By Eric Reich
We all have our regrets in life. Many of us lament missed opportunities, lost loves, and the list goes on. I try not to regret things and accept that things happen for a reason. Many retirees, however, share a common regret. A staggering 67% of retirees say they regret not saving enough for retirement.
Those of us not yet retired can learn from that. I like to joke with clients and say that you can never have too much money or be too good-looking. Well, we sadly can’t do much about the latter, but saving and investing is entirely within our control. Let’s look at this common regret from different perspectives.
Younger savers
If you are just starting out or even still in the first 20 years of your working life, making savings a priority now is the best possible way to avoid this regret later in life. Save at least 10% of your income for retirement. If you think that there is no way you can possibly save that much, then you need to examine your expenses. You could almost certainly cut out a ton of unnecessary expenses from your budget. Examples include trips to Starbucks, Wawa, lunches or dinners out, or, one of the biggest culprits for many young people, trips to the bar. Add all of these together, and for many people, they can easily add up to several hundred or a thousand dollars a month. I’m not suggesting you don’t enjoy life, but making some sacrifices now will likely reduce the likelihood of being one of those 67% of people who regret not saving and investing more when you get to retirement.
Here’s a tip that I’m sure I heard when I was young but never listened to: You’ll be near retirement a lot sooner than you think. Time flies. I still can’t believe I’m so close to what my normal retirement age would be. The key thing at this phase of life is to save as much as possible and make it automatic. That way, you don’t even have to think about it. Save first and spend what’s left over, not the other way around.
Mid-career
The next 20 years leading up to your actual retirement are typically your peak earning years. The problem for many of us is that these are also your peak expense years. Kids, private school, college and more can all wreak havoc on your ability to save. This is the time when you are most likely to see what is known as lifestyle creep. You are making more than ever, but you feel like you have less than ever. The house is bigger, and so are the expenses that go along with it. The car is nicer, and so are the vacations. Now is a crucial time to not waver in your savings plan. It’s so easy to say that you are only going to reduce your 401(k) contributions for a few years and then raise them back up. The reality is that almost nobody ever raises them back up until right before retirement. Don’t make this potentially devastating financial mistake. Instead, cut expenses where you can or look for ways to earn additional income to stay on track. Better yet, take advantage of the increased contribution limits (one of the few benefits of turning 50). This is the phase where you will determine your ability to retire when you want and on your terms.
Retired
Many would assume that once you are entering this phase, there isn’t much, if anything, you can do about your financial position. The truth is, entering retirement allows for a lot of financial flexibility. Many people I meet don’t follow the traditional path that often comes to mind when we think about retirement. Many people choose not to stop completely, for good reasons. There are many studies that suggest that stopping your working life without a good plan often leads to a lack of enjoyment or, worse, depression in retirement. Working part-time or consulting could add to your finances in retirement. This is also a good time to examine your expenses again and look for ways to shift expenses from non-essential ones to those that you care more about, which may include travel.
Whenever I see statistics like more than two-thirds of retirees regret something, it tells me that we need to stop and consider what we are currently doing as well as look for ways to avoid feeling like this ourselves in the future. With some discipline at each phase of life, we can be a part of the less than one-third who have no regrets in retirement.
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Reich Asset Management, LLC is not affiliated with Kestra IS or Kestra AS. The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. To view form CRS visit https://bit.ly/KF-Disclosures.
Eric is President and founder of Reich Asset Management, LLC. He relies on his 25 years of experience to help clients have an enjoyable retirement. He is a Certified Financial Planner™ and Certified Investment Management AnalystSM (CIMA®) and has earned his Chartered Life Underwriter® (CLU®) and Chartered Financial Consultant® (ChFC®) designations.
