Do you want to retire early? Here are the top 5 regrets of Americans who decided to quit too soon
Retiring early may sound like a dream come true – however, some Americans have faced the various problems that can arise once those regular paychecks stop.
In fact, many retirees who left the workforce at younger ages now experience regret. According to a study by the American Association of Retired Persons (AARP), more than a quarter of retirees ultimately discovered they had to spend more money on medical bills and housing than they had anticipated.
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Retiring early may leave you with less nest egg to cover these unexpected expenses and rising costs of living.
Here are five key things many retirees would change if they could turn back time.
1. Claiming Social Security too early
Many people may assume that retirement automatically means dipping into Social Security (SSA). The reality, however, is that you can retire without claiming these benefits if you have enough money saved to get you through those early years.
Unfortunately, most people don’t – and many early retirees regret how quickly they claimed their Social Security benefits.
A National Bureau of Economic Research (NBER) study found that one-fifth of older Americans wish they had deferred applying for Social Security. This is understandable, given that each month of delay in filing for benefits can result in an increase in your monthly income.
Delaying your retirement until age 67, for example, could result in a 24% increase in the standard Social Security benefit.
Early retirees are even more likely than the average senior to wish they had made different choices, because claiming benefits at age 62 with a full retirement age of 66, for example, could reduce a standard benefit by 25 %.
With half of the population aged 65 and over relying on retirement benefits to provide at least 50% of their household income, this is a tough blow to take.
If you want to get estimates of your benefits before making an early retirement decision, the SSA offers a variety of useful tools on its website that can help you understand the full impact of working under 35 .
2. Not saving enough before retiring
More than half of those surveyed in the NBER Financial Regrets Survey said they wished they had saved more money before retiring. For comparison, another study by MedicareFAQ found that figure to be even higher: 86% of respondents wish they had more money saved, while 60% admitted they hadn’t started saving. invest in retirement funds early.
For pre-retirees who have to rely on their savings for more years than the average senior, having too little savings can be a serious concern. Running out of money at age 70 or 80, after decades of inactivity, is not an easy problem to solve.
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3. Not Developing a Health Care Plan
About three-quarters of retirees have expressed concerns about their health in old age, according to a study by the TransAmerica Institute. Additionally, 52% of retirees told MedicareFAQ that they wish they had prioritized their health more before retiring.
Unfortunately, early retirees can find themselves in dire financial straits if they fail to plan for their healthcare costs. Although it is commonly assumed that Medicare will cover most medical needs, this couldn’t be further from the truth.
Fidelity’s retiree health care cost estimate for 2023 found that the average senior could have to pay $157,500 (or $315,000 per couple) for health care in retirement, even with Health Insurance.
Early retirees may face greater challenges than most when it comes to accessing health care because Medicare doesn’t kick in until age 65. Anyone who left the workforce before then may have to rely on expensive private health insurance, without help from an employer. pay premiums.
4. Give up long-term care insurance
Seven in ten people aged 65 and over will need long-term care in their lifetime, and the Genworth Cost of Care Survey found that a semi-private room in a nursing home could cost $8 $669 per month, while a room in an assisted living facility costs an average of $5,350 per month.
Given these numbers, it’s no surprise that the MedicareFAQ study found that a third of retirees would like to have long-term care insurance. Unfortunately, the longer you wait to purchase this coverage, the higher the premiums become.
Purchasing an insurance policy or paying for a room in a retirement home later in life can be a particularly challenging challenge for pre-retirees who may have already exhausted their resources by the time they need this type of care.
5. Leave the workforce at a young age
Many retirees who left the workforce before age 62 ultimately regretted retiring so early, for a variety of financial reasons.
According to the NBER study, about a third of retirees would have liked to stay on the job longer. Of those surveyed, 52% said they regretted not saving enough, while 19% revealed they regretted claiming Social Security too early.
Before opting for early retirement, make sure your finances are in good shape, research how claiming Social Security at different ages will impact your benefit amount, and create a plan for how you plan to to retire – and factor in those extra home costs. renovations or trips.
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This article provides information only and should not be considered advice. It is provided without warranty of any kind.
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