Top Retiree Investment Regrets
If there’s an American Dream for retirement, it probably includes telling your boss to lose your number, unplugging the alarm clock, and moving somewhere that’s 72 and sunny year-round. It’s a worthy goal, but it doesn’t just magically happen when you turn 65. When you look more closely, you’ll find that retirement could also mean learning to live with more time—and less money.
It doesn’t mean you’ll never live on the beach in retired bliss. But retirement does require planning, foresight, and a solid grasp on your finances that needs to start long before you decide to leave your career.
To help you try to retire without regret, we put together a list of the top financial planning tactics that retirees wish they had done better, sooner, or longer. This is straight from retirees who’ve been there, done that, and wished they had done something differently.
Regret #1: Not Saving Soon Enough
We’re starting here, because 59% of Americans ages 60 to 79 wish they had saved more for retirement. And now, instead of enjoying the full, kick-back freedom of life, some are still having to work part-time.
Others are moving back in with their grown children—a stark contrast to their dreams of traveling the world. The picture gets even bleaker knowing that 42% of boomers have no retirement savings.
The good news is that saving even a few bucks a month can help reduce many other retirement stressors, like unforeseen health issues. And it makes sense that more financial security equals less worry. But how much is enough? One way to calculate your needed retirement income is to start with your end goal and work backward.
How much you need to live on for a year can determine how much you’ll need to invest in the years prior, which is another great reason to start saving sooner rather than later. The longer you wait to start, the more you’ll need to save each month in order to meet your goal.
That sounds like a lot of math, but we’ve created a simple retirement calculator that lets you see how far you’ve come and how far you have to go.
Regret #2: Retiring Too Early
Nope, not a typo. Thanks to complicated Social Security rules , there’s a gap between expectations and reality when it comes to this government benefit and savings regrets. In a recent survey , 38% of those who said they had savings regret admitted their benefits were less than they expected. For those without regret, 26% were surprised by their benefit amount.
Social security is calculated based on your full retirement age , which is 67 for anyone born after 1960. At that time, you’re eligible for the full benefit, but you can cash out as early as age 62. There’s a big catch, though—if you don’t wait until age 67, you’ll only receive a portion of your full allotment. At age 62, it’s reduced by about 30%. Hanging in there until 67 can make you eligible for up to 8% more than your full amount.
The same goes for private retirement accounts like IRAs and 401(k)s. Each comes with an eligible age for use, and withdrawing prior to that birthday can incur up to 10% penalties. And just like Social Security, the longer you delay withdrawing, the more money you can build up as long as you keep contributing.
Regret #3: Being Too Scared to Privately Invest
Investing can be seen as scary, risky, or inaccessible—especially for older Gen Xers or Baby Boomers who grew up with the notion that financial planning is only for those who are already rich. And while they’ve warmed to the idea of 401(k)s and IRAs, some retirees say they regret staying in the “pension and Social Security” mindset.
Worries about the government taking care of you in your sunset years are well-founded. It’s estimated that the Social Security fund is running so low that Americans who retire after 2037 will only be able to claim about 76% of their scheduled benefit .
There’s good news here, too. Thanks to the growing popularity of automated investing apps that use algorithms to optimize your portfolio, or hybrid automated/human services like SoFi Invest, you have easy access to stocks, bonds, and mutual funds, plus complimentary access a human financial planner who can help guide you.
Playing the market aside, another aspect of investment regret is not starting and contributing to a 401(k) soon enough. Especially for employees just entering the career marketplace, cash flow now may seem more important than retirement later.
One good way to build your 401(k) is to contribute the amount your employer is willing to match your contributions. And in 2019, contribution limits are going up to $6,000 for IRAs and $19,000 for 401(k). Setting up automatic withdrawals for either of these accounts can be a pain-free way to save.
Regret #4: Overspending
As life goes on, the bills tend to grow—cars, tuition, weddings—it all adds up. And while it may be tempting, or sometimes necessary, to dip into your retirement fund to help pay for a large expense, consider the compound interest you could lose or the withdrawal penalties you might incur should you choose to go this route.
A well-planned (and well-kept) budget can go a long way to avoid overspending. It can be helpful to keep a good perspective on what truly makes you happy in life and spend wisely.
Some tips from retirees go even further—in the years leading up to retirement, start learning to live with less. Calculate a budget based on what your retirement income will be, and live only on that money. The benefits of this strategy are twofold, in that retirement downsizing won’t come as a shock, and all that extra money can be funneled into your retirement accounts.
Expanding Your Retirement Knowledge
Looking for even more tips for retirement? Check out the Retirement Resource Center full of calculators, articles, and tips to help make your Golden Years, well, golden.
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Advisory services and automated investing are offered through SoFi Wealth LLC an SEC-registered investment adviser. Brokerage products and services offered through SoFi Securities, LLC, member FINRA /SIPC .
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