People always say that you should never have regrets. But, sorrow about choices in life seems to be part of the human condition. And, that seems to be true for many retirees. Recent research suggests that retirees can point to clear planning steps they could have taken that would have made a dramatic impact on being prepared for retirement.
Most Retirees Have Regrets
The vast majority of retirees have regrets. According to a survey conducted by Lincoln Financial Group, 62% of retirees would like to go back and plan differently for retirement. Bankrate puts the number of retirees regretting their financial choices at 74%!
Here are 10 ways today’s retirees say they would have planned differently, and how you can do better.
1. Save More
According to an annual study by the Transamerica Center for Retirement Studies, a full 78% of retirees wish they would have saved more. And, in a 2023 EBRI survey, retirees were asked to detail what pieces of financial advice they would give their younger self. The majority (70 percent) would advise changing savings habits by saving or investing more or earlier.
Retirees who were less confident about their financial situations say not saving was a major regret. Other savings regrets included not making the most of their 401(k) plan, not enrolling in the plan early enough, and not saving the maximum amount allowed by their plan.
Too many soon-to-be retirees put off retirement saving, says Kerry Soudan with TREW Financial & Benefits Group, Inc., which has offices in Chicago’s north shore suburbs and Las Vegas.
“A lot of people wait until the very end when they retire to start planning for retirement,” Soudan says.
Don’t make this mistake
Saving adequately is imperative to your future financial security. And, while it is easier if you start saving in your twenties, it is never too late. Use the NewRetirement Planner to determine how much you need to save to support the life you want and discover strategies for achieving your goals.
2. Document an Overall Plan
Whether you are far from, approaching or already in retirement, a written plan will help put your worries to rest. However, the Transamerica study found that only 18% of retirees have a written plan.
A written financial plan is likely to make you feel more confident about your finances (the Schwab Modern Wealth Survey showed that 63% of people with a written financial plan say they feel financially stable while only 28% of those with a plan feel the same level of comfort).
Planning takes time, but we make it easier
Creating a written plan takes time, but we strive to make it easier. The NewRetirement Planner is widely considered the online planning system. Forbes Magazine calls it “a new approach to retirement planning.” It is comprehensive, reliable and will help you discover opportunities for more wealth and security.
3. Plan More Carefully for the Fun You Want to Have in Retirement
Two-thirds of pre-retirees (68%) have not completed a budget of anticipated income and expenses, according to Fidelity Investments.
And, retirees can really underestimate how much retirement fun will cost, says Mike Niemczyk with MLN Retirement Planning, Inc., with offices in Grayslake, Ill. and McHenry County, Ill.
While many older Americans believe once they retire they’ll spend less as a result of having a lower income, financial experts say most retirees often spend more in at least the first few years of retirement.
“We find now that retirees are going out and spending more – dinner with friends, vacations,” Niemczyk says.
When helping clients budget for retirement, Soudan asks what they enjoy doing on the weekend. “They might say, ‘Golf and then go out to dinner,’” Soudan says. “I tell them, ‘When you retire, every day is Saturday. You have to think about what it’s going to take to live like it’s Saturday seven days a week.’”
“They didn’t plan ahead of time,” Niemczyk says of the challenge many clients face. “Many are running out of money before running out of life.”
Know what you want to do (and what it is going to cost)
Explore these resources to help you plan for fun in retirement:
4. Plan for Healthcare
Not being able to afford dinner out is a surmountable problem. A bigger issue is knowing if you can afford healthcare.
According to a report by AARP, “only about one-third (36%) have tried to estimate how much money they will need to save and have set money aside to cover these expenses in the future. Adults age 60-64 (40%) are just slightly more likely than those age 50-59 (35%) to have money set aside although these differences are not statistically significant.”
Two-thirds of respondents have thought about the costs at least somewhat but only 52% are confident they can afford the costs. In fact, less than two in ten (16%) are very confident that they can afford the costs of health care in retirement.
Before you retire, you should get a reasonable estimate of your healthcare costs and make sure you can afford them. Medicare does not cover everything and most people spend hundreds of thousands of dollars in out of pocket healthcare expenses in retirement — not even including funding a long term care need.
Don’t regret not planning for healthcare costs
The NewRetirement Retirement Planner can give you a personalized estimate for health care costs. It also helps you figure out how to plan for a possible long term care need.
5. Learn More About Personal Finance
The Transamerica research suggests that a full 66% of retirees wish they were and had been more knowledgeable about financial planning.
There are a lot of considerations from investing, budgeting, debt and taxes…
Good thing you are reading articles like this one!
6. Plan and Make Moves to Protect Money from Taxes
Taxes are a major consideration for retirees. Uncle Sam can take a big bite out of your nest egg. “Many older Americans with 401(k) plans don’t realize those monies are taxed when cashed out,” Soudan says.
“If you have half a million in your 401(k) you might be hit with a 30 to 40% tax,” he adds.
However, with proper planning, there is a lot you can do to protect your money from taxes. It just takes some forethought.
Understand your future tax burden
The NewRetirement Planner enables you to see your potential tax burden in all future years and get ideas for minimizing this expense. It takes forethought, but Roth conversions, taxable income shifts and other strategies can result in significant lifetime savings.
7. Anticipate the Unexpected
When you retire you need a financial plan that can be flexible enough to still fund your life when the unexpected happens. Because in life, the only thing you can expect is the unexpected.
Inflation has stressed many retired households. The research suggests that people hadn’t adequately considered the possibility of higher prices.
Be it inflation, natural disasters, fraud, family who needs help… there is almost no end to the list of things that could go wrong. Here is a list of 21 risks you face and how to plan for them.
8. Plan for Income
One way to protect yourself from life’s many unexpected risks is to make sure that you have reasonably guaranteed your retirement income sources. And, according to Lincoln Financial Group, over one third of retirees regret not having chosen investments that supplied a steady stream of income.
If saving is what you need to do when you are working. Figuring out how to turn savings into income is what you need to do for retirement. Having a steady income stream can give retirees peace of mind.
9. Have Less Debt
Debt, particularly credit card debt, increases your cost of living. The interest you pay increases the price of the goods or services and you have less money to spend and save.
The burden of debt can quickly erode your financial security, increase stress, and compromise your ability to enjoy a comfortable retirement, as your options for earning more money or extending your working years are significantly limited compared to when you are employed.
One third of retirees regret not paying off debts sooner.
10. Retire Earlier
Not all retirement regrets are related to poor planning. In fact, it is common to hear many people rue not retiring sooner.
It is common, particularly among those who have been financially responsible their whole lives, to have a difficult time making the switch to retirement. Leaving behind an income stream and the habits of saving can feel like a leap of faith. Retiring too late or years after you could have is a regret about how you have spent your time, which can feel more demoralizing than sorrows about money.
If this is you, consider 9 ways to overcome the terror of spending your nest egg.