Title: Avoid These 3 Common Regrets in Your Retirement Years to Savor Your Golden Age
The adage "live and learn" holds true in numerous aspects of life, and retirement planning is no exception. Sadly, neglecting to acknowledge mistakes until you've left the workforce can make rectifying them an uphill battle.
Emphasize prioritizing retirement savings now, and be open to advice from older generations who can share their own regrets and lessons learned. A recent survey from Clever unveiled three common retirement regrets that serve as valuable warnings for us all.
1. Inadequate Saving
Unsurprisingly, approximately one-third of retirees admit to this regret. While the concept of a million-dollar retirement fund may sound significant, it must stretch over decades or more—depending on your life expectancy and retirement age.
Inflation has a way of exaggerating expenses over time, making that nest egg worth less in the future. Overestimating required retirement funds can lead to unrealistic expectations, so remember to account for inflation when calculating your requirements.
One strategy, often suggested, is to estimate your annual out-of-pocket expenses excluding income sources such as Social Security or part-time employment, and multiply the result by 25. This should ensure your savings last approximating 30 years. Alternatively, utilize a retirement calculator for a more personalized estimate.
2. Delayed Savings Start
Starting retirement savings early in your career gravely impacts the amount you'll need to save later on. A $1 million retirement target with an 8% annual return would only require a $322 monthly contribution if you started saving at 25 and retired at 65, amounting to $154,560 in total savings. However, waiting a decade to start would require saving $736 monthly, totaling $264,960 over 30 years.
Saving early allows your investments to generate higher returns and accumulate additional earnings, which can ease up the pressure of contributing more substantial amounts later. Although finding spare funds for retirement saving can be challenging, even a few dollars monthly contribute towards a brighter retirement.
3. Premature Social Security Claiming
Becoming eligible for Social Security benefits at age 62 offers numerous paychecks, but don't expect it to be the most financially advantageous decision. The Social Security Administration reduces benefits by as much as 30% for every month claimed before your full retirement age (FRA), which ranges from 66 to 67 for current workers upon reaching 62.
Postponing Social Security benefits can be advantageous, as checks actually grow until reaching 70, granting an increase of up to 132% of the FRA-entitled benefit. The decision to claim Social Security depends on your unique circumstances and life expectancy. Short life expectancies and restricted savings alternatives may prompt retirees to apply early.
Generally, addressing these common retirement planning pitfalls strengthens your retirement readiness and adds peace of mind for the later years.
It's essential to learn from these retirement regrets and adopt proactive strategies, such as starting savings early and considering finance strategies that account for inflation. Despite the appealing notion of delaying retirement savings, starting in your 20s or 30s can considerably reduce the needed savings later in life.
In addition to prioritizing early retirement savings, it's crucial to be mindful of the impact of claiming Social Security benefits prematurely. Doing so may provide immediate income, but it could result in reduced benefits in the long run. It's essential to weigh the pros and cons carefully based on individual financial circumstances and life expectancy.
