No one wants to live with regret, but many of us have made decisions that cause us to cringe when we look back on them, especially when it comes to money. But whether you wish you had worked harder in college or regret how much you spent on your newest phone, you can’t change the past. You can only take the lessons you have learned and move forward.
The same goes for retirement. Many people, 55% according to a Global Atlantic Financial Group study, (1) enter retirement and discover several things they wish they’d done differently. Thankfully, you can avoid problems in your own retirement by learning from the mistakes of the millions of people who have gone before you. Here are four common retirement regrets to keep in mind as you prepare for your golden years.
1. Retiring Too Early (Or Too Late)
Whether you are forced to retire earlier than planned or you decide on your own, retiring before you are ready can cause plenty of regret. In fact, 30% of retirees admitted they would gladly re-enter the workforce if a job became available. (2)
If you decided to retire before turning 65, you probably had to find pre-Medicare coverage, which is often quite a bit more expensive than an employer-sponsored plan. By waiting until you turn 65, you will qualify for Medicare and not be forced to obtain other health insurance to cover you during the transition.
Financially, the earlier you retire, the fewer years you have to save and the longer you will have to live off of your money. If your finances are keeping you up at night or you are living at a lower quality of life than you are used to, you may regret retiring when you did.
Working even a few years longer can provide these valuable benefits:
- More time to accumulate savings
- More years to apply toward Social Security, which could result in a larger benefit amount
- Health insurance coverage through your employer
- Purpose and identity
- Stronger mental and physical health (3)
On the other hand, another common regret is waiting too long to retire. If you have enough money saved and you and your financial advisor have planned for every aspect of your golden years, you should consider retiring as soon as possible. The younger you are when you retire, the more energy and health you’ll have to enjoy retirement. Many retirees regret spending their best retirement years grinding away at work. Sure, they had more money when they finally did retire, but they had less time to enjoy it. The point is this: your situation is unique. Be sure to take a good hard look at your financial situation to ensure your money will last, and don’t let your retirement fears hold you back.
2. Retiring With Unnecessary Debt
When you retire and are living on a fixed income, you want all your financial resources to go towards your expenses. Carrying debt into retirement can eat away at your precious savings and force you to be much tighter with your budget than you’d like to be.
Make a strategic plan to simultaneously eliminate your debt while still saving for retirement. Review all current debts you face and compare interest rates and balances. This can help you decide which to pay off first. Once you’ve eliminated credit card and auto debt, see how you can aggressively pay off your mortgage. Being mortgage-free could reduce your monthly expenses by up to a third and make a significant impact on how you spend your savings.
3. Underestimating Risk
You might think that if you just save as much as possible, you’ll be fine. But there are a handful of factors that could devastate your hard-earned nest egg, like inflation, what the markets are doing when you retire, how long you live, or unexpected healthcare expenses. You might not be able to plan for every contingency out there, but you can stress-test your finances to see how they will hold up to any or all of these risks, then map out a strategy for how to protect yourself and your money.
4. Not Prioritizing Your Roth IRA Contributions
Not saving enough is a common retirement regret, but it’s also essential to save in the right ways and with the right savings vehicles. On top of maximizing your Roth contributions, you should consider opportunities to convert your traditional IRA funds to a Roth IRA.
When it comes to IRAs, the common thought is that when you retire, you’ll be in a lower tax bracket so you might as well take the deduction now and pay the tax later. But what if your IRA or 401(k) savings ends up being responsible for moving you into higher tax brackets in retirement? If you pour all your savings into traditional tax-deferred savings accounts, you could end up with millions when you retire. For example, if your combined tax-deferred retirement savings is valued at $4.5 million, your annual required minimum distribution (RMD) at age 70½ will be $164,000. (4) This puts you in the third-highest tax bracket of 32%. (5) Research your options to convert some of your traditional retirement funds into a Roth IRA to have a more tax-efficient retirement.
Retire With No Regrets
No matter what your situation, it’s possible to enjoy your retirement without regretting the decisions you made. At Harbor Wealth Management, we understand that deciding when and how to retire is a difficult decision, but we want you to know that you don’t have to make the hard choices on your own. Our top priority is to help you achieve financial stability and give you the confidence to work toward financial independence. If you want to have a regret-free retirement, email email@example.com to schedule a meeting or phone call consultation.
About Jeremy Smith
With nearly two decades of experience in the financial services industry, Jeremy Smith serves as a dedicated and knowledgeable financial advisor and the founder of Harbor Wealth Management. He specializes in serving retirees, pre-retirees, small business owners, and widows, providing a comprehensive array of investment management and financial planning services. Jeremy aims to serve his clients as a financial guide who is here for their every need, helping families find lasting plans so they can focus on what matters most to them. To learn more about Jeremy, visit www.myharborwm.com or connect with him on LinkedIn. You can reach Jeremy directly at firstname.lastname@example.org or by calling his office at 985-605-7185.
Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC.
The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. You should discuss your specific situation with the appropriate professional.