Financial Regrets
A recent poll by Lincoln Financial saying that 60% of retirees wish they could get a “do-over” in retirement planning caught my attention. I was curious about what the poll said they would do differently and I started researching articles on the topic of financial regret. Many of the conclusions were overlapping and also consistent with what I hear in my office. Below are the most common financial regrets based on my research and experience, as well as some thoughts on how financial planning can play a role.
Not saving enough – This one is no surprise. We’ve all heard about the power of compound interest and how starting to invest early can make a huge difference in the long run. Since small sacrifices now can turn into large rewards later, it makes sense to save more if you are able to. In addition, maintaining savings for emergency funds or other goals also helps provide a solid financial foundation.
Taking on too much debt/spending above means – Debt, especially consumer debt like credit cards and personal loans is often a sign of living beyond your means. The reality is that it can be too easy to take on debt but very difficult to pay it off. Being cautious with debt obligations you choose to take on, even for worthwhile items such as college or a home should be done wisely.
Not buying long-term care insurance – I didn’t see this as being a common regret and I assume it applies largely to those who have reached the stage of needing care or having a loved one who does. Long-term care can be a smart purchase, however, as insurance costs rise the cost/benefit equation has changed from many years ago. That said, it is recommended you evaluate this purchase closely to determine if it makes sense to insure against this risk and how these costs would be covered if the event arises.
Not working longer/filing for Social Security too early – As with the regret above, this one is likely very dependent on individual circumstances. Given that Social Security makes up a very large portion of retirement income for many people, maximizing the amount received by working longer can make a huge difference in retirees’ overall retirement experience. If you don’t have enough saved or are on the cusp of having enough, working a little longer can make a huge difference. Life expectancy, health, financial resources, and many other factors can all play a role.
Not planning sooner/at all – One of the most common things I hear in my office is “we should have done this a long time ago”. That said, I see a very wide variety of individuals, from those who are significantly behind to those who have done okay on their own due to developing good financial habits such as living within their means, saving and investing, and making reasonable financial decisions. As the retirement timeline draws closer many questions tend to arise and it is important to evaluate where you stand and what you can do to increase your chances of achieving a successful retirement.
It is worth mentioning that while the information above relates to finances and retirement, when it comes to regrets people commonly state at the end of their life, they aren’t financial in nature but rather about how people spent the time that they had. Generally, people wish they would have spent more time with friends and family, had taken better care of themselves and others, pursued their passions, and worried less and taken more risks. This is important to note as I believe that financial decision-making requires balance. For instance, working at a job that pays you the most but you like the least isn’t likely to bring fulfillment, buying the largest house but feeling financially strapped can cause stress, and over-working to retire early only to miss out on your kids’ childhoods are decisions that many people will regret.
Finding the right balance of financial and personal priorities is unique for everyone, and not considering one or the other when making decisions can backfire. I strongly suggest that any financial plans you have take into account priorities that go beyond your finances. It is wise to incorporate input from others, most importantly your spouse if married, trusted friends, colleagues, and even financial planners as you do your best to plan for the future.
It is impossible to know what the future holds. It is also impossible to know exactly how you will feel in 5, 10, or 30 years from now. For those reasons, I recommend that you prepare for a variety of future outcomes and make the best decisions with the information that you do have today. Taking this type of approach provides flexibility and a higher likelihood that you will be well-prepared for whatever the future may bring and have fewer regrets when you get there.
If you would have questions related to your financial and retirement planning, feel free to email me at advisor@blakegallion.com
