Millions of Americans facing retirement worry they won't be financially prepared — or fear they'll have to work forever.
Some are already there. Finances and retirement were a major theme in the nearly 1,200 responses Business Insider received from Americans between the ages of 48 and 90 who filled out a voluntary survey about their biggest regrets. (This is part two of an ongoing series.)
Retirement – how to invest and how much one needs – is a black box for many. Some wish they had hired a financial advisor, while others regret making an expensive purchase. Some say they took Social Security early or retired without a long-term financial plan.
Then there are those who face unexpected problems like a cancer diagnosis, job loss, or divorce and wish they had prepared better for the emergency.
Gary Lee Hayes, 70, wishes he had been more systematic about his savings and investments. The California native served briefly in the Navy, earned a degree in public administration, and worked in mental health and manual labor positions. He had little financial knowledge when he was growing up and said he did not focus on building his career to be more profitable.
Two of Hayes' biggest money regrets are not investing in Verizon stock early on and not saving at least 10% of his salary every month. He also said that he was very liberal in his spending throughout his life, although he said that he did not buy anything that was far beyond his means. He also avoided putting money into his 401(k) and said he should have chosen stable investments instead of short-term ones.
“You can't expect to win the lottery all of a sudden,” said Hayes, who receives $1,846 a month from Social Security and lives in subsidized housing. “You can't expect someone to pass and leave you a legacy that will make your life comfortable.”
A major theme among BI survey respondents was that they lacked knowledge about investing. For some, this meant not saving enough; for others, it meant falling into some common investing mistakes.
New research from Vanguard suggests that people who change jobs put less into their 401(k), often without realizing it, and can lose up to $300,000 over the course of their careers.
Another theme among survey respondents is that they wait too long to start saving. Two separate surveys from the Transamerica Institute and Charles Schwab found that, on average, boomers are waiting until age 35 to start saving.
Nancy Seeger, 64, who lives outside of Cleveland, said she made investment mistakes that had long-term consequences for her finances. Seeger, who holds two master's degrees, has worked for many years as a teacher and health librarian. He was laid off earlier this year from his $74,000-a-year job and although he is not ready for full retirement and is still looking for a job, he is concerned that he will not be able to find another well-paying job given his age.
She told BI that she wishes she had saved more money when her children were young and started retirement funds earlier. Although he had some money, he started putting more money into his savings when he was 50 years old.
He was also unaware that because he has a pension in addition to Social Security when he retires, he will be affected by an unknown Social Security program that will reduce his monthly check. Between his $713 monthly pension and Social Security, which he expects to be between $1,200 and $1,400 monthly, he will have enough to pay his rent.
“I was lucky enough to receive a small inheritance from my parents and aunt, which saved me, but it is unlikely that I will be able to do the same for my children, that makes me very sad,” said Seeger. “I was hoping to leave, and I wanted to leave some money for my children, but both of those goals have been thwarted now.”
Seeger said he has few regrets and has “let life come to me,” although he plans to take on part-time work in retirement to supplement his income. He's still paying off cancer treatment in 2022, and because he has a few months until he's 65, he can't get Medicare and has to pay for his health insurance out of pocket.
“I've had a lot of unexpected things happen, but I've come to understand that 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 8.5 times their income in savings. A person with $1 million in savings at 65 can safely withdraw $40,000 in their first year of retirement, Bank of America says.
For some, saving 1% more can have significant financial rewards down the line. If someone making $50,000 a year contributes 5% of their income to retirement, they will save about $60,000 in less than 30 years if they contribute 6%.
Nevenka Vrdoljak, managing director in the chief investment office of Merrill and Bank of America Private Bank, told BI that calculating how much you need in retirement requires rough estimates of life expectancy, retirement spending, and retirement resources. .
“Changes in government benefits can affect income,” said Vrdoljak. “The volatility of investment returns makes it difficult to estimate how much you will save in the future.”
With cancer rates rising and diagnoses arriving earlier in life, one of the tough calculations is how to prepare for time off work and rapidly mounting medical bills.
“The need for long-term care can cause more than financial problems in retirement. It can put a burden on loved ones,” Vrdoljak said. “Investors with large assets may prefer to insure themselves against this risk. But for many investors nearing retirement, long-term care insurance can help reduce risk and the cost of care.”
PJ White, 69, never had aspirations of a lucrative career – but he never expected to be homeless.
Throughout his career, he has worked for a lab supply company, retail companies, and as a secretary for law firms. He married at 21 and bought a house, but divorced a year later, setting him back financially.
Although he says he often lives with his hands, he wishes he'd been more careful about spending money on vacations and clothes — what he calls “play money” — and set aside time to learn about investing. He said it was rare for him to have money saved each month, and his income was about $41,000. He left his job in 2008 to take care of his partner's mother.
“The money was coming in and out and going out,” White said, adding that he rarely puts money into his 401(k). “I didn't think about the retirement aspect because it was too far down the road, but now I wish I had.”
He recently lost his house because he and his partner did not have the money to pay the property taxes. They now live in a tent camping in San Diego. He lives on about $1,500 in Social Security each month as they fight to get their home back, but he said most of his money goes toward court fees. He got some help with groceries through his new health insurance company, but he still hasn't found an affordable house.
“He doesn't make any money at all, so everything is on me, and I understand,” Mhlophe said about his partner. “I'm showing signs of depression, and I have nowhere to go, no one to turn to.”
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