Millions of Americans facing retirement worry that they won’t be financially prepared, or fear having to work forever.
Some are already there. Finances and retirement were top topics in the roughly 1,200 responses Business Insider received from Americans ages 48 to 90 who completed a voluntary survey about their biggest regrets. (This is part two of an ongoing series.)
Retirement (how to invest and how much you need) is a black box for many. Some wish they had hired a financial advisor, while others regretted making expensive purchases. Others said they took Social Security too early or retired without a long-term financial plan.
And then there are those who suffered an unexpected setback, such as a cancer diagnosis, job loss, or divorce, and wish they had been better prepared for an emergency.
Gary Lee Hayes, 70, wishes he had been more in control with his savings and investments. The California resident briefly served in the Navy, earned a degree in public administration and worked in maintenance and mental health positions. He had little financial knowledge growing up and said he didn’t focus on developing his career to make it more lucrative.
Two of Hayes’ biggest money regrets are not investing in Verizon stock early on and not saving at least 10% of his income each month. He also said that he was too liberal with his spending throughout his life, although he said that he did not buy anything that was beyond his means. He also avoided putting money into his 401(k) and said he should have chosen more stable investments instead of short-term investments.
“You can’t expect that you’re going to suddenly win the lottery,” said Hayes, who receives $1,846 a month in Social Security and lives in government-subsidized housing. “You can’t expect someone to die and leave you an inheritance that will make your life more comfortable.”
A major theme among BI respondents was that they lacked investment knowledge. For some, this meant not saving enough; For others, it meant falling into some common investing mistakes.
New research from Vanguard suggests that people who change jobs invest less in their 401(k) plans, often without realizing it, and can lose up to $300,000 over the course of their careers.
Another theme among respondents was that they waited too long to start saving. Two separate surveys from the Transamerica Institute and Charles Schwab found that, on average, boomers waited until age 35 to start saving.
Nancy Seeger, 64, who lives outside Cleveland, said she made investment mistakes that had long-term repercussions on her finances. Seeger, who has two master’s degrees, worked for many years as a teacher and health librarian. She was laid off earlier this year from her job that earned $74,000 a year, and while she’s not ready to fully retire and is still looking for work, she’s worried she won’t be able to get another job with a decent salary given her age.
He told BI that he wished he could have saved more when his children were young and started his retirement funds earlier. While he had some savings, he began investing more consistently in his 50s.
She also didn’t realize that because she has a pension in addition to receiving Social Security when she retires, she would be affected by a little-known Social Security provision that would reduce her monthly check. Between his pension of $713 a month and Social Security, which he expects to be between $1,200 and $1,400 a month, he will have just enough to cover the rent.
“I was lucky enough to receive a small inheritance from my parents and an aunt, which saved me, but it’s unlikely I can do the same for my children, and that bothers me a lot,” Seeger said. “I had hoped to travel and wanted to leave money for my children, but both goals are now compromised.”
Seeger said he has no regrets and “let life come to me,” although he plans to take a part-time job in retirement to supplement his income. He is still recovering from bills for cancer treatment in 2022, and because he has a few months left until he turns 65, he can’t enroll in Medicare and has to pay for his health insurance out of pocket.
“A lot of unexpected things have happened to me, but I’ve also come to understand that unexpected things affect everyone and you can’t plan for them,” Seeger said.
While $1 million for retirement may be enough for some Americans, it might be too little for others.
Bank of America’s Financial Wellness Tracker suggests that Americans ages 61 to 64 should have about 8.5 times their current salary in savings. Someone with $1 million in savings at age 65 can safely withdraw $40,000 in their first year of retirement, Bank of America said.
For some, saving just 1% more could lead to significant financial rewards down the road. If someone who earns $50,000 a year contributes 5% of their salary toward retirement, they would save almost $60,000 less after 30 years than if they had contributed 6%.
Nevenka Vrdoljak, managing director of the chief investment office of Merrill and Bank of America Private Bank, told BI that calculating how much you need for retirement requires difficult estimates of life expectancy, retirement spending and retirement resources. retirement.
“Changes in government benefits may affect expected income,” Vrdoljak said. “Fluctuations in investment returns make it difficult to estimate how much savings you will have in the future.”
With cancer rates on the rise and diagnoses coming earlier in life, another difficult calculation is how to prepare for time off work and rapidly increasing medical bills.
“The need for long-term care can cause more than financial strain during retirement. It can put a burden on loved ones,” Vrdoljak said. “Investors with substantial assets may prefer to self-insure against this risk. But for many other investors approaching retirement, long-term care insurance can help mitigate the risk and cost of care.”
PJ White, 69, never aspired to a high-paying career, but he never expected to be homeless.
Throughout her career, she worked for a laboratory supply company, retail companies, and as a secretary at law firms. She married at age 21 and bought a house, but divorced a year later, setting her back financially.
While she said she often lived hand to mouth, she wishes she had been more cautious about spending on entertainment and clothing (what she called “play money”) and set aside time to learn how to invest. He said it was rare for him to have savings left over each month and that his maximum income was about $41,000. She left work in 2008 to care for her partner’s mother.
“Money was coming in and going out,” White said, adding that he rarely puts money into his 401(k). “I didn’t think about the retirement aspect because it was so far down the road, but here I am now wishing I had done it.”
She recently lost her home because she and her partner couldn’t pay the property taxes. They now live in a tent in San Diego. She lives on about $1,500 from Social Security each month as they fight to get their house back, but she said much of her money goes to court fees. He has received some help with the purchase through his new health insurance company, but has not yet secured an affordable housing unit.
“He doesn’t make any money, so it’s all on me and I’m sorry,” White said of her partner. “I’m showing symptoms of stress and I have nowhere to go and no one to turn to.”
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