If only we could have a do-over.
Many of us have a few things we’d love to go back and change — choices we made in school, our careers or life in general.
And then there’s retirement. A few things come up repeatedly when you ask retirees what they would do differently.
One of the biggest regrets, of course, is not saving enough, especially when they were young. The power of compound interest is critical in retirement — you would have so much more in that retirement account had you been serious about saving in your 20’s or 30’s and not waited until your 40’s or, for some, their 50s. (For example, $10,000 invested at 4 percent with compound interest becomes $14,802 in 10 years. That $10,000 turns into $48,010 over 40 years.)
“You have to give that money time to grow,” says Paul Saganey, president of Integrated Financial Partners in Waltham, Mass. “You can’t wake up at 57 or 58 and say, ‘I want a great life.’ ”
Some of the regrets may surprise you. Others are just common sense:
This one pops up all the time. And again, compound interest comes into play.
Fifty percent of working Americans don’t have access to a 401(k) at their jobs. But 20 percent of baby boomers who have access don’t participate, according to the Transamerica Center for Retirement Studies.
Additionally, Fidelity says of the 13 million 401(k) accounts that it manages, 22 percent have an outstanding loan. The average loan balance is $10,000. Fifty percent of those borrowers take out additional loans. Another huge drawback: Most reduce their contribution to repay the loan.
“People use their retirement as a piggy bank,” says Adam Nugent, CEO of Foresight Wealth Management, based in Salt Lake City. “They will pull money out, take loans and take premature distributions. That car they want to pay $40,000 for in cash, will cost them $50,000 or $55,000 when taxes are considered. People do not factor in the amount of tax.”
This is a big one. Whether it’s because they don’t have time or they just put it off because it’s too stressful to think about, many people have no idea when, where or how they will retire. That can turn out badly.
“Many people spend more time planning their one- or two-week vacation each year than planning for a 20- or 30-year retirement,” says Gretchen Cliburn, senior managing adviser at BKD Wealth Advisors in Springfield, Mo.
“To plan for a retirement, it takes time — 10, 20 and even 30 years, based on the lifestyle you want to have during retirement,” Saganey says. “The more elaborate, you have to give yourself more time to accumulate the assets.”
“Hope is not a strategy,” says Katherine Dean, managing director of Wells Fargo Private Bank in San Francisco. “Doing nothing is a strategy. It is not the best strategy.”
As difficult as it may be to plan for the unexpected, a catastrophic event or health emergency can derail any retirement, no matter how much you’ve planned and saved.
“The unimaginable happens, and you see long-term disability, premature death and loss of employment,” Cliburn says. “Even if you plan, these things can quickly derail retirement plans.”
That’s one reason financial planners recommend emergency savings, separate from your retirement account. Long-term care insurance may be an option for others. Adequate life insurance may also help.
Cliburn says people often buy life insurance only on the primary wage earner, not the lower wage earner or the stay-at-home parent. That is a mistake. “If that stay-at-home parent dies, and there are kids,” she says, “the other parent has to change jobs or reduce income to stay with kids or hire someone to help. That can significantly impact saving for retirement.”
When we talk about retirement, the focus, for obvious reasons, is financial. Have we saved enough? Most people have not. But we also need to think about what we will do when we stop working. That is a problem for many.
“In the real world, the happiest retirees are ones who have a schedule of activities the minute they retire,” says Wes Moss, an author, radio host and financial planner. “The key is to build your core pursuits list long before you stop working. What I see or hear is, ‘My husband and I have been so busy in the last five years working — we go to work, get home and with the commute, we have no other time. We don’t play golf. We don’t exercise. And we don’t go fishing.’ To have to figure it out when you’re retired, that’s a difficult thing to do. For those who hadn’t focused on ‘me’ time, its’s a real problem.”
While much of the retirement advice these days is for people to work longer and save more, some people get so wrapped up in their jobs and careers that they don’t even think about retirement. They look back and wish they had retired sooner.
“We had several times people retired and within weeks passed away,” Dean says. “You don’t want to work your entire life and not get to enjoy it and all the things you planned in your retirement. You’ve got to have the plan in place. If you are a workaholic, put that into perspective”
Nugent says he had a client, a nurse who had saved diligently for retirement. And even though she hated her job, she thought she couldn’t afford to retire. He checked the numbers with her.
“I said, ‘This is a no brainer: You can retire,’ ” he says. “She started to cry. She gave me a hug. Having someone empower her to make that decision was huge.”