Provided by John Halterman and written by Indigo Marketing Agency, a non-affiliate of First Allied Securities, Inc.
It’s hard to ignore the topic of retirement. You probably see news reports about the state of retirement savings in our country, come across articles on your social media, or receive updates on your 401(k) or other investment accounts from your employer or financial advisor. For many of us, retirement is at the top of our minds as we work hard to grow our nest egg so we can one day slow down, change pace, and finally have all the time we need to pursue passions and invest in relationships.
But one question that probably doesn’t cross your mind as you inch closer to this milestone is this: What if you get to retirement and it’s not all it’s cracked up to be? Have you considered the idea that you could regret your decision to retire? Here are four common retirement regrets to keep in mind as you prepare for your golden years.
1. Retiring Too Soon
Whether you were forced to retire earlier than planned or you made the decision on your own, retiring before you are ready can cause plenty of regret. In fact, 30% of retirees admitted they would gladly re-enter the workforce if a job became available. (1)
If you decided to retire prior to turning 65, you probably had to find pre-Medicare coverage, which is often quite a bit more expensive than an employer-sponsored plan. By waiting until you turn 65, you will qualify for Medicare and not be forced to obtain other health insurance to cover you during the transition.
Financially, the earlier you retire, the fewer years you have to save and the longer you will have to live off of your money. If your finances are keeping you up at night or you are living at a lower quality of life than you are used to, you may regret retiring when you did.
Working even a few years longer can provide these valuable benefits:
More time to accumulate savings
More years to apply toward Social Security, which could result in a larger benefit amount
Health insurance coverage through your employer
Purpose and identity
Stronger mental and physical health (2)
2. Not Creating A Personalized Social Security Claiming Strategy
Social Security benefits can be claimed anytime between ages 62 and 70. However, the timing of when you choose to collect these benefits will impact the amount of benefit you receive.
Full retirement age (FRA) changes based on the year you were born. For those born in 1937 and earlier, FRA is 65. After 1937, two months is added each year until FRA becomes 66 for those born between 1943 and 1954. Starting in 1955, two months a year is added again until the FRA becomes 67 for those born in 1960 or later.
If you wait until you reach full retirement age to begin collecting your Social Security benefits, you will receive your full Primary Insurance Amount, which is the full benefit that you have earned, but if you choose or are forced into an early retirement, you will receive a reduced benefit. Your basic benefit is reduced a fraction of a percent for each month you begin receiving benefits prior to full retirement age, up to 30%.
3. Not Prioritizing Your Roth IRA Contributions
Not saving enough is a common retirement regret, but it’s also essential to save in the right ways and with the right savings vehicles. On top of maximizing your Roth contributions, you should consider opportunities to convert your traditional IRA funds to a Roth IRA.
When it comes to IRAs, the common thought is that when you retire, you’ll be in a lower tax bracket so you might as well take the deduction now and pay the tax later. But what if your IRA or 401(k) savings ends up being responsible for moving you into higher tax brackets in retirement? If you pour all your savings into traditional tax-deferred savings accounts, you could end up with millions when you retire. For example, if your combined tax-deferred retirement savings is valued at $4.5 million, your annual required minimum distribution (RMD) at age 70½ will be $164,000. (3) This puts you in the third-highest tax bracket of 32%. (4) Research your options to convert some of your traditional retirement funds into a Roth IRA to have a more tax-efficient retirement.
4. Not Having A Retirement Bucket List
Free time is a major perk of retirement, but when you go from working full-time to not working at all, it can be a shock to your system. Saying goodbye to your career, your colleagues, and your routines can cause anxiety and depression. But if you plan ahead to fill your time with activities that will fulfill you, you can avoid the negative emotions that can come with this life transition.
Do you want to know what activities result in a fulfilling retirement? A BMO study on retirement planning reveals that retirees who stayed busy and active, pursued independence, and volunteered their time were satisfied with their life. One study of retirees even found that those who volunteered 200 hours a year were less likely to develop high blood pressure. The takeaway here is to be intentional about your time in retirement. Make a list of things you want to do, places you want to go, and people you want to spend time with, then strategically map out the details so your goals become a reality. It’s easy to lose your identity when you say goodbye to your career, but filling your time and venturing out into new territory will help you build a new identity and give you something to look forward to.
Do You Want A Regret-Free Retirement?
You probably don’t want to celebrate the incredible milestone of retirement and then wake up the next day wondering if you made the right decision. Deciding when and how to retire is one of the most difficult decisions you will make in life, but you don’t have to make the hard choices alone. At Beacon Wealth Management, we believe that wealth is not a game and we do not leave things to chance. If you want to avoid facing these common regrets when you retire, call (304) 626-3900 or email me at firstname.lastname@example.org and schedule your free 60-minute discovery consultation.
John Halterman, best-selling author and nationally published blogger has been featured as a financial guest expert on the shows of self-help gurus Brian Tracy and Jack Canfield, author of “Chicken Soup for the Soul” and has appeared on ABC, FOX, BRAVO, NBC, CBS and A&E. John is the expert host of the weekly WDTV News 5 segment, “Solutions 4 Financial Independence”.
As an authority on wealth management, he has been invited by hundreds of institutions such as universities, federal agencies, professional associations, and large energy and utility corporations to be a guest speaker and educational event host. Event topics include retire ready, managing down market investment risk, how to reduce your tax burden, and transferring your family wealth in the most tax advantageous way.
John is the founder and owner of Beacon Wealth Management, specializing in helping entrepreneurs, professional practitioners and retirees overcome the 5 major challenges facing success families. He is a warm communicator with a passion for helping people transform their financial futures. John understands the multifaceted set of financial worries people face as they become more successful and enter the retirement redzone. He empathizes personally with each client and delivers a collaborative client experience that empowers people to reach their life goals.
With more than two decades of experience, John’s professional credentials include Certified Wealth Strategist, Accredited Investment Fiduciary, Certified Estate Planner, Chartered Federal Employee Benefits Consultant, Professional Plan Consultant and Registered Financial Consultant. He is also a past member of Ed Slott’s Master Elite IRA Study Group.
A native of Weston, West Virginia, John served in the United States Air Force prior to becoming a Wealth Advisor. Today, he resides with his family in Clarksburg, West Virginia. He and his wife, Lisa, have been married since 2005 and have three amazing children. A family-oriented man, he enjoys giving back to his community, coaching youth sports, landscaping, architectural design, and playing racquetball.