Top Money Regrets That Haunt Retirees Today
Retirement planning mistakes can have long-lasting consequences. Here are the most common financial regrets retirees share, along with practical solutions to avoid them.
Social Security Timing Regrets
Starting Social Security at 62 (the earliest possible age) often proves costly. Benefits increase by 5-8% annually for each year you delay claiming. Early claiming also reduces the survivor benefit for your spouse. While some people plan to invest their early benefits, they rarely match the guaranteed return from delayed claiming.
Insufficient Roth IRA Investments
While traditional retirement accounts offer immediate tax benefits, required minimum distributions (RMDs) can push retirees into higher tax brackets. These mandatory withdrawals may increase Social Security taxation and Medicare premiums. Including Roth accounts in your retirement strategy provides tax-free withdrawals and better tax management options.
Medicare Cost Surprises
Many retirees underestimate healthcare costs, particularly Medicare expenses. Beyond standard deductibles and copays, Medicare premiums can increase significantly based on income through IRMAA (Income-Related Monthly Adjustment Amount). In 2020, monthly premiums could increase by $57.80 to $347 per person above the standard $144.60 for higher-income beneficiaries.
Limited Stock Market Exposure
Despite market volatility, stocks remain crucial for combating inflation in retirement portfolios. Some retirees may actually benefit from increased equity exposure, particularly if their basic expenses are covered by guaranteed income sources like Social Security and pensions.
Lack of Comprehensive Planning
Many retirees have investments but lack a comprehensive financial plan. Without proper withdrawal strategies, tax planning, and investment management, retirees often face unnecessary anxiety about their financial security. Working with a fee-only, fiduciary financial planner helps create sustainable retirement strategies and reduces financial stress.
The most effective retirement planning combines these elements into a cohesive strategy, ideally implemented well before retirement begins. Regular review and adjustments ensure the plan remains aligned with changing needs and market conditions.