Retirement is one of life’s greatest milestones and, as a result, many pre-retirees are worried about making the leap. Have they saved enough money? Will they be able to maintain their current standard of living? When should they claim Social Security?
Do you remember when you first heard the term “retirement?” You may have been too young to fully understand what it meant at the time, but by now it probably crosses your mind on a regular basis. We spend a good majority of our lives working towards this major milestone, planning, worrying, and dreaming. If you’re like more than half of Americans, you are most likely looking forward to your retirement years. (1) But what happens when you get to retirement and it’s not all it’s cracked up to be? Have you considered the idea that you could regret your decision to retire? Here are five common retirement regrets to keep in mind as you prepare for your golden years.
1. Not Understanding Social Security Benefits
Social Security benefits can be claimed anytime between ages 62 and 70. However, the timing of when you choose to collect these benefits will impact the amount of benefit you receive.
Full retirement age (FRA) changes based on the year you were born. For those born in 1937 and earlier, FRA is 65. After 1937, two months is added each year until FRA becomes 66 for those born between 1943 and 1954. Starting in 1955, two months a year is added again until the FRA becomes 67 for those born in 1960 or later.
If you wait until you reach full retirement age to begin collecting your Social Security benefits, you will receive your full Primary Insurance Amount, which is the full benefit that you have earned, but if you choose or are forced into an early retirement, you will receive a reduced benefit. Your basic benefit is reduced a fraction of a percent for each month you begin receiving benefits prior to full retirement age, up to 30%.
If you don’t have a strategy in place for claiming your benefits, you could be leaving thousands of dollars on the table. Once you start claiming Social Security, you can’t just change your mind. According to the Social Security website, you can withdraw your claim once within 12 months after applying, but you must repay all the benefits you received. (2)
2. Overspending In The First Years Of Retirement
Even if you have a solid nest egg saved to carry you through retirement, you still need to exercise financial discipline to ensure your money lasts. Digging too deep into your savings as soon as you retire could make or break your retirement dreams. Instead, create a realistic retirement budget, factoring in travel or hobbies, then work with your advisor to find a withdrawal rate that is intended to stretch your money for as long as possible.
3. Not Planning For Your Free Time
Free time is a major perk of retirement, but when you go from working full-time to not working at all it can be a shock to your system. Saying goodbye to your career, your colleagues, and your routines can cause anxiety and depression. But if you plan ahead to fill your time with activities that will fulfill you, you can avoid the negative emotions that can come with this life transition.
Do you want to know what activities result in a fulfilling retirement? A Bank of Montreal study on retirement planning reveals that retirees who stay busy and active, pursue independence, and volunteer their time were most satisfied with their life. (3) One study of retirees even found that those who volunteered 200 hours a year were less likely to develop high blood pressure. (4) The takeaway here is to be intentional with your time in retirement. Make a list of things you want to do, places you want to go, and people you want to spend time with, then strategically map out the details to make it happen. It’s easy to lose your identity when you close the door on your career, but filling your time and venturing out into new territory will help you build a new identity and give you something to look forward to.
4. Retiring Too Soon
Whether you were forced to retire earlier than planned or you made the decision on your own, retiring before you are ready can cause plenty of regret. In fact, 30% of retirees admitted they would gladly re-enter the workforce if a job became available. (5)
If you decided to retire prior to turning 65, you probably had to find pre-Medicare coverage, which is often quite a bit more expensive than an employer-sponsored plan. By waiting until you turn 65, you will qualify for Medicare and not be forced to obtain other health insurance to cover you during the transition.
Financially, the earlier you retire the fewer years you have to save and the longer you will have to live off of your money. If your finances are keeping you up at night or you are living at a lower quality of life than you are used to, you may regret retiring when you did.
Working even a few years longer can provide these valuable benefits:
More time to accumulate savings
More years to apply towards Social Security which could result in a larger benefit amount
Health insurance coverage through your employer
Purpose and identity
Stronger mental and physical health (6)
5. Not Relying On A Financial Professional
Studies show that people who work with an advisor are more likely to feel less stressed, more confident in their savings, more knowledgeable about their retirement opportunities, and more conscious of their spending habits. (7) But unfortunately, 62% of Americans don’t work with a financial advisor of any kind. (8)
Even if you are an educated, savvy investor, getting a second opinion from a professional never hurts. An advisor may be able to see trouble spots in your finances or guide you to resources that will help you decide when and how to retire. Deciding when and how to retire is one of the most difficult decisions you will make in life, but you don’t have to make the hard choices alone. If you want to avoid facing these common regrets when you retire, reach out to us for a complimentary consultation by calling (239) 204-4333 or emailing email@example.com.
Scott R. Schatzle, CFP® is a financial advisor and the owner of Mutual Trust Advisory Group, an independent, fee-only financial planning firm that specializes in helping successful individuals, families, and retirees. Scott brings more than 13 years of industry experience to the table, along with specialized training in and knowledge of comprehensive financial planning. Working closely with each of his clients, he strives to assist people in making smart decisions around their money and help them build and maintain wealth over time. Based in Estero, Florida, he works with clients in Estero, Bonita Springs, Fort Myers, and Naples. To learn more about Scott and his firm’s services, call (239) 204-4333, email firstname.lastname@example.org, or connect with him on LinkedIn.
Mutual Trust Advisory Group is registered as an investment advisor with the state of Florida and only conducts business in states where it is properly registered or is excluded from registration requirements. Registration is not an endorsement of the firm by securities regulators and does not mean the advisor has achieved a specific level of skill or ability.
All investments and strategies have the potential for profit or loss. There are no assurances that a client’s portfolio will match or exceed any particular benchmark.
A financial advisor should be consulted before implementing any of the strategies presented.
This newsletter has been provided by Claire Akin of Indigo Marketing Agency for informational purposes and does not constitute an offer to sell or a solicitation of an offer to buy any security. All expressions of opinion reflect the opinions of Claire Akin of Indigo Marketing Agency and not necessarily those of Mutual Trust Advisory Group.