When you picture your retirement, you probably envision days filled with fun and void of worry. Unfortunately, with more than half of Americans saying they might not have saved enough for retirement, too often our golden years are woefully low on gold.
To help you avoid the same fate, find out what retirement planning experts said retirees’ biggest regrets are — this way you can grow your wealth instead.
Investing Early and Often
Let’s face it, saving is tough when you’re in your twenties and thirties. Whether it’s fun with your friends or starting a family, saving is often last on the list of priorities. But that’s one of the regrets most often voiced by retirees, said Ryan Marshall, vice president and financial advisor at Wealth Enhancement Group: “Retirees often regret not investing early enough to take advantage of the compounding effect of growth in their tax-deferred retirement vehicles. This can come from not contributing enough to an IRA or company-sponsored retirement plan, or from inappropriate asset allocation decisions at a younger age.”
Understanding Taxes
No one likes taxes, especially when they unexpectedly take a chunk out of your retirement savings. So, planning for taxes, and how to mitigate them, should be high on your retirement checklist, said Devin Carroll, owner and lead advisor at Carroll Advisory Group, which specializes in retirement planning. Retirees often regret not understanding how taxes would affect the money they withdraw from retirement accounts, leading to bigger tax bills than expected. For instance, said Carroll, some retirees regret not putting more money into tax-free accounts like Roth 401(k)s and Roth IRAs. “These accounts can give them more options in retirement and help reduce the taxes they pay,” he said.
Avoiding Debt
Unfortunately, there’s nothing more American than debt. It’s how we buy homes, cars, college degrees and big TVs. But do yourself a favor and pay off as much of it as possible before retiring, said Michael Collins, CFA, founder and CEO at WinCap Financial. “Retirees who enter retirement with significant debt often regret not paying it off earlier, as debt payments can eat into their limited retirement income and add stress to their financial situation.”
Planning for Healthcare Expenses
Unfortunately, humans do not generally get healthier with age, and so healthcare costs tend to rise with age, said Dennis Shirshikov, adjunct professor of economics at the City University of New York and head of growth at Summer. “Many retirees regret not planning adequately for healthcare expenses, which can be a significant financial burden in retirement,” he said. “Consider purchasing long-term care insurance while you’re still young and healthy enough to qualify for lower premiums. Additionally, build a dedicated healthcare savings account, such as a Health Savings Account, if available, to cover future medical expenses.
And if you are already retired, Shirshikov suggested exploring supplemental insurance options like Medigap.
Paying Attention to Investment Fees
Fees can often be a hidden cost of investing — a cost which is easy to miss during your busy work and family life. But they can add up, Carroll said: “Fees can eat away at your savings. Retirees often regret not paying closer attention to the fees they paid for investments or financial advice, especially if they didn’t get enough value in return.”
Resisting Panic Selling
When it comes to many things in life, panic does not result in wise decisions. That goes double for retirement investing, said Carroll.
“Some retirees regret selling their investments when the market took a downturn because they were scared,” he said. “In hindsight, they see that staying invested would have been a smarter move.”
This is another reason for investing early. It makes it much easier to benefit from the long-term rise in the market and disregard dips along the way.
Delaying Social Security Benefits
Because Social Security payments increase the longer you wait to begin claiming them, part of a solid retirement plan is optimizing when to access your benefits.
“Many retirees wish they had waited longer to claim Social Security benefits,” Carroll said. “Claiming too early means getting smaller monthly checks for the rest of their lives.”
Controlling Spending
For many, retirement is an exciting period in life, when they get more time to do the things they’ve always wanted to. But that exuberance can result in spending beyond your means, explained Carroll.
“Some retirees spend too much in the first few years of retirement and later regret it when they have less money left to live on,” he said. He added that with life expectancies getting higher, it can result in serious monetary shortfalls late in life.
Prioritizing Your Needs
Children are expensive. And, often, being a good parent can be really expensive. You want the best for your kids, and it’s difficult not to prioritize their needs above your own. But, said Collins, many retirees he’s worked with express a regret that they didn’t do a better job of balance in this area. “Some retirees regret putting their children’s financial needs above their own retirement savings goals, ultimately leaving them with less money in retirement,” he said.
Avoiding 401(k) Loans
Whether it’s for a long-held goal or an unforeseen emergency, borrowing from a 401(k) or IRA account can seem like a wise or needed move at the time. But Collins said that retirees often need to express their regret at not trying harder to find another solution. “This may seem like an easy solution in times of financial need, but it can significantly impact the growth potential of these accounts and result in taxes and penalties upon withdrawal,” he said.
Final Thoughts
While retirement can be a time of excitement and liberation, it’s crucial to approach it with a solid financial foundation. By acknowledging the common regrets shared by retirees and taking steps to avoid them, you can increase your chances of enjoying a fulfilling and worry-free retirement.
