Retiring without kids

October 3, 2008

Not having children may mean you don't have to worry about day-care costs, college tuition, or wedding bills, but it doesn't ensure a comfortable retirement.

Key Points

Planning and saving enough money to pay for services that grown children might otherwise provide is one key issue. Equally important is for you to find and empower the right people to take care of you if you become unable to care for yourself. Estate planning, too, will be markedly different than that of parents who choose to leave large, tax-sheltered inheritances to their kids.

PLUSES AND MINUSES OF NON-PARENTHOOD

While everyone's situation is different, Mignone estimates that childless individuals will need about 25 percent more cash in their nest eggs than those who anticipate help from their children. The extra money will go to finance the myriad services you may need help with, such as grocery shopping, paying bills, or taking care of the dog if you're in the hospital, says Diana DeCharles, a financial planner in Shreveport, Louisiana. "It can get pretty expensive to pay someone to accompany you on a daylong trip to the doctor," she points out.

Unlike parents concerned with heirs, "your priority should be to make sure you have enough money, with a buffer, to last as long as you do," Mignone says. With proper planning, you'll end up as what he calls a "RINK"-Retired, Independent, No Kids. Typical RINKs, whether single or married, have worked their whole lives, paid off their home mortgages, and amassed at least $500,000 of investable assets by the time they retire. The following are strategies you should adopt to achieve that financially secure position.

Invest aggressively Your current lifestyle should include both saving and spending. But you can't spend freely if you hope to be financially comfortable when you retire. Even though you won't cough up big bucks for weddings or college tuition, you'll still need to save early and invest consistently to build that larger nest egg.

Aim to sock away at least 25 percent of your after-tax income, Mignone says. Here you have the advantage over your peers with children, many of whom consider themselves lucky if they manage to save 10 to 15 percent before the kids are out of college.

Mignone advises an aggressive investment strategy: In your 40s, hold an 80 percent stock and 20 percent bond portfolio for high growth. These percentages will become more conservative with time, as they would with most portfolios. (While parents should be just as aggressive, they'll have much less discretionary income at that age.)