Updated: Oct 18, 2020
A recent survey found that more than half of retirees have retirement planning regrets. Unfortunately, many of these retirees had to cut back on their lifestyles to compensate for financial shortfalls. (1) Considering their most common regrets may help you avoid making the same mistakes.
Not Saving Enough
More than one-third of retirees wish they had saved more. (2) How much is enough? The amount you need depends on your other sources of income and your anticipated retirement lifestyle.
The longer you have before retirement, the more time you have to take advantage of long-term savings and compounding of potential returns. If you have a workplace retirement plan known as a 401(k) or 403(b), you might start by saving enough to receive any employer match and then increase your savings percentage by 1% each year until you reach 15% or more. You may need to target a higher percentage if you get a late start. Even if retirement is coming soon, you might be surprised by how much you can save if you focus on that goal.
Relying Too Much on Social Security
Social Security was never meant to meet all your retirement income needs. The average 2020 monthly benefit of $1,503 for a retired worker and $2,531 for a married couple would hardly provide a comfortable retirement. The 2020 maximum worker benefit of $3,011 at full retirement age would be better, but that would require maximum taxable Social Security earnings for at least 35 years. Waiting until age 70 to claim Social Security can increase your benefit by 8% for each year after reaching full retirement age. For example, if you were born in 1960 or later, your full retirement age will be 67 under current law, so working until age 70 would increase your benefit by 24%.(3)
According to the most recent trustees report, Social Security may be able to pay out only 77% of scheduled retirement benefits beginning in 2034, unless Congress takes action to strengthen the program. (4)
Considering the importance of Social Security, it seems unlikely that benefits will be reduced to that level.
Not Paying Off Debt
Carrying heavy debt can be a strain at any stage of life, but it can be especially difficult for retirees who are living on a fixed income. Paying off your home before you retire not only reduces your monthly expenses but also provides equity that could be tapped if necessary for future needs. Before paying off your mortgage, however, it might be wise to pay off credit cards and other high-interest loans.
The road to retirement can be challenging, but avoiding the mistakes made by those who have traveled before you may help you reach your destination with fewer regrets.
1–2) National Association of Plan Advisors, December 8, 2018 3–4) Social Security Administration, 2019
This information is not intended as tax, legal, investment, or retirement advice or recommendations, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek advice from an independent tax or legal professional. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Broadridge Advisor Solutions. © 2019 Broadridge Investor Communication Solutions, Inc.