Regrets. Everybody has a few. But you certainly don’t want to reach the end of your working life to find you’re not where you want to be.
A recent survey by Global Atlantic Financial Group, which sells annuities, asked more than 4,000 Americans, pre-retirees and retirees, about their retirement savings. Of those surveyed, 55% said they had regrets. The top three were that they:
- Did not save enough.
- Relied too much on Social Security.
- Did not pay down debt before retiring.
It’s possible to avoid some of this remorse by taking steps now, says Maura Cassidy, vice president of Retirement Product at Fidelity.
“There are tools available that can help you plan ahead,” Cassidy tells Money Talks News. “Work on a plan now, and you’ll have fewer regrets later.”
Here’s how you can avoid those big retirement regrets.
1. Not enough savings
Fidelity’s recent Retirement Mindset survey found 62% of respondents were confident about their current financial health, Cassidy notes.
But when people looked ahead to their retirement finances, that changed.
Part of the issue is planning. Only 18% of the Fidelity respondents had a financial plan for retirement. Without planning, it’s hard to know if you have enough saved.
Find out how much you’ll be spending in retirement, Cassidy says. “Sit down and think through your expenses, and amp up your savings.”
The most common financial surprises for retirees, Global Atlantic’s survey found, are inflation and unexpected medical costs.
Consider establishing a health savings account, if you qualify. It can be a valuable retirement planning tool.
Picture your retirement lifestyle and think over how you’ll fund it, says Brandon Renfro, a fee-only retirement adviser with a Retirement Income Certified Professional credential.
“Without knowing what you’ll spend money on, simply saving more is like working toward an unknown goal,” says Renfro, who also is an assistant professor of finance at East Texas Baptist University in Marshall, Texas. “Plan your savings amount around a definable goal.”
2. Relying too much on Social Security
Rather than viewing Social Security as your main source of income in retirement, Cassidy suggests looking at it as one of several legs of a stool.
“There’s a lot of misunderstanding about what Social Security can do and what you’ll get,” she says. “It’s supplemental, and not designed to be replacement income.”
It’s not meant to provide all the necessities of life. Also, no one knows how Social Security benefits will change or whether the entire system will face an overhaul. Cassidy says your planning should include other resources, including:
- Tax-advantaged retirement plans
- Taxable investment accounts
- Personal savings
- A health savings account
- Income from businesses or properties
You may not be able to develop all of these, but you can increase your retirement income by working now to diversify your future income.
Consult with a retirement planning specialist to assess your resources and make a withdrawal plan. Coordinate that with your plan for taking Social Security benefits.
“Relatively little attention is paid to how retirees will withdraw from their savings,” Renfro tells Money Talks News. “A good withdrawal plan can add years to your retirement and provide emotional comfort.” And you won’t have to depend exclusively on Social Security.
3. Not paying off debt before you retire
For retirees on fixed incomes, debt makes it hard to truly enjoy retirement.
Therefore, Renfro advises you to retire any debt you have before you stop working. Do this by systematically focusing on one debt at a time, while making minimum payments on other debts. Get started by targeting the debt with the highest interest, or perhaps the one with the smallest balance.
The important thing is to be debt-free in retirement so your financial resources can go toward helping you enjoy life.
Cassidy, however, warns against focusing too much on paying down debt. Don’t neglect your retirement savings, she cautions.
“Compounding really works miracles (with retirement savings), and you can still save while paying down debt.”
Cassidy’s advice: Put 15% of income toward retirement, making sure to get every cent of any company match you’re eligible for.
“You can do both, save and pay down debt, and even if you’re not putting 15% toward retirement, you can still get a good start,” she says.
For the most part, the best way to avoid retirement regret is planning. Start immediately, evaluating your situation and creating a retirement roadmap that helps you get from today to tomorrow.
“Taking a small action today helps,” says Cassidy.