Financial news & notesAlan Moore / L’Observateur / May 4, 1999The image of carefree singles with no responsibilities and no need to plan for the future is just that – image, not reality.
Published 12:00 am Tuesday, May 4, 1999
The idea that financial planning is only necessary when one “settles down” to marry and have children is a concept that went the way of discos and leisure suits.
There are very good reasons why singles have even more reason to plan for their financial futures than their married counterparts. In case of illnessor loss of job, the single doesn’t have the spouse’s income to fall back on.
Also, singles generally have to pay higher income tax rates than their married counterparts.
But there is no standard cookie cutter plan for singles, whose financial circumstances vary as much as married persons. If you fall into any of thefollowing single categories, here are some things to think about.
The Not-yet Married. If you’re young and marriage is still far from yourmind, now is an ideal time to begin some serious thought about your financial future. Setting aside a percentage of your income for long-termneeds is important even if your idea of planning ahead is deciding what party to go to this weekend. Take advantage of your company’s tax-deferred 401(k) plan if offered or open an Individual Retirement Account.
Even if your contribution is modest, the benefits of compounding and tax deferral can help your nest egg accumulate over the long haul. Try to payoff any large debts, such as college or car loans, to establish a positive net worth.
The Never-have and Never-plan-to-be Married. While people in this groupmay think life insurance is unnecessary, disability insurance is important.
As you age, the chances of suffering a debilitating illness increases significantly, risking loss of income and major medical expenses. Also, asyou get closer to retirement your retirement assets, which by now may be substantial, need to be monitored more closely and possibly moved to more conservative investments. Finally, you should think about having awill drawn up and establishing an estate plan so your money goes where you want it to go after you die.
Divorced or Widowed. If you fall into this category, you have a strong needfor both disability insurance and life insurance, especially if you have dependent children. You also need to think about your children’s futurecollege costs and your retirement. Again, a will is essential, as is naminga guardian for your minor children. Also establishing a trust and estateplan is important.
Estate planning for singles can be complicated. While you will not be ableto take advantage of the unlimited estate tax marital deduction, you can make maximum use of the unified credit and charitable trusts. The unifiedcredit essentially allows estates of $650,000 (the 1999 maximum lifetime exemption amount) or less to avoid estate tax. Charitable trustsallow individuals to secure a current tax deduction, subject to limitations, for a charitable gift that will be made in the future.
Whether you are recently widowed, divorced or just young, single, and enjoying your freedom, planning is important to your financial future.
(Alan S. Moore is a Financial Advisor of Legg Mason Wood Walker Inc., adiversified financial services and securities brokerage firm that is a member of the New York Stock Exchange, Inc. and SIPC.)
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