5 Major Retirement Regrets (That Are NOT Inevitable & How to Avoid Them)
When are you going to retire?
How did you make that decision?
Many of us look at finances and health when we’re deciding when to retire.
Whether or not we realize it, we’re also considering our emotions and what we imagine for the future — we compare how we feel in our current circumstances to how we expect to feel in our anticipated retirement.
With that, we tend to overestimate our future emotions, thinking we’ll be a lot happier as retirees.
And that can motivate short-sighted decisions that lead to more regrets than satisfaction in retirement.
To avoid that and make better decisions about retiring, let’s look at some of the leading retiree regrets, what’s behind them, and what you can do now to set yourself up for a dream retirement later.
Retirement Regret #1: Retiring Too Early
Picture this: You’re at the top of your career, feeling burnt out, and dreaming of early retirement. You decide to call it quits at 57, thinking, "I’ll figure the rest out later." Fast forward five years, and your excitement for retirement has worn thin. Now, you’re worried about your shrinking savings, unexpected expenses, and a lack of structure in your daily life.
Retiring too early is like starting a long road trip without a full tank of gas or a map. You may feel ready to hit the road, but unforeseen detours—like market downturns or medical bills—can leave you stranded.
What You Can Do:
If early retirement is your goal, approach it strategically. For example, explore part-time consulting or freelance work in your current field. This lets you "test drive" retirement while maintaining a steady income. Additionally, think through your emotional readiness. What will you do with your time? How will you stay socially engaged? Many retirees find fulfillment in volunteer work or developing hobbies, but these require forethought to avoid a sense of purposelessness.
Retirement Regret #2: Sidelining Retirement Plans for Too Long
Imagine a snowball rolling down a hill. The sooner it starts, the bigger it becomes by the time it reaches the bottom. Retirement planning works the same way. Waiting too long to start building your "snowball" of savings means you’ll need to work much harder later to catch up.
For example, consider someone who begins saving $500 a month at age 25. By 65, with a 7% annual return, they’ll have nearly $1.2 million. Now imagine another person starts saving the same amount at 40. By 65, they’ll have less than $400,000—a difference of nearly $800,000, just because they waited.
What You Can Do:
Start today, no matter your age. If you’re in your 50s, look into catch-up contributions. For instance, you can contribute an extra $7,500 annually to your 401(k) once you’re 50, which can significantly boost your savings. If you’ve received a windfall—like a bonus or inheritance—consider funneling part of it into a tax-advantaged account. Even small steps, like setting up automatic contributions, can make a difference.
Retirement Regret #3: Underestimating the Length of Retirement
Think about this: Your retirement savings are a loaf of bread, and your retirement years are slices. If you miscalculate how many slices you’ll need, you might run out of bread long before the end of your meal. With people living longer than ever, it’s easy to underestimate just how many "slices" you’ll need.
Take Susan, for instance. She planned her retirement around the assumption she’d live to 80, based on her parents’ lifespans. But with advances in healthcare, she’s now in excellent health at 83 and is worried her savings won’t last another decade.
What You Can Do:
Plan for longevity. Tools like online longevity calculators can give you a better estimate of your life expectancy. Beyond that, consider strategies like a Qualified Longevity Annuity Contract (QLAC), which kicks in later in life to provide guaranteed income. Think of it as a safety net for your “bonus years.” Additionally, review your withdrawal rate regularly. A 4% withdrawal rule might work for some, but it can be overly simplistic for those with longer retirements.
Retirement Regret #4: Overlooking Inflation
Imagine going to your favorite coffee shop. Today, your latte costs $5. Twenty years from now, it might cost $10. That’s inflation in action—it slowly erodes your purchasing power over time. Many retirees overlook this, budgeting based on today’s costs and finding themselves in trouble as prices rise.
For example, healthcare is notorious for outpacing general inflation. A 65-year-old couple retiring today might spend over $315,000 on healthcare during retirement, and that number doesn’t even account for long-term care.
What You Can Do:
Build an inflation buffer into your retirement plan. Invest in assets that tend to grow faster than inflation, like equities or real estate. Think of stocks as the "engine" driving your financial train forward, while bonds or cash are the brakes keeping you steady. Revisit your budget annually to adjust for changing costs. For healthcare, look into supplemental insurance or Health Savings Accounts (HSAs) to offset rising medical expenses.
Retirement Regret #5: Not Having a Sound Investment Strategy
Imagine planting a garden and leaving it untended. Weeds take over, plants wilt, and before you know it, your garden is in worse shape than when you started. Your investments work the same way. Without a clear strategy and regular attention, they can underperform or fail to meet your needs.
Consider Tom, who left his 401(k) entirely in cash because he feared market volatility. Over 20 years, his savings barely grew, and inflation ate away at their value. Meanwhile, his colleague Sarah diversified her portfolio, balancing growth stocks with income-generating bonds. Even with market ups and downs, Sarah’s investments outpaced inflation and provided her with financial stability in retirement.
What You Can Do:
Take a proactive approach to your investments. Diversification isn’t just a buzzword—it’s a shield against risk. Work with a financial advisor to assess your risk tolerance and adjust your portfolio accordingly. If you’re nearing retirement, consider a "bucket strategy," where you allocate funds for immediate needs in conservative investments while letting long-term funds grow in higher-risk, higher-return assets.
A Better Path to a Regret-Free Retirement
Retirement is more than a finish line—it’s a marathon that requires preparation, strategy, and adaptability. By learning from these common regrets, you can sidestep pitfalls and create a retirement that’s both secure and fulfilling.
Start today by reviewing your current plan. Are you saving enough? Have you accounted for inflation and longevity? If not, don’t wait. Seek guidance from a financial professional who can help you tailor a plan to your unique goals and circumstances.
Sources
- https://www.ssa.gov/policy/docs/ssb/v71n4/v71n4p15.html
- https://ceal.sdsu.edu/2023/08/18/how-long-will-you-live-how-financial-and-longevity-literacy-can-predict-retirement-readiness/
- https://www.nasdaq.com/articles/whats-the-ideal-inflation-rate-and-how-does-the-fed-plan-to-get-us-there
This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets.
