By Paul S. McNulty, CFP®
When you stop to think about your retirement, what are the things that come to mind? Perhaps some traveling or bucket-list adventures? Or maybe enjoying plenty of extra time at home with family? Most of the time, we look ahead with excitement, relishing the thought of slowing down and finally having all the time in the world to pursue passions and invest in relationships. But there’s a lot more to planning for retirement than just counting down the days until you turn 67.
While musing about the fun-filled freedom you’ll enjoy is far more attractive than considering the obverse, it is important to consider the potential for unwanted outcomes and address the details before it is too late. No one wants to reach the milestone of retirement and realize it’s not all it’s cracked up to be. How horrible would it be to finally retire just to suddenly wonder if you should have done things differently and feel like it’s now too late? Have you considered the possibility that, if not properly prepared, you very well may regret your decision to retire?
Our team at Boston Metro Advisor wants to help you avoid this devastating outcome in what should be your “golden” stage of life. We often see 4 common regrets that you should keep in mind as you prepare for your golden years.
1. Retiring Too Soon
There are many reasons people retire early, and the truth is retirement isn’t always your choice. Whether you were forced to retire earlier than planned or you made the decision on your own, retiring before you are truly ready can end up being a source of much regret. In fact, 30% of retirees admit they would gladly re-enter the workforce if a job became available. (1)
One common cause of regret for those who retire prior to turning 65 is the need to find pre-Medicare coverage, which is often quite a bit more expensive than an employer-sponsored plan. If you are able to wait until you turn 65 to retire, you will then qualify for Medicare and avoid being forced to obtain other health insurance to cover you during the transition.
Financially, the earlier you retire, the fewer years you have to save and the longer you will have to live off of your retirement money. In other words, you have less money saved and you have to make it stretch further. It’s a lose-lose situation. If you retired before age 65 and your finances are keeping you up at night, or you are living at a lower quality of life than you are used to, you may regret retiring when you did.
Working even a few years longer can provide these valuable benefits:
- More time to accumulate savings
- More years to apply toward Social Security, which could result in a larger benefit amount
- Health insurance coverage through your employer
- Purpose and identity
- Stronger mental and physical health (2)
2. Not Having A Social Security Claiming Strategy
Social Security benefits can be claimed anytime between ages 62 and 70. However, the timing of when you choose to collect these benefits will impact the amount of benefit you receive.
Full retirement age (FRA) changes based on the year you were born. For those born in 1937 and earlier, FRA is 65. After 1937, two months is added each year until FRA becomes 66 for those born between 1943 and 1954. Starting in 1955, two months a year is added again until the FRA becomes 67 for those born in 1960 or later.
If you wait until you reach full retirement age to begin collecting your Social Security benefits, you will receive your full Primary Insurance Amount, which is the full benefit that you have earned, but if you choose or are forced into early retirement, you will receive a reduced benefit. Your basic benefit will be reduced a fraction of a percent for each month you begin receiving benefits prior to full retirement age, up to 30%. (3)
3. Overspending In The First Years Of Retirement
You may have a hefty nest egg to carry you through retirement, however, you still need to exercise financial discipline to ensure your money lasts. Dipping too deep into your savings as soon as you retire could quickly break your retirement dreams. Practicing self-control to resist impulse buying and frivolous spending is important if you want to see your savings pan out as you planned them to.
However, these impetuous behaviors are not always to blame. It could be that you set a plan that sounded good on paper but just wasn’t realistic or flexible enough to allow for some stress-free splurging. So, when developing your retirement plan, create a realistic retirement budget, factoring in travel or hobbies, then work with your advisor to find a withdrawal rate that will stretch your money for as long as possible.
4. Not Having A Retirement Bucket List
Unscripted schedules and the freedom to do as you please are a major perk of retirement. However, transitioning from working full-time to the unstructured days of not working at all can be a real shock to your well-being. Saying goodbye to your career, your colleagues, and your routines can cause anxiety and depression, which can lead you to develop comfort behaviors like shopping or eating out frequently. Planning ahead to fill some of your time with activities that will help you feel active and fulfilled can help to avoid the negative emotions (and reactions) that can come with this major life transition.
Do you want to know which activities typically result in a fulfilling retirement? A BMO Harris Bank study on retirement planning reveals that retirees who stayed busy and active, pursued independence, and volunteered their time were satisfied with their life. (4) One study of retirees even found that those who volunteered 200 hours a year were less likely to develop high blood pressure. (5)
The takeaway here is to be intentional about your time in retirement. Make a list of things you want to do, places you want to go, and people you want to spend time with. Then thoughtfully map out the details so your desires become a reality. It’s easy to lose your identity when your career ends and your social interactions dwindle. Intentionally filling your time and venturing out into new territory will help you build a new identity as a retiree and give you something to look forward to.
Live With No Regrets
The last thing you want is to celebrate the incredible milestone of retirement just to wake up the next morning feeling unsure, or even fearful, of the years ahead. We don’t want that for you either! Figuring out when and how to retire is one of the most difficult, yet vital, decisions you will make in life. You don’t have to make those loaded decisions alone. If you would like to avoid facing these common regrets when you retire, contact us at Boston Metro Advisor for a complimentary consultation by calling (781) 995-0253 or email me directly at [email protected] today!
About Paul
Paul McNulty is the founder of Boston Metro Advisor with over 20 years of experience helping people navigate the ups and downs of the economy toward the financial future they envision. His education consists of a Bachelor of Science in business administration from the University of Rhode Island and the CERTIFIED FINANCIAL PLANNER™ (CFP®) professional designation.
Paul’s experience and education have made him a multi-faceted professional capable of assisting people with virtually all their financial needs. His services include every facet of retirement planning, from 401(k) rollover services and income planning to wealth management and estate planning. Paul has been active in his community over the years as a youth sports coach. When he’s not spending time with his wife, Cindy, and their two children, who are both recent college graduates, Paul enjoys reading, playing golf, and fishing. Learn more about Paul by connecting with him on LinkedIn.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
______________
(1) https://www.cnbc.com/2014/08/21/retirees-go-back-to-work.html
(2) http://www.medicaldaily.com/planning-retiring-early-consider-these-5-health-risks-first-247669
(3) https://www.ssa.gov/planners/retire/retirechart.html
(4) https://commercial.bmoharris.com/resource/wealth-management/whats-your-retirement-game-plan/
(5) http://psycnet.apa.org/journals/pag/28/2/578/?_ga=1.177767717.1281536077.1488342343