Top 5 Financial Regrets for Retirees

While many of us look forward to retirement, financial struggles and other unwelcome surprises can present challenges during this phase. Here are some common regrets retirees have, and strategies on how to help avoid them. 

Retirement is meant to be a period of relaxation and enjoyment. However, it’s important to plan carefully to help ensure that your retirement can be enjoyed when the time comes.

For many retirees, certain financial decisions made early on in life can lead to financial regrets later down the line. In this blog, we will dive into the top financial regrets of retirees and offer some advice on how to help avoid them. Here’s what you need to know.

Helping Avoid Financial Regrets

The University of Pennsylvania’s Wharton business school recently surveyed older Americans on their financial regrets. They gathered insights from 1,764 Americans aged 50 and above, averaging 72 years old. The research showed that this age group commonly has five noteworthy financial regrets. And those regrets increase significantly when people are encouraged to think more about how long they are likely to live. Let’s take a further look:

1. Not Saving Enough

One of the most significant regrets that retirees often express is not saving enough during their working years. Approximately 57% of retirees regret not saving more for retirement. Failing to build a nest egg can lead to financial stress, forcing retirees to compromise on their lifestyle or depend heavily on social security benefits. To help avoid this regret, it’s crucial to start saving as early as possible. These tips can help prevent you from sacrificing your retirement plan:

  1. Save Early: The power of compound interest allows your investments to grow over time. Start as early as possible to help your money start working for you.
  2. Retirement Accounts: Take full advantage of retirement accounts like 401(k)s and IRAs. These accounts offer tax advantages and potential employer-matching contributions, helping to enhance your ability to save effectively.
  3. Review and Adjust: Periodically review your retirement plan. As life circumstances change, your financial needs may evolve. Adjust your savings goals and strategies accordingly.

By taking these steps, you can help avoid not saving enough, build a strong foundation for your golden years, and confidently embrace the future. Working alongside a financial advisor can also help ensure you stay on track.

2. Not Buying Long-Term Care Insurance

As we age, the likelihood of needing long-term care increases. 40% regretted not buying Long Term Care (LTC) insurance. The costs of medical care and assisted living facilities can quickly deplete one’s savings. While long-term care insurance may not be required for everyone, factoring in future health-related expenses is important in retirement planning.

This insurance can serve as a protective shield for your savings and assets, helping to cover long-term care costs should the need arise. It can offer peace of mind, knowing you have a safety net to rely on without depleting your retirement funds. To help avoid this regret, the following tips can help:

  1. Assess Your Risk: Evaluate your family history and personal health factors that might influence the likelihood of needing long-term care. A family history of specific medical conditions could increase your risk.
  2. Compare Policies: Investigate various LTC insurance policies from different providers. Compare coverage, benefits, and costs to find a plan that aligns with your needs and budget.
  3. Financial Assessment: Take stock of your financial situation. Determine how much you can comfortably afford for insurance premiums and weigh it against the potential future costs of long-term care.

While long-term care insurance might seem like an additional expense, it’s an investment that can safeguard your future health and financial stability. By taking these steps, you can help avoid the regret of not having this crucial safety net in place during your retirement years.

3. Claiming Social Security Too Early

Around 23% of retirees regret claiming their Social Security benefits early. It might be tempting to grab those benefits as soon as you’re eligible, but be wary—this decision can cast a long shadow. Social Security is designed to cover about 40% of your pre-retirement income. You might be short-changing yourself on those monthly payments by not holding off on claiming benefits. To help avoid this remorse, take these steps:

First, familiarize yourself with your full retirement age, typically 67, according to Social Security rules. This is the age when you can claim your full benefit without any reduction due to early claiming. Next, take inventory of your health, family history, and overall life expectancy. If you have a family history of living well into your old age, waiting to claim benefits could be the best move.

4. Not Working Longer

37% of retirees express regret about not working longer. While retirement is seen as an opportunity to relax, continuing to work can provide financial benefits, a sense of purpose, and social engagement. Working part-time or pursuing a passion project can help stretch retirement savings further while helping to keep retirees mentally and emotionally fulfilled:

  1. Plan Ahead: Consider your retirement as a gradual transition. If you are still in the workforce, discuss the possibility of phased retirement with your employer, which allows you to reduce your hours and responsibilities gradually.
  2. Explore New Opportunities: Look for part-time roles or freelance work in your field. Alternatively, consider pursuing a new interest or hobby that could also help generate income.
  3. Stay Informed: Continuously evaluate your financial situation and retirement goals. If working longer aligns with your plans, make informed decisions accordingly.

5. Not Investing Early Enough

33% of retirees regret not taking advantage of the power of early investments. Investing early can profoundly impact the trajectory of your retirement savings. In the same realm of not saving soon enough, the concept of compound interest again plays a pivotal role here. Compound interest refers to the phenomenon where not only the initial investment earns interest, but the accumulated interest also earns interest over time. This compounding effect can lead to exponential growth, helping to allow your money to work harder for you.

  1. Diversify Your Portfolio: Spread your investments across different asset classes to reduce risk. A well-diversified portfolio can help provide more stable returns over the long term.
  2. Embrace Long-Term Perspective: Understand that investing is a long-term endeavor. Market fluctuations are normal, but history shows that the market tends to recover and grow over time.
  3. Seek Professional Advice: If you’re unsure about investing, consider consulting a financial advisor who can help tailor an investment strategy to your goals and risk tolerance.

Working With a Fiduciary Advisor

Working with a Fiduciary can help provide numerous benefits in achieving your financial goals in retirement. A Fiduciary advisor is a financial advisor who has an obligation to make financial decisions and recommendations that are in their clients’ best interest. Your chosen advisor should help you create a personalized plan based on your unique circumstances, including income, expenses, and investment objectives. They can also provide guidance on navigating complex financial topics, such as Social Security benefits.

At Johnson Wealth and Income Management, our team of Fiduciaries can help you stay on track with your goals by monitoring your progress and adjusting your plan. Whether you’re seeking to help maximize your Social Security benefits, dip your toes into investing, or achieve other financial goals, our experienced advisors can offer invaluable knowledge and support to help you succeed as you transition to retirement.

Final Thoughts

Planning for retirement requires careful consideration of various factors to help ensure a comfortable and secure financial future. Avoiding these top five financial regrets could lead to a more financially sound and fulfilling retirement. 

Our commitment is to help you work towards achieving all your financial goals and to help provide you with a more “worry free” retirement. Take charge of your financial future today to help minimize the chances of regret tomorrow.

Contact us today to schedule your complimentary strategy session today.

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