More than half of over 65s live alone – here’s how to prepare for a solo retirement

Going through retirement solo is now the most common lifestyle for over 65s, according to official statistics.

A lone later life is far from all doom and gloom, but shouldering the costs on a single pension does require a bit more financial preparation in a world still largely built for couples – we look at how to get ahead of the singles game in your golden years.

More mature people live solo – around 51% of those living alone last year were aged 65 or over, the latest figures from the Office for National Statistics showed. This is up significantly from 45.5% in 2014.

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A larger proportion of women over 65 live alone (41%) than men (27%) but the figures for men are growing faster. Having no one to split the costs with can put extra pressure on already stretched pensions.

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: “The number of older people living alone continues to grow – they now account for more than half of all single person households. Women account for the bulk of this.

“There’s a number of reasons why – women live longer than men on average, so many women will outlive their husbands. There’s also the rise of the so-called silver splitters – those who choose to divorce or separate later in life.”

The cost of living alone in later life

Living alone can have enormous impacts on our finances – you have to cover all your costs yourself and this can eat away at our financial resilience.

Jordan Clark, a financial planner at Quilter, said: “We often hear about the ‘singles tax’, the additional costs people experience by being single. It is no different in retirement and perhaps even more pertinent given the stretched budgets many retirees have to live on.

“Single people often spend more on bills, housing and groceries, being unable to share the cost with another person. Indeed, this is further reflected in the size of pension pot people need in order to maintain a moderate or comfortable living standard in retirement,” he added.

In order to achieve the Pension and Lifetime Savings Association’s (PLSA) moderate living standard annual income, single people require a pension pot of £415,000, by Quilter’s calculations, allowing them to buy an annuity and in addition to the state pension.

For a couple, the combined pot size required is £418,000, meaning each individual only needs a pot of £209,000, almost half of what a single person would need for that standard.

For a comfortable standard of living, a single person needs a pension pot to be £296,000 larger than an individual that is part of a couple (£682,000 versus £386,000).

How to prepare financially for a solo retirement

There are a number of steps single older people can take to prepare financially for a solo retirement.

1. Even if you are happily married, don’t fall into the trap of relying on your partner’s pension at the expense of your own

Morrissey said: “It may be generous but if you were to split up then you could find yourself close to retirement with little in the way of pension and very little time to make up the gap. Building up your own pension will give you an important buffer as well as your own pot of money to manage rather than being reliant on someone else.”

2. Think about what you want your retirement lifestyle to be

“Once you’ve got an idea you can work out how much it costs. Use a pension calculator to see what you are on track for – it will either give you the confidence of knowing you are saving enough or the time to put a plan in place if you aren’t,” said Morrissey.

3. Budget budget budget

Life is more expensive for single people – there’s no-one to share bills with, your food bill will be higher and you could fall foul of things like the dreaded single supplement on holidays.

Morrissey said: “With this in mind it’s really important to have a good idea of what your outgoings are to make sure they are affordable. Revisit it regularly to make sure your expenses aren’t slowly creeping up.”

4. Ensure you aren’t paying over and above what you should be for things

For example, you can get a 25% council tax discount for living on your own – “if you are in a financial position to do so, you could put those sorts of discounts to good use by putting them into your pension”, said Clark.

Reviewing your budgets regularly and things like subscriptions will also ensure you are getting value for money throughout retirement and aren’t paying for things unnecessarily as your way of life changes, he added.

5. Stay in equities

Ultimately, the size of our pension pots all depends on the contributions we make and the return on investment. While you are still in your 40s, it is important to stay heavily invested in equities to ensure that your pot grows to its full potential.

Clark said: “Someone at 40, or even 45, will potentially have a time horizon of 20 years or more, so there is plenty of time to both add more to the pot and to ride out the ups and downs of the stock market over the long-term.”

In separate articles we look at the top funds to invest in now as well as investment funds for beginners.

6. Don’t be afraid to lean on family

While family may not be able to help financially, they could help in other ways that save you money, said Clark, “for example, sharing holiday costs, helping prepare meals or even providing some form of accommodation to help limit your costs”.