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Financial Mistakes You May Regret When You're Old

By Donna Fuscaldo, AARP, May 2024

Act now to avoid common money missteps that could haunt you in your later retirement. Americans with retirement on the horizon are worried.

A recent AARP survey found that 20 percent of adults 50-plus have no money saved for retirement and 61 percent are concerned they will not have enough money to support themselves during their so-called golden years. Add unexpected injuries, illnesses, divorces and deaths to the mix and it’s easy to see why preretirees are losing sleep.

But you don’t have to stress. You can learn from the mistakes made by those who came before you and avoid the same pitfalls. “Over the past five years, I’ve heard the same sage wisdom: if only I knew then what I know now,” says Pam Krueger, founder and CEO of Wealthramp, an online service that matches investors with financial advisers. The top do-overs include the following six:

1.  Not saving enough

The rule of thumb is you’ll need 80 percent of your working income in retirement to maintain your lifestyle, but it’s not cut-and-dried. Many variables, such as working longer or an illness, can move the amount up or down. Regardless, not saving as much as possible is a big retirement regret for many. “Life events kept them from saving, and now those decisions made back in their 40s, 50s and even as early as 30s are really biting them,” says Kevin Chancellor, CEO of Black Lab Financial. “It’s making it hard for them to live a good quality life with the cost of things so much higher.”

Among retirement savers polled by AARP, just 36 percent expect to have enough money to be financially secure in retirement if they continue to save at their current rate. Many respondents are in the 50-plus category, underscoring the need to save early and often. 

How to prevent it:

Determine how much money you think you’ll need each month in retirement, making sure to include potential and unexpected injuries and illnesses. If you fear you’ll have a shortfall, there are ways to shore up more cash. You can increase your contributions to a company-sponsored retirement savings account, delay your retirement for a few more years, get a part-time job, sell your used goods and look for ways to reduce your spending. AARP’s retirement calculator can help you determine if you are saving enough.

2. Avoiding the stock market

The stock market can seem scary and volatile, but avoiding it can hurt your savings goals. Over the long haul, people with a diversified portfolio of stocks and bonds have historically saved more than those who keep it stashed in a bank account or under the mattress.  Even in bad times, having stock exposure has paid off.  Take the Great Recession of 2007 to 2009 for one example. Five years after the market tanked, investors who stayed the course had recouped their losses and then some. The same goes for the pandemic. Stocks rebounded after falling more than 30 percent. 

How to prevent it:

Being in the stock market doesn’t mean your entire nest egg should be invested in one company or industry. A diversified portfolio of low-cost funds that provide access to different stocks and bonds can protect you if one area of the market suffers.

3. Claiming Social Security benefits too early

When to claim Social Security benefits is a personal decision based on factors unique to you. But the longer you wait to collect Social Security benefits , the more money you’ll earn. If you begin collecting at age 70, your monthly check will be 24 percent more than if you start collecting at your full retirement age. Draw benefits at the earliest age of 62 and your earnings will diminish further. Despite that, many people choose the smaller payout for the immediate cash flow. They either need the money or figure they aren’t going to live forever. When the opposite happens, they realize they need more. “They took it too early, and now they can’t go back and change it,” says Chancellor. “That’s the thing about Social Security. That decision is final. You don’t get any do-overs.”

How to prevent it:

If you aren’t sure when to collect Social Security, the government can help you figure it out. The Social Security Administration operates a free online calculator that lets you see how much your benefits will be if you start collecting at 62 and beyond.  AARP’s Social Security Resource Center has answers to hundreds of questions regarding this important benefit. AARP’s Social Security calculator estimates your monthly benefit, based on your earnings history and age. You can also see what percentage of daily expenses your payments can cover and how you can increase your payment by waiting to collect.

4. Spoiling the kids and grandkids

Who hasn’t spoiled their kids or grandkids from time to time, but when you do too much, it can hurt your bottom line, leading many to regret those spending sprees.

“Another big regret of clients is paying children’s bills, gifting them money and helping their kids get back on their feet,” says Chancellor. “They regret spending so much money on their children to help them get ahead when they should be funding their own retirement.”

How to prevent it:

If you feel like you are always opening your wallet for your adult kids and saving less for retirement, rethink it. They can take out loans for college or a house, but you can’t borrow to pay for retirement. “Sometimes we need to let them fall,” says Chancellor. Before you help them, make sure you have a sufficient emergency fund and are contributing to your retirement. If you are already in retirement, ensure that your needs are met first before giving cash to children or grandchildren.

5. Getting bad advice

Recommendations and referrals carry weight when deciding how to invest, especially from family, friends or colleagues. But trusting the person doesn’t mean blindly following their advice. That can be risky and can lose you money, yet many people do it and come to regret it.  “They never took the time to consider the importance of who they were listening to,” says Krueger. “They had no idea if it was good advice.”

How to prevent it:

While that tip you get at the company picnic or dinner with friends sounds amazing, take the time to vet the opportunity. If it’s a stock, do research online to see if you agree with the assessment. If it’s a financial adviser, use resources like AARP’s free Interview an Advisor tool , which lets you check their credentials and track record and see how much they get paid.

6. Ignoring long-term care

The potential costs of long-term care are too steep to ignore — and Medicare doesn’t cover them. Just how steep? Adult day health care runs an average of $24,700 a year, and a private room in a nursing home averages $116,800 annually, according to insurance company Genworth. So the sooner you can start planning for long-term care, the more time you will have to weigh your options. Yet many people don’t think about their health and are caught off guard when something goes wrong.

How to prevent it:

Think about where you plan to retire, says Marguerita M. Cheng, a certified financial planner and the chief executive officer of the financial planning firm Blue Ocean Global Wealth, based in Gaithersburg, Maryland. ​​Do you expect to stay near family who would help with your care as you age, possibly allowing you to remain at home longer? Or do you envision retiring far away from loved ones? Next, consider what kind of long-term care you’d prefer. For example, would you want to have skilled in-home care, or does an assisted living facility make more sense? Then you can be realistic about your future finances and consider your options to cover the costs. “This does not mean you need to run out and buy insurance right now,” Cheng says. “But it’s important to be proactive, so you’re the one deciding, and your family isn’t the one deciding for you later.”

Long-term care insurance is also an option, although it can be cost-prohibitive for some. To determine if its right for you consider how much you saved. If you think you' ll have a shortfall then this type of insurance can give you peace of mind. The younger you purchase long-term care insurance the cheaper it will be.  AARP’s long-term care resource center can help you determine if this is coverage you need.

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