Retirement Plans

If you are moving quickly to the end of your working life, be careful to avoid some of these retirement top regrets. Are you picturing your retirement? Without careful planning, those years might not live up to your plans, according to The Washington Post in “The top regrets of retirees.” Retirement expectations don’t always line up with reality. Global Atlantic conducted a study of retirees and found that many admitted to making mistakes in their retirement planning. The report was based on data from more than 4,200 retirees and pre-retirees in America. The company wanted to learn how expectations for retirement costs lined up with reality. The expectations often did not. The report said the risk of running out of money is real, noting that 39% of retirees said they had planning regrets. Here are the top reasons for regret: They found themselves relying too much on Social Security for income. They did not pay down debt before retiring. Many people today are retiring with a mortgage. It used to be common for people to pay off their mortgages before retiring, but it’s less common now. Failing to do so is a retirement top regret. Many retirees didn’t save enough. Most people didn’t start saving for retirement until they turned 31. Missing almost a decade in savings can make a massive difference over time. Let’s say an employee puts away $50 every time she gets a paycheck—twice a month—and puts the money into an account with a 6% annualized return. If she started saving at age 23, by retirement age, she’d have $227,150 in that account. If she waited to start saving until age 31, the account would be worth $128,578—$88,572 less. If she could save $100 per paycheck by retirement, she’d have $434,299 versus $257,156. The power of time and compounding makes a huge difference. Compounding is the process through which an asset’s earnings are reinvested to earn additional earnings over time. The more time your assets have to grow, the more compounded growth can occur. Age 31 seems relatively young to start thinking about retirement. However, by waiting that long, workers are missing out on almost a decade of savings, asset accumulation, and the associated potential of compound returns. The survey also revealed that women are more likely than men to have retirement planning regrets, with 62% of women having retirement regrets versus 47% of men. Reference: The Washington Post (Dec. 10, 2018) “The top regrets of retirees.”