Retirement is the culmination of decades of financial decisions, and the unfortunate truth is that some of those decisions aren’t always good. This is exceedingly common, in fact. At present, millions of Americans are making financial choices that will hurt them down the road. According to a GOBankingRates survey, an alarming 42 percent of Americans will retire broke.
To gain a better understanding of the financial decisions that can tarnish one’s golden years, GOBankingRates interviewed five real retirees. Although they’re largely content, they all had at least one nagging money regret they still think about. Keep reading to learn their financial mistakes and what you can do instead to ensure a happy retirement.
Not Investing More in Real Estate
“You know how when the Christmas catalogs come out, you change your mind a dozen times about what you want Santa to bring you?” said Mary Ann Huntington. “That is a good way to describe how you wish you would have done things differently with retirement.”
Though Huntington and her husband had many exciting entrepreneurial ventures over the years, looking back, she wishes they had done one thing in particular differently. “Being self-employed most of our working years, we didn’t have a lump sum saved like couples who work for a company,” she said. “What small amount we did have, I wish we had bought properties in small communities around where we live.”
“You really can’t go wrong investing in land,” the former realtor added. “The few times we did it, we did well. If only we had listened to ourselves and done it more often.”
Do You Know? The Best and Worst Cities to Own Investment Property
What You Can Do
Real estate investment can be a scary prospect for the average investor. You have to make enough to cover maintenance, utilities, insurance, taxes and more on your properties. However, it can be lucrative.
You can make money off of real estate investments in a number of ways:
- You can become a specialist in the real estate industry, taking a commission for each property you sell.
- You can flip houses for a profit.
- You can become a landlord and have cash flow income from your tenants.
- You can invest in a Real Estate Investment Trust (REIT), a corporation that purchases properties using investors’ money and is required to pay dividends — meaning you’d receive regular income.
- You can purchase land and sell it for a profit later.
Focusing Too Much on Making Money
Former college professor, researcher and social worker Kathleen Fox wishes she had focused less on money over the years.
“I worked very hard for most of my life and put aside just enough to live on (pension and social security) when my husband and I retired,” said the mother of three. “The one regret I have is that I did not take more time off to spend with my children. It all went so fast, and I regret every day that I was off working, usually in a job I did not really like, while they were learning and growing — days you can never get back.”
What You Can Do
Undoubtedly, one of the best parts of retirement is the time you get to spend with family. However, if you spend too much time looking toward the future, you might forget the importance of the present.
To ensure you don’t waste valuable time with loved ones, try one of these tips:
- Institute a family night during which you play games, watch movies or simply recap your days over dinner.
- Take regular vacations. There are plenty of ways to have an affordable vacation, including staying in a local hotel and exploring your own city. Remember to put your adventure on a credit card that offers generous rewards so you can get the most bang for your buck, too.
- Request a flexible work schedule or shift your schedule so that your hours align with your child’s.
- Take advantage of any employer-provided family time. Some companies allow you to take a certain amount of time off for children — so don’t miss that dance recital or soccer game if you can help it.
Not Investing More and Being Too Cautious
“I wish I would have invested a larger percentage of my salary,” said Lito Dayrit, a retired financial analyst who lives in Texas. “I also wish I’d been less overtly cautious about investing.”
The Phillipines-born family man said he wishes he had come to America earlier, too, which would have afforded him more opportunities to earn, save and invest.
What You Can Do
Fortunately, there is no shortage of options out there for investing. Mutual funds, commodities, annuities, micro-investing and property are just a few choices available.
No matter which vehicle you choose, the point is to invest as much as you comfortably can as soon as possible. The sooner you start investing, the longer your money has to grow, and the more money you put in earlier on, the better — all thanks to the rules of compound interest.
Investing can also be as little or as much of a gamble as you make it. If you choose a certificate of deposit, for instance, you have zero risk. You lock in your money and your money grows, usually at a higher rate than a savings account. It’s also FDIC-insured.
If you’re investing in stocks and bonds, on the other hand, you can adjust your risk tolerance based on a number of factors, including how close to retirement you are. Someone in their 30s will likely be far more comfortable with a riskier stocks and bonds split (bonds being less volatile than stocks) than a person who is five years from retirement and can’t stand to lose anything.
Not Taking Advantage of a 401k
“Back when we lived paycheck to paycheck with four kids at home, I wish we had put as little as $20 per pay period into a 401k or 403b (for educators),” said Pam Davis, a former speech pathologist at schools in the Omaha school system. “We thought we needed hundreds each month to save for retirement, and since that wasn’t an option, we had years where we put nothing into our accounts.” Once the couple became empty nesters, they tried to make up for lost time but it proved more difficult than they anticipated. They never reached their goal.
Fortunately, Davis worked in a field that offered a pension. “I had no choice but to give a set amount to the retirement account and my employer matched it at 101 percent. At the time, I didn’t even think about it, but now realize how wonderful that was. In fact, with little money in the 401k and 403b accounts, it is our lifesaver,” she said.
What You Can Do
You don’t have to live below your means to take advantage of an employer-sponsored retirement program. You decide how much you’re willing to contribute per paycheck. Start small if you need to, and as your salary increases, increase your contributions accordingly.
It’s especially important to capitalize on employer matching. Let’s say you make $30,000 annually or $2,500 a month. If you contribute 5 percent of your paycheck to your 401k, that is equivalent to $125 per month. Now, if your employer matches up to 5 percent, you’ll have $250 contributed per month instead. You’ve just gone from tucking away $1,500 a year in your retirement fund to $3,000. That’s a big difference.
Not Saving Sooner
Retired Trans World Airlines employee Dave R. said he focused on buying a home and having a family before he really got into saving aggressively for the future.
“Start saving as early as possible and as much as you can within your budget,” he said. “This will allow it to accumulate and build up your nest egg well over time.”
What You Can Do
You can save your money in a variety of ways, including the aforementioned investments options. Depending on how you invest, you’ll usually earn an average return rate far higher than a basic savings account at the bank, so investments make sense as a means of growing your wealth.
That said, one of the main reasons people tap their retirement funds early — a big no-no — is because they otherwise lack the savings to cover emergencies. A recent GOBankingRates survey revealed that nearly 44 percent of people who borrowed from their retirement funds ahead of schedule did so to pay off debt and/or bills. A nearly equal amount used their money to pay for medical expenses or a financial emergency such as a job loss (21.6 and 21.7 percent, respectively). So, though you should be investing for the future, it’s also important to save for life’s little curveballs along the way.
A high-yield savings account is one option for growing your emergency savings. There are several banks that currently offer 2.00% APY or higher with no minimum deposit.
A Little Goes a Long Way
Whether you are just entering the workforce or are far along the path to retirement, these retirees’ valuable insights shouldn’t be overlooked. They all underscore the importance of financial literacy. If more people were educated on topics such as investing, compound interest and employee benefits, nearly half of the population might not be looking at impoverished retirement.
Take a moment to evaluate where you stand financially and be honest with yourself. Knowing where you are relative to where you need to be can make all the difference in the long run. Hard numbers can be scary, but they can also spark action that will completely transform your future.
Click through to find out how one man found his “magic retirement number” and how you can too.
More on Retirement
- IRA vs. 401k: 7 Tips for Choosing the Best Retirement Plan
- 10 Lessons on 401k Withdrawal Rules and Options
- Here’s Why These 20 Cities Are the Worst for Retirees
- Watch: How One Couple Retired in Their 30s to Travel in an Airstream RV
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