Retirement is the time of branching out, trying new things, and simply enjoying your meaningful life, right? As retirement approaches, you’ll likely find similar encouraging and empowering messages coaxing you toward getting the most out of your retirement—but that’s not what we’re today.
I wanted to talk about something a little more uncomfortable, but a topic that can hopefully start some interesting discussion and introspection as you plan. Today, let’s talk about regrets.
Over the next few weeks I’ll touch on one or two common regrets retirees may have, and this week’s regret is a two-fold one:
- Wishing I hadn’t spent so much in the first few years of retirement
And for good measure:
- Wishing I’d ramped up my savings after my kids left home.
Overspending
This one may be an obvious one, but it’s something a large proportion of families struggle with. It can be a serious temptation to look at that newly available IRA or 401(k) account as a blank check, one you’ve worked most of your adult life toward and now is the time to cash in and start enjoying. It’s natural and probably a good idea to enjoy that retirement income while you’re healthy (something we’ll touch discuss in next week’s blog). But there is just no excuse for spending without a plan. This is such a hard concept to grasp for many people who are less “Type-A” that I venture for many, you’ll need a financial planner to help get you in the right mindset, so that you can enjoy your retirement while staying within your means.
For most people, this means hovering at around 4 or 5% withdrawal rate for those accounts.
Kids Gone? Save More!
The Center for Retirement Research of Boston College released some curious numbers[i] about retirement savings and what happens once a couple’s children leave the nest. Ideally, much of that reduction of expenses from not being responsible for another human would be channeled into putting away more for retirement. But strangely, the numbers show that increases in 401(k) contributions only increase a measly average of 0.3 to 1.0 percent! The mystery then arises: where is that extra money going? I’m sure it won’t be hard for you to guess that most of those families are throwing away their extra money on unnecessary purchases or eating out. Only through specific planning can you avoid falling into the habit of excess.
What we can glean from this first regret is that, obviously, the more you know about your finances the better, and that is usually expressed in a Systematic Withdrawal Plan, once the time comes to convert those savings into living expenses.
But maybe more importantly, not putting away enough due to lack of awareness can really sting once you crunch the numbers and realize that instead of taking the trip to Barcelona you’ve always dreamed of, you may be going to Pismo Beach this year.
More regrets to come in the following weeks.
[i] Dushi, Irena et. Al. “Do Households Increase Their Savings When The Kids Leave Home?” crr.bc.edu. Center for Retirement Research at Boston University. September 2015. Web. 7 October 2015.