If you are already retired or are approaching retirement, you may feel overwhelmed that you didn’t start saving earlier or set aside enough to last through your golden years. Those are the two most common concerns for retirees. However, there are other financial regrets that you can take steps today to avoid.
Taking Social Security Too Early Into Your Retirement
According to the Social Security Administration, about 1 out of 3 people apply for benefits at the earliest possible age. That age is 62. If you can be patient and wait to file for benefits, you will be able to collect a much higher monthly amount. That is because benefits grow by a guaranteed 5% to 8% each year that you delay your claim. According to the SSA, you can wait until age 70 to claim your monthly benefits. This could result in a payment that is 75% bigger than if you had claimed at age 62.
Delia Fernandez, a certified financial planner from Los Alamitos, California, says many retirees look back and wish they had waited to collect a larger payment.
“They look back and say, ‘I should have waited, I would have had so much more Social Security coming in right now.’”
Not Putting Enough Money In A Roth IRA
The money going to “pre-tax” makes retirement contributions to 401(k)s and IRA while you are working more appealing. Also, doing so reduces the amount of taxes you pay since the money is taken out before taxes. But eventually, you will be withdrawing the money and paying taxes on just like regular income.
Presidential nominee Joe Biden has already announced he will increase taxes should he win the November election. With this, the tax rates can go higher. It may make more sense to put money into a Roth IRA and let the money grow tax-free. With a Roth IRA, you are putting in “after-tax” money, so when the time comes to start withdrawing money in retirement, you can take out the money tax-free – instead of tax-deferred like with a 401(k) or traditional IRA.
Not Investing Enough In The Stock Market
Many retirement plans recommend starting with a 60/40 mix between stocks and bonds and then decreasing stock exposure and increasing bond exposure as you age. However, many retirees may find that advice is too conservative to grow their nest egg. While the stock market can gyrate wildly, there’s still no other way to consistently generate returns that can outpace inflation.
Elizabeth Muldowney, a financial adviser with Savant Capital Management in Rockford, Ill. says, “Conventional wisdom may indicate the stock market is ‘risky’ and therefore should be avoided if your goal is to keep your money safe. However, this comes at the expense of low returns and, in fact, you have not eliminated your risk by avoiding the stock market, but rather shifted your risk to the possibility of your money not keeping up with inflation.”
Not Having A Retirement Plan
A care-free retirement is something we all dream about. Setting a financial plan to reach retirement is a great first step. But without planning how you will spend down your nest egg in retirement, you leave the door open to anxiety and worries.
Matt Wilson, a certified financial planner from Overland Park, Kansas, had a couple with a tremendous amount of anxiety about their investments and whether their money would last.
“They did not have a spending plan, tax plan or investment strategy. They had been pulling money from the investments in a haphazard way because they did not know what they did not know,” said Wilson.
“The level of stress and anxiety was reduced significantly after our meetings because they now had a plan,” Wilson says.
You can better predict your financial stability in retirement, making it possible to alleviate unneeded stress and worry. This can be done with a plan in place. It outlines how much money you will withdraw from your retirement accounts each month to live on,
If you are looking to create a retirement plan to make sure your golden years are enjoyable and free from worries, consult with a financial planner or financial advisor to discuss your specific wants and needs.