Let’s talk about regrets – we all have some. Those things that you feel you could have, should have, or would have done differently given another chance. And as you settle into your retirement years, you may find that you’ve racked up more than your fair share, too – especially when it comes to finances.
A recent survey found that a notable 76% of Americans indicate they have some financial regrets1. And among those most likely to have these regrets are Baby Boomers. The first generation to be facing retirement relying heavily on their own financial resources as opposed to a pension, Boomers are feeling the financial stress. In fact, only 35% of retirees feel they are adequately prepared for retirement2.
While you can’t go back in time and give yourself a financial do-over, it’s never too late to turn over a new leaf and get your retirement finances in check. Often, the best place to start is by addressing some of the most common financial regrets – and learning what you can do about them.
- Prolonging Saving for Retirement
According to a 2019 survey by New York Life, the top financial regret of older adults was overwhelmingly failing to save and invest for retirement at a young age3. The earlier you start saving for retirement, the less you need to save and the more you can count on compounding interest to do some of the heavy lifting for you. Time is of the essence so starting early is key. However, as retirement planning in America has largely shifted over the past decade, with the days of defined benefit plans becoming increasingly obsolete, you may find yourself wishing you made larger contributions earlier in your career. Fortunately, it’s never too late to start. Even if you begin to invest now, your contributions will start compounding and growing – especially if you’re willing to cut your budget to put away a larger amount each month. And if you need to generate more income, you can also check out some fun ways to make money in retirement.
- Not Saving Adequate Funds
They say that retirement years are your golden years – and it’s only natural that you’ll want to maintain your current standard of living. But as retirement nears, many people find themselves coming to the realization that they may have underestimated just how much they’ll need. So what exactly should you have allocated for your retirement years?A good rule of thumb is to enter retirement with 10 times your ending salary available in a retirement savings plan. Another conventional rule of wisdom advises retirees to avoid spending more than 4% of their nest eggs annually. If you’re running the numbers and are worried you may fall short, there are measures you can take to make your money go further.And if your nest egg doesn’t support your income needs, tapping into your home’s equity with a reverse mortgage could provide another source of cash flow.
- Neglecting Your ‘Rainy Day’ Fund
A recent study found that 19% of Americans cited failure to save enough money for emergency expenses as their top financial regret4. And perhaps unsurprisingly – unexpected bills and expenses aren’t the exception – they happen far more often than you may think. Whether it be a large household project like a new roof, an appliance needing to be replaced, a large medical bill, or auto repair – research shows that a majority of Americans face unexpected expenses each year with the median costs in the ballpark of $2,0005. Do you have the money for these types of events on hand?Without having money set aside to cover emergencies and surprise expenses, you could be left forced to borrow. Get ahead of this now by earmarking a set amount every month to be kept in an off-limits ‘rainy day’ fund. While the recommended emergency fund should have enough funds to cover three to six months of living expenses, even a small fund of $1,000 or $2,000 is a great place to start. Should you hit a bump in the road, you’ll be glad it is there.And if you’re short on funds or could use another source of cash flow, tapping into your home equity may be a viable solution. With a reverse mortgage, you can establish a line of credit to make sure that you’re prepared for any unexpected or future expenses. This financial “safety net” can help give you peace of mind today, and financial protection for the future.
- Retiring with Too Much Debt
Borrowing money or charging expenses on your credit card may not seem like a big deal – you’ve done it plenty of times, especially back when you were working. You’d buy a new pair of shoes, grab a round of drinks with some co-workers, or take the family out for a nice dinner – without even giving it a second thought. Having this debt when you are still working and bringing in a regular source of income is one thing. However, it’s quite different paying off debt when you’re retired and living off your savings and Social Security.Yet, despite this sentiment – total debt is skyrocketing, especially amongst the senior population. According to the Federal Reserve Bank of New York, total debt for Americans over age 70 increased by 543% from 1999 to 2019, weighing in at $1.1 trillion. Similarly, total debt for Americans over age 60 saw debt increased by 471%, amounting to $2.14 trillion6. If you have debt, you’re not alone. And while paying off debts in retirement is not easy, it can be done.Start by identifying all your current debts and working to pay off those with the highest interest rates, such as credit cards and car loans. Once you’ve gotten these debts under control, determine how much you can put towards aggressively paying off your mortgage. By eliminating monthly mortgage payments, you can free up more cash flow, save money on interest payments, and enjoy the well-deserved peace of mind that comes with a comfortable retirement. You can also read more about eliminating your monthly mortgage payment with a reverse mortgage, here.
- Claiming Social Security Too Early
Perhaps one of the biggest decisions you’ll make in retirement is when to start receiving your Social Security benefits. While one school of thought is to start collecting as soon as you become eligible, it’s important to note the clear benefits to deferring Social Security as well.Many retirees claim Social Security too early, which leads to an overall decreased payout. And while you become eligible to begin taking benefits at age 62, the payout will be less than if you wait until you reach full retirement age. By waiting until your full retirement age, either 66 or 67, you’ll receive 100% of your benefits. What’s more, waiting past full retirement age results in a bonus of about 8% annually until you reach age 70.Learn more about deferring Social Security, as well as what a reverse mortgage means for your benefits, here.
- Underestimating the Cost of Healthcare
When it comes to the cost of healthcare, retirees are often left with sticker shock. While Medicare is a valuable tool, many don’t account for the associated out-of-pocket expenses. And if you weren’t planning for the out-of-pocket medical expenses, you could be left facing costs over retirement that add up to hundreds of thousands of dollars.While you may not be able to go back in time and build a dedicated healthcare fund, there are still come things you can do. Start by shopping around for your health insurance coverage. Medigap and Medicare Advantage plans can supplement your Medicare coverage for future care. While the premiums will be higher, it’s a smart way to protect yourself from unforeseen care expenses.It’s no secret that the best healthcare is preventative healthcare – so it’s worth investing in your health. Be sure to take advantage of the free services and screenings you’re entitled to under Medicare. Even the most minor of health issues can potentially become major ones when left untreated – not to mention major expenses. Learn more about funding your healthcare in retirement, here.
While some of the most important financial lessons are learned in hindsight, the good news is that even in your retirement years, you can still address your financial regrets. Whether you saved too little or waited too long to start putting money aside, identifying the errors you’ve made in handling your finances is the first step to correcting them.
From budgeting more, to allocating funds for specified uses, or even setting aside more for longer retirements – there are plenty of steps you can take now to focus on building a brighter financial future.
And if you could use another source of retirement income, tapping into your home equity with a reverse mortgage could be a viable option. Plus, with no monthly payments required7, a reverse mortgage can free up more cash to fund what matters most to you.
- Real estate taxes, homeowners insurance, and property maintenance required.