We all make mistakes, and we all have regrets. That’s part of the deal when you’re a human being.
We got to wondering: What do old people regret the most, financially speaking? If they could go back in time, what would they do differently — especially when it comes to money?
A researcher at the University of Pennsylvania’s Wharton Business School recently found out. Economics professor Olivia Mitchell conducted a survey of nearly 1,800 older Americans with an average age of 72. “What’s your biggest financial regret?” she asked.
The answers may surprise you. Your average 72-year-old has regrets about how much longer they should have worked and whether they started claiming Social Security too early, among other things.
Pay attention to the 72-year-olds. Because if we know what they would do differently, then we still have time to change things before it’s too late.
Here are the top five financial regrets, along with our suggestions for how to handle them.
1. ‘I Should Have Saved More for Retirement’
Let’s start with the biggest one. An eye-opening 57% of older Americans regret that they didn’t save more for retirement during their working years.
That’s more than half! (Yes, obviously we are advanced mathematicians here at The Penny Hoarder.)
Actually, this shouldn’t come as much of a shock. Any number of studies have found that lots and lots of American families have virtually nothing saved for retirement.
Our advice here is really straightforward: Learn from your elders and start saving for retirement now. If your employer offers a 401(k) plan, sign up for it and learn how to maximize it. If that’s not an option for you, set up automatic withdrawals on payday into a Roth IRA, a type of individual retirement account. If you haven’t gotten around to this yet, the sooner the better.
If you’re already saving for retirement, dig a little deeper and sock away a little more. Even an extra $25 a week could make a huge difference over time, thanks to the magic of compound interest.
2. ‘I Should Have Bought Long-Term Care Insurance’
We know, we know. Your eyes are glazing over right now. After all, who wants to think about long-term care insurance? Boring, am I right?
The thing you should know here is 40% of older adults regret not having it. Forty percent!
Here’s why it’s important: Everyone seems to think Medicare will pay for you to stay in a nursing home in your old age. But it won’t. You’re the one who has to pay.
Long-term care insurance covers the things regular health insurance or Medicare won’t, like nursing home care, assisted living facilities, in-home medical care, in-home assistance for routine daily activities, adult day care, home modification and more.
Only about 7.5 million Americans have this insurance because, unfortunately, it can be pricy. According to the American Association for Long-Term Care Insurance, the average annual premium is $2,220 for a 55-year-old single male, $3,700 for a 55-year-old single female (it’s higher because women typically live longer) and $5,025 for a 55-year-old married couple.
So the insurance costs money. Long-term care is really pricy, though, so having this insurance can pay off.
3. ‘I Should Have Worked Longer’
Third on the list: 37% of retired Americans regret not working longer.
Once you hit your 60s, the two most useful things you can do to fund your retirement is to:
- Keep working as long as you can, and;
- Delay taking Social Security as long as possible. (More on that later.)
Lots of us don’t have any choice but to keep working, of course. Millions of Americans can’t afford to retire.
On the other hand, lots of us end up getting forced into retirement due to a layoff or health problems. Having trouble finding full-time work at your age? Here’s our list of 20 part-time jobs for retirees who aren’t quite ready to call it quits.
4. ‘I Should Have Invested in an Annuity’
Actually, we’re not too sure about this one. But here goes:
According to this Wharton Business School survey of nearly 1,800 older Americans, 33% of them regret not having invested in a lifetime annuity or some other product that would produce a guaranteed income for the rest of their lives.
Now, here at The Penny Hoarder, we’re not necessarily fans of annuities. Sure, guaranteed income for life sounds like a great deal, and that’s what most annuities promise. But nothing is ever as good — or as easy — as it seems.
If you’re considering purchasing an annuity to supplement your retirement income, it’s important to understand the risks, fees and restrictions involved.
The positives: Annuities protect you against the risk of outliving your money. No matter what, you’ll have income coming in as long as you live.
The negatives: They’re often ridiculously complex, with loads of less-than-transparent fees. You’re losing out on potentially growing your wealth because insurance companies make money on annuities by investing your cash and paying you less than if you were investing it on your own. And finally, inflation can eat away at your earnings over time.
5. ‘I Claimed Social Security too Early’
Fifth on the list: 23% of retired Americans suspect that they claimed their Social Security benefits too early.
When your 62nd birthday approaches, you’ll have a big decision to make: Should you take Social Security at 62 and accept lower benefits? Or should you delay Social Security to get a higher benefit amount?
The answer to whether taking Social Security at 62 is the right move for you depends on several factors: your life expectancy, whether you’re retiring early and your overall financial situation. By taking Social Security at 62 instead of at full retirement age, you’ll reduce your monthly benefit by 30% for life.
However, if you’re feeling relatively healthy and you wait until you’re 70 to start claiming your Social Security benefits, you’ll end up getting checks that are nearly 80% larger.
It’s a bit of a gamble either way. Just know that nearly a quarter of retired Americans wish they’d waited longer.
Here’s something you won’t regret: You’ll never regret digging into each of these topics, doing your own research and weighing all of your options before making a decision.
Mike Brassfield ([email protected]) is a senior writer at The Penny Hoarder. And by “senior” we mean “older.”