Research shows most American seniors regret at least one aspect of their retirement planning.
Saving for retirement is all about preparing for the future. But once they reach retirement age, many Americans find themselves regretting the past.
Research shows a majority of older Americans wish they’d prepared better for their golden years. According to a paper by researchers at the Hebrew University of Jerusalem and the University of Pennsylvania published in the National Bureau of Economic Research, almost six in 10 Americans aged 50 and older wish they’d saved more for retirement. Other regrets are more specific: Respondents wish they’d prepared better for health expenses, filed for Social Security later or stayed in the workforce longer.
The good news is there are ways to avoid these regrettable decisions before it’s too late — or even afterward, to mitigate their consequences. Advisors can help. The key, experts say, is to have the client envision what their ideal retirement looks like — and doesn’t look like — in as much detail as possible.
“Don’t have the goal be simply to not have any regrets, but think through what regrets you don’t want to have,” said Jacquette Timmons, a financial behaviorist and the CEO of Sterling Investment Management. “The more specific you are about the regret you want to avoid, the more intentional you can be about what you do or don’t do today.”
Here’s a look at America’s top retirement regrets and how advisors can help clients steer clear of them.
The most common regret of all is undersaving. According to the study published by the NBER, 57% of Americans regret not having stashed away more for their post-work years — either because they started too late or just saved too little.
“Everybody wishes they had started sooner or contributed more,” Timmons said.
When a client still has many years left before retirement, the solution is obvious: Save more. Nicole Cope, senior director of Ally Invest Advisors, said she encourages younger clients to scale back on dining out, taking vacations and “keeping up with the Joneses.” But even for older clients, minor tweaks can result in big savings — like spending less on family gifts or waiting longer to buy a new car.
It’s after retirement, she said, when the conversation gets harder. Two or three years after leaving their jobs, some clients realize they can’t afford the lifestyle they’d been looking forward to. At that point, Cope said, the best thing an advisor can do is help readjust the client’s expectations — while staying as positive as possible.
“The first thing is, you don’t shame anybody. It should be a judgment-free zone,” Cope said. “You can’t go back in time. You can only plan for the future.”
Another major regret has to do with healthcare, which is extraordinarily expensive in the United States. According to the Kaiser Family Foundation, U.S. spending on healthcare per capita is more than twice that of the average wealthy country. One regret Cope often hears from her clients, she said, is that they neglected to save specifically for these costs.
“They think of their living expenses, including healthcare, as one lump sum,” she said. “And we all know that healthcare inflates at a much higher rate than basic living expenses.”
When clients still have years left to save, Cope said, advisors can help by pushing them to plan in as much detail as possible — “to break those goals up and get very granular.”
But later in life, many clients regret not planning for long-term care, such as nursing homes, home care and assisted living. According to the NBER study, 40% of respondents regretted not buying long-term care insurance, which gets more expensive the longer one waits to buy it.
Timmons said she’s heard this regret from her clients. But instead of despairing, she got creative.
“If it’s too expensive for you to do it now, can you create your own version?” Timmons recalled asking. “So maybe you can’t do that through an insurance company… but can you perhaps set up an investment account that’s purely for long-term care?”
Procrastination is normally a bad thing, but when it comes to filing for Social Security, later is usually better. Those born in 1961, for example, can start collecting at age 62, but they’ll only receive 70% of the benefit. To get 100%, they need to file at 67 — and if they can wait even longer, they’ll get even more money in the form of delayed retirement credits.
“The longer you can wait, the better, because the amount will be more,” Timmons said.
Unfortunately, some seniors don’t understand this until it’s too late. Cope said clients sometimes come to her asking for ways to maximize their Social Security, long after they filed at the earliest possible age.
“Clients always want to understand the loopholes,” she said. “Like, ‘Oh boy! I took this at 62, now I’m at full retirement age, how do I get the full benefit?’ That’s a misunderstanding that could easily be rectified by speaking with an advisor 10 years before you retire.”
This mistake fills many retirees with regret — the authors of the NBER study found that 23% wished they’d filed for Social Security later. To avoid this, Cope said, investors should discuss their plan for the program with an advisor — and unlike filing, they should do this as early as possible.
“That, to me, is the retirement red zone — 10 years before you retire, you should have a plan in place for retirement,” she said. “Part of that plan should be Social Security optimization.”
Sometimes retirement itself is the regret. More than a third of the seniors who spoke to the NBER study’s authors — 37% — felt they left the workforce too early. The financial advantages of retiring later are obvious: more earnings, more time to save and the retiree can claim Social Security later. But there are also other, less tangible benefits.
“Personally, I do think people should work a little bit longer,” Timmons said. “Not just from a financial standpoint, but from an engagement standpoint, it’s beneficial.”
Both Timmons and Cope said working longer — when possible — is often good for the mental and social health of a client. But even in retirement, there are ways to keep one’s mind just as active.
“One thing that I always tell my clients is that you’re not retiring from something; you’re retiring to something,” Cope said. “So that becomes a very important conversation: finding out what their hobbies are, finding ways to fill their time.”
Cope recalled one client whose “entire identity” was wrapped up in his work, and she worried he would struggle in retirement. After many discussions with him, Cope realized the thing that gave this client joy was “building something from nothing.” So to fill the void left by his job, Cope helped him get involved in several local charities, where he put his creative skills to work.
“He ended up flourishing in retirement,” Cope said. And flourishing is a much healthier state of mind than regret.
Anil Vazirani is president of Secured Financial Solutions, independent insurance advisor investment advisor rep with a fiduciary obligation and in the financial services industry since 1994. A+ rating with the Better Business Bureau for over a decade and a half, members in good standing with the National Association of Insurance and Financial Advisors.
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