The Most Common Financial Regrets Retirees Have

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Looking back on years of financial decisions, retirees often wish they had done some things differently. From not saving enough to making risky investment choices, these reflections highlight the importance of making smart financial decisions long before retirement.

Here are the seven most common financial regrets of retirees.

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1. Not Starting To Save for Retirement Early Enough

While financial experts often advise starting retirement as early as in your 20s to capitalize on compound interest, many Americans find themselves behind on their retirement planning. According to a Bankrate survey, a common regret among retirees is not beginning their savings journey early enough, with 21% wishing they had started sooner. Additionally, 22% of working Americans admit they haven’t contributed to their retirement savings in the past year. 

“The most common regret I hear is people thinking they haven’t saved enough and that they wish they had started saving earlier,” Julia Pham, a Certified Financial Planner at Halbert Hargrove, told CNBC. “Younger clients often make this mistake. You should save 10% to 15% of your pre-tax income. That seems like a lot, but it’s okay to not hit that 10% right away.”

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2. Choosing Investments That Didn’t Provide a Steady Income

Opting for investments that failed to yield a steady income is another financial misstep some retirees wish they could redo. It’s crucial to diversify your portfolio with assets that offer not just growth potential but also reliable income streams, especially as you transition into retirement. This strategy helps ensure a stable financial foundation during the years when regular employment income ceases.

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3. Not Paying Off Debts Early

Addressing debts sooner rather than later is a financial strategy often overlooked but deeply regretted by many upon reaching retirement. The urgency of paying off high-interest debts, such as credit card balances, cannot be overstated. 

According to data from the Federal Reserve, the average annual percentage rate (APR) for credit card accounts accruing interest was 16.17% as of the third quarter of 2021. You can save thousands in interest payments by focusing on eliminating these debts early. For example, paying off a $10,000 credit card balance at an 18% APR over 20 years would cost over $28,000 in interest alone. In contrast, tackling the same debt in five years reduces total interest to about $4,800.

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4. Not Planning for Inflation

Another common regret among retirees is underestimating inflation’s impact on their living costs. Many realize too late that their retirement savings don’t stretch as far as they anticipated because they didn’t account for how inflation increases expenses over time. 

In 2022, inflation forced a quarter of Americans to dial back on retirement savings, endangering their financial futures. An annual study by the Global Financial Literacy Excellence Center and the TIAA Institute found that 12% of those reducing savings ceased their retirement contributions entirely. Despite this setback, experts encourage retirees not to lose hope. 

“It is never too late to take action — adjustments during retirement can still make a big difference,” Lena Haas, head of wealth management advice and solutions at Edward Jones, told MarketWatch.

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5. Ignoring Catch-Up Contributions

Among the strategies often overlooked is the opportunity for catch-up contributions. Available to those 50 and older, these allow extra contributions to retirement accounts, offering a chance to “catch up” on savings. For example, the 2021 limit for a 401(k) was $19,500, but those eligible could add an additional $6,500, raising the cap to $25,000. Similarly, though the Roth IRA limit is $7,000 in 2024, those who are 50+ can add an addition $1,000.

However, a Vanguard study found that only 15% of eligible individuals take advantage of catch-up contributions, missing a crucial opportunity to enhance their retirement savings, lower their taxable income, and benefit from compounded growth. Even if the full catch-up amount seems out of reach, contributing any extra amount can significantly impact future financial stability.

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6. Not Working Longer

Many retirees express regret over retiring early, finding it difficult to re-enter the workforce at a similar level. About 51% of Americans retire between 61 and 65, though this varies by state due to factors like cost of living. Delaying retirement can enhance financial security, making re-entry into the workforce less necessary. Yet, unforeseen circumstances like health issues or layoffs may force early retirement, impacting savings strategies. 

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7. Not Diversifying Investments

Failing to diversify investments can increase risk and lead to missed opportunities in retirement portfolios. Many retirees find themselves wishing they had spread their investments across various asset classes to minimize risk and improve potential returns.

This article was produced and syndicated by MediaFeed.

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