We all have regrets — including financial regrets. As you get older, there’s a good chance that you might feel as though life could have been better if you’d just done things a little differently.
The National Bureau of Economic Research (NBER) recently surveyed more than 1,700 Americans age 50 and older and determined their top financial regrets. If you’re not 50 yet, pay attention to these regrets so you can hopefully avoid them later.
5. Claiming Social Security too soon
Survey participants age 50 and older who cited this regret: 23%
You can claim your Social Security benefits starting at age 62, and many seniors do so. However, if you don’t wait until full retirement age to claim your benefits, the monthly benefit you receive will be reduced.
If you wait until your full retirement age, which is determined by your birth year, you will likely see a larger amount. For example, if you were born after 1960, your full retirement age is 67. If you begin taking your retirement benefits before then, you could potentially see a 30% reduction in your benefit.
Waiting even longer could have more positive benefits. If you put off receiving benefits until age 70, you can receive an extra 8% per year for each year beyond your full retirement age. For many retirees, waiting can be worth it.
4. Not buying lifetime income (annuity) benefits
Survey participants age 50 and older who cited this regret: 33%
With the right type of annuity, you could potentially set yourself up with a lifetime income. An annuity is an insurance contract that provides a set amount of money each month for your use. You can purchase an annuity with a portion of your retirement portfolio and guarantee yourself just enough each month to cover your basic living expenses.
According to the NBER paper, informing participants about retirement risks and their income options increased their regret by 2.4 times regarding purchasing lifetime income. While an annuity isn’t for everyone, and you might not want to use all of your retirement money to purchase an annuity, for some seniors learning that they could have had a source of guaranteed retirement income prompted regret.
3. Not working longer
Survey participants age 50 and older who cited this regret: 37%
One major source of regret for Americans older than 50 is that they didn’t work longer. Working longer usually means a chance to earn more money. By working longer, you can put off taking Social Security benefits, building up your monthly benefit amount. Plus, you also have the chance to invest more — including taking advantage of making catch-up contributions to tax-advantaged accounts.
On top of that, Harvard Health points out that working longer can provide other benefits, like mental stimulation and social engagement. Those who stop working sooner might regret not having those interactions to shore up their mental and emotional health as well as help them maintain their financial health.
2. Not buying long-term care insurance
Survey participants age 50 and older who cited this regret: 40%
According to the U.S. government, someone turning age 65 now has a 70% chance of needing long-term care in their remaining years. The cost of long-term care can be expensive, and Medicare doesn’t cover non-medical long-term care.
If you end up in a long-term care facility, chances are that you’ll need to pay out of your own pocket if you don’t have long-term care insurance. And, like most other types of insurance, the cost of long-term care insurance goes up the older you get.
For those who haven’t reached age 50 yet, it’s a good idea to consider your retirement plan and consider when the right age might be to purchase a long-term care insurance policy.
1. Not having saved more
Survey participants age 50 and older who cited this regret: 57%
Finally, the No. 1 regret the surveyed seniors have is not saving more. According to a recent Vanguard report, the average amount saved by those aged 55 to 64 is $256,200. That’s a far cry from the $1 million that some experts suggest you have in your nest egg when you retire.
With inflation hitting pocketbooks around the country, including for seniors, it’s no surprise that many of them wish they had a bit more in their portfolios to draw on.