Millions of Americans facing retirement worry they are financially unprepared or worry they will have to work forever.
Some are already there. Finances and retirement were major themes in the nearly 1,200 responses Business Insider received from Americans ages 48 to 90 who responded to a voluntary survey about their biggest regrets. (This is part two of an ongoing series.)
Many baby boomer respondents said retirement – how to invest and how much you need – is a black box. Some wished they had hired a financial advisor, while others regretted expensive purchases. Others said they retired too early or retired without a long-term financial plan.
And then there are those who have suffered an unexpected setback, such as a cancer diagnosis, job loss or divorce, and wish they were better prepared for an emergency.
Gary Lee Hayes, 70, would have liked to be more regulated in his savings and investments. The California resident briefly served in the Navy, earned a degree in public administration and worked in mental health and handyman positions. He had little financial knowledge growing up and said he wasn’t focused on building his career to be more lucrative.
Two of Hayes’ biggest financial 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 had been a little too liberal in his spending throughout his life, although he said that he had not purchased anything beyond his means. He also avoided putting money in his 401(k) and said he should have chosen more stable investments instead of short-term ones.
“You can’t expect to suddenly win the lottery,” said Hayes, who receives $1,846 a month from Social Security and lives in government-subsidized housing. “You can’t expect someone to pass away and leave you an inheritance that will make your life more comfortable.”
A major theme among BI survey respondents was that they lacked investment knowledge. For some, this meant not saving enough; for others, it meant making common investing mistakes.
A new study from Vanguard suggests that people who change jobs invest less in their 401(k), often without realizing it, and can lose as much as $300,000 over the course of their career.
Another theme among survey respondents was that they waited too long to start saving. Two separate surveys from the Transamerica Institute and Charles Schwab found that, on average, baby boomers waited until age 35 to start saving.
Nancy Seeger, 64, who lives outside Cleveland, said she made investing mistakes that had long-term impacts on her finances. Seeger, who holds two master’s degrees, worked for many years as a health teacher and librarian. She was laid off earlier this year from a job that paid her $74,000 a year, and while she’s not ready to retire completely and is still looking for a job, she fears she won’t be able to get another well-paid job given her age.
She told BI she wished she could have saved more when her children were young and had started retirement funds earlier. Although she had some savings, she began investing more in her investments at age 50.
She also didn’t realize that because she has a pension in addition to Social Security when she retires, she would be affected by a little-known Social Security provision that would reduce her monthly check. Between her pension of $713 a month and Social Security, which she estimates will be between $1,200 and $1,400 a month, she will have just enough to cover her rent.
“I was lucky to receive a small inheritance from my parents and an aunt, which saved me, but it is unlikely that I will be able to 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 in jeopardy.”
Seeger said she has few regrets and is “letting life happen to me,” although she plans to take a part-time job when she retires to supplement her income. She’s still saddled with bills related to cancer treatment in 2022, and because she has a few months left before she turns 65, she can’t get Medicare and must pay for her health insurance out of pocket.
“A lot of unexpected things happened, but I also realized that unexpected things impact everyone and you can’t really 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. A person 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 yield significant financial rewards in the long run. If someone earning $50,000 a year contributes 5% of their salary in retirement, they would save almost $60,000 less after age 30 than if they had contributed 6%.
Nevenka Vrdoljak, managing director of Merrill’s Chief Investment Office and Bank of America Private Bank, told BI that calculating how much you need for retirement requires difficult estimates of life expectancy, retirement expenses, retirement and retirement resources.
“Changes to 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 rising and diagnoses occurring earlier in life, another difficult calculation involves preparing for lost work and rapidly mounting medical bills.
“The need for long-term care can cause more than financial hardship in retirement. It can be a burden on loved ones,” Vrdoljak said. “Investors with significant assets may prefer to self-insure against this risk. But for many other investors nearing retirement, long-term care insurance can help mitigate the risk and cost of care .”
PJ White, 69, never aspired to a well-paying career – but she never expected to end up homeless.
Throughout her career, she has worked for a laboratory supply company, retail companies and as a secretary in law firms. She got married at 21 and bought a house, but divorced a year later, which cost her dearly.
Although she says she often lives hand to mouth, she wishes she had been more careful about her spending on hobbies and clothing – what she calls “play money” – and set aside time to learn about ‘investment. She said it was rare for her to have any savings left each month and her maximum income was about $41,000. She left her job in 2008 to care for her partner’s mother.
“Money was coming in and going out,” White said, adding that she rarely put money in her 401(k). “I didn’t think about the retirement aspect because it was so far away, but now I wish I had.”
She recently lost her home because she and her partner couldn’t afford to pay property taxes. They now live in a camping tent in San Diego. She lives on about $1,500 in Social Security each month as they fight to get their home back, but she said much of her money goes to legal costs. She received help with groceries through her new health insurance company, but she has yet to find affordable housing.
“He doesn’t make any money at all, so it’s all on me, and I feel that,” White said of his partner. “I have symptoms of stress and I have nowhere to go, no one to turn to.”
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