Millions of Americans approaching retirement worry that they won't be financially prepared – or worry that they will have to work forever.
Some are already there. Finances and retirement were major themes in the approximately 1,200 responses Business Insider received from Americans between the ages of 48 and 90 who completed a voluntary survey about their biggest regrets. (This is part two of an ongoing series.)
Many respondents from the baby boomer generation said that retirement – how to invest and how much one needs – is a black box. Some wished they had hired a financial advisor, while others regretted expensive purchases. Others said they left Social Security too early or retired without a long-term financial plan.
And then there are those who have experienced 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, wishes he had more control over his savings and investments. The California native briefly served in the Navy, earned a degree in public administration and worked in mental health care and as a handyman. He had little financial knowledge growing up and said he didn't focus on building his career to become more lucrative.
Two of Hayes' biggest financial regrets are not investing in Verizon stock early and not saving at least 10% of his income every month. He also said that he was a little too liberal with his spending throughout his life, although he said he didn't buy anything too far beyond his means. He also avoided putting money into his 401(k), saying he should have opted for 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 in Social Security and lives in government-subsidized housing. “You can't expect someone to pass away and leave you a legacy that will make your life more comfortable.”
An important theme among respondents to the BI survey was that they had no knowledge about investing. For some, this meant not saving enough; for others, it meant making some common investing mistakes.
New research from Vanguard shows that people who change jobs put less into their 401(k)s, often without realizing it, and can lose as much as $300,000 over their entire careers.
Another theme among respondents was that they waited too long to save. Two separate studies from the Transamerica Institute and Charles Schwab found that boomers, on average, waited until age 35 to start saving.
Nancy Seeger, 64, who lives outside Cleveland, said she has made investment mistakes that have had long-term consequences for her finances. Seeger, who has two master's degrees, worked for many years as a teacher and health librarian. She was laid off from her $74,000-a-year job earlier this year, and while she's not ready to fully retire and is still looking for work, she's concerned that given her age she won't be able to get another high-paying job to get.
She told BI that she wished she could have saved more when her children were young and started investing in retirement funds earlier. Although she had some savings, at age 50 she started consistently putting more into her investments.
She also didn't realize that because she has a pension in addition to Social Security when she retires, she would be hit with a little-known Social Security benefit that would reduce her monthly check. With her pension of $713 a month and Social Security, which she expects to be between $1,200 and $1,400 a month, she will have just enough to cover her rent.
“I was fortunate enough 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 greatly,” Seeger said. “I had hoped to travel and I wanted to leave money for my children, but both goals are now in jeopardy.”
Seeger said she has few regrets and “lets life come to me,” although she plans to take a part-time job in retirement to supplement her income. She is still paying bills to undergo cancer treatment in 2022, and because she still has a few months until she turns 65, she cannot rely on Medicare and must pay for her health insurance out of pocket .
“A lot of unexpected things have happened, but I've also come to understand that the unexpected things affect everyone, and you can't really plan for them,” Seeger said.
While $1 million for retirement may be enough for some Americans, it may 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. Someone with $1 million in savings at age 65 can safely withdraw $40,000 in their first year of retirement, according to Bank of America.
For some, saving just 1% more can yield significant financial benefits in the longer term. If someone who earns $50,000 annually contributes 5% of his salary to his retirement, after thirty years he would save almost $60,000 less than if he had contributed 6%.
Nevenka Vrdoljak, director of the chief investment office of Merrill and Bank of America Private Bank, told BI that calculating how much you need for retirement requires difficult estimates of life expectancy, expenses in retirement and retirement benefits.
“Changes in government benefits can 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 happening earlier in life, another difficult calculation is how to prepare for time off work and rapidly mounting medical bills.
“The need for long-term care can cause more than financial strain in retirement. It can place a burden on loved ones,” Vrdoljak said. “Investors with substantial assets may prefer to insure themselves against this risk. But for many other investors nearing retirement, long-term care insurance can help limit the risk and costs of care.”
PJ White, 69, never had ambitions for a high-income 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 married at 21 and bought a house, but divorced a year later, which left her in financial trouble.
Although she said she often lived from hand to mouth, she wished she had been more careful about spending on leisure and clothing (what she called “play money”) and made time to learn about investing. She said it was rare for her to have any savings left every month, and her peak income was about $41,000. She left work in 2008 to care for her partner's mother.
“The money came in and went out,” White said, adding that she rarely put money into 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 could not pay the property taxes. They now live in a camping tent in San Diego. She lives on about $1,500 in Social Security benefits each month as they fight to get their home back, but she said much of her money goes to legal costs. She has received some help with groceries through her new health insurer, but she has not yet found an affordable place to live.
“He doesn't make any money at all, so it's all my business, and I feel it,” White said of her partner. “I'm showing symptoms of stress, and I have nowhere to go, no one to turn to.”
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