangements can I make in this regard? For example, a trusted friend or neighbour should know my health insurance details.
- Who will help me manage my retirement corpus if I cannot do so?
A living trust may act as insurance in such situations. See The role of a living trust in retirement planning. Also, see: How do you handle retirement assets in old age?