Retirement is always one of the top concerns for Americans. This is no surprise, given that preparing for retirement is not something you can do over again. Over the years, I have had to work out common regrets for some of my clients to help get them back on track. Here are the most common regrets of retirees and what you can do about them.
- Little to no financial planning. Setting up an in-depth financial plan is important in order to know how much you need to save, where you should invest it and how much you should withdraw. You want the financial plan to take into account best-case scenarios, worst-case scenarios and the most likely scenario. You want to revisit your financial plan regularly, especially if there are major changes. A good financial plan will help you determine when to take Social Security, and it looks at investment planning, tax planning, insurance planning and estate planning.
- Not saving enough for retirement or spending too much during your working years. Look to save 10-15 percent of your income every year, especially if your employer offers a matching amount to invest in a work retirement plan – that’s free money! Save as much as you can during your peak earning years. Some instead leverage too much and unnecessarily get further into debt. If you get a salary increase, raise your standard of saving, not standard of living.
- Not planning for catastrophic emergencies. Life-changing events, such as a major medical issue, debilitating illnesses, family members who need help or accidents that require a large sum of money, can derail any financial plan. Make sure to have a liquid emergency safety net and make provisions for these emergencies.
- Planning too early for retirement. People are living longer these days, with many Americans spending more than 30 years in retirement. Longevity risk, the risk of outliving your money, is one of the top risks retirees will face. By retiring too early, you have less time to save and need more money for retirement income. Work longer or look to start a side career for additional income.
- Planning for too lavish a retirement. Many successful people may expect that they can spend as they did when they had a good income. However, if your retirement income can’t match your previous expenses, you will have to change your expectations. If you spend too much early in your retirement, you may not have time to make it up if you live for another 20 years.
- Not having enough insurance. The longer you wait, the higher your insurance premiums will be. Life and long-term care are two types of insurance you want to make sure you have enough of. Make sure to get the right type and right amount of insurance for your situation.
- Premature retirement account withdrawals. Unless it’s an absolute emergency, you should never take early withdrawals from your retirement accounts. There is a limit per year that you can contribute, and once you take early withdrawals, you cannot put that money back in.