How To Pursue A Regret-Free Retirement
By Michael Vaughn, CFP®
Regret is not always a bad thing. While it’s not good to sit in the regret of past mistakes, when we learn from those mistakes, it can help us make better choices in the future. Unfortunately, that’s not true in every situation, namely retirement. There are no retirement do-overs, and any mistakes you’ve made in your preparations are a lot harder to remedy once you’ve packed up your office for good.
Here’s the good news: if you aren’t retired yet, there’s still plenty of time to learn from others so your retirement can be as fulfilling and comfortable as possible. Take a look at these four tips that will help you work toward a regret-free retirement.
1. Just Keep Saving
Many people, 55% according to a Global Atlantic Financial Group study, (1) enter retirement and discover several things they wish they’d done differently. And the number-one regret? Not saving enough. One of the ways to make sure you have the nest egg of your dreams is to save early and often. While it may be tempting to hold off on saving until the kids are out of the house or until you’re more established in your career, don’t. The longer you hold off saving for retirement, the harder it will be later on.
For every year you delay in saving, you’ll have to contribute exponentially more to reach your savings goals because of compound interest. If you start saving $400 per month at age 25, you will have $1 million saved by age 65 (assuming a 7% annual investment return). If you don’t start until age 35, you’ll have to save around twice as much to reach $1 million by age 65. Make it a priority to save, even if it seems like a small amount, and you’ll be on your way to avoiding this regret.
2. Root Your Budget In Reality
A common retirement misconception is that you won’t need as much money in retirement as you do now. You may think that you won’t have a mortgage in retirement or that you won’t be supporting your kids anymore. And while your expenses will change, that doesn’t mean you’ll have fewer expenses. For example, healthcare costs can put a serious dent in your retirement savings. It is estimated that the average couple will need an average of $285,000 to cover medical expenses in retirement, and that’s often more than people have saved for retirement overall! (2)
To make sure you don’t underestimate your retirement needs, develop a clear picture of what you want in retirement and track your spending now so that you know how much retirement will cost. The key takeaway here is to create a retirement saving and spending plan specific to your lifestyle and your needs. While the general rule of thumb is that you’ll need 70-80% of your pre-retirement income to live on in retirement, that number may be more or less for you. Work with a professional to create a customized strategy so you aren’t scraping pennies together later in life.
3. Create Multiple Income Streams
Social Security is an important piece of your retirement income plan and you should create a claiming strategy to maximize your benefits, but did you know that the Social Security program was designed to replace just 40% of an average worker’s wages? (3) In other words, you’re going to need more than just Social Security to get through retirement.
Take stock of the tools available to get you to your retirement goal. What income sources do you have? This could be anything from IRAs to 401(k)s to pensions to annuities, even rental income or taxable brokerage accounts. It is important to analyze your alternative income sources and incorporate them into your overall retirement strategy.
4. Think Beyond The Money
When it comes to retirement planning, a common mistake is to only focus on the financial side of things. Sure, it’s great if you have enough money saved, but you can’t enjoy your retirement if you are not fulfilled. Most people find their identity in their careers, and when their career ends, they don’t know what to do; they lose their feeling of purpose. Make a plan for your time in retirement so when you leave your job, you have something to look forward to. It could be travel, hobbies, volunteering, time with grandchildren, or even volunteer work. The important thing is to determine what your next step is going to be.
Experience A Fulfilling Retirement
No matter what your situation, it’s possible to enjoy your retirement and feel confident in your future. I understand that deciding when and how to retire is a difficult decision, but I want you to know that you don’t have to make the hard choices on your own. My top priority is to find out what your ideal retirement looks like and work with you to make it a reality. If you want to have a regret-free retirement, schedule your complimentary introductory meeting by emailing me at [email protected], calling (417) 351-2942, or using my online calendar.
Michael Vaughn is a Certified Financial Planner™ (CFP®) and Vice President at Pinnacle Financial Advisors (PFA) with 20 years of industry experience. Before joining the PFA family, he served clients with investment management and retirement planning at The Mutual Fund Store for 14 years. Michael graduated from Missouri State University with a bachelor’s degree in business administration and management and earned his CFP® designation in 2004. He also served 20 years in the Missouri National Guard, retiring in 2007 as a Major. He currently volunteers on the board of directors for Good Dads and Fellowship of Christian Athletes. He and his family attend Hill City Church, where he serves as an elder. Michael is married to Lori and they have two daughters. To learn more about Michael, connect with him on LinkedIn.