Check out our Video on this topic here!
In today’s blog, we want to break down the top regrets that we see retirees face in addition to the roadmap we use to try to help them through their golden years.
Time and time again, like a broken record, we see that money doesn’t equal happiness.
We look at money more so as a tool you can utilize to accomplish your goals but not having a clear plan for how and what you are spending it on can lead to unintended consequences.
For example, the “once in a lifetime excursion” that starts with a $10,000 budget but ends up ballooning to over $60,000.
Dream vacations tend to be a focal point for many when planning out their retirement.
But what happens when you start with one number in mind, and very quickly all of the unintended ancillary expenses add up to something you never could have imagined.
The dopamine hit from spending money and checking an item off your bucket list takes control and next thing you know you’re facing an uphill battle when it comes to maintaining your daily lifestyle.
With that said, this next regret seems just as, if not more, prevalent.
Picture this: You've worked your entire life in a cramped city apartment, dreaming of that perfect retirement home.
Maybe it's a lake house with a dock, or a sprawling ranch with mountain views. The day you sign those papers feels like victory.
You sell your apartment to then buy your dream home. The alleviation from being cramped or even claustrophobic in your old home instantly feels great. You’re surrounded by nature as opposed to congested traffic and you can see the beautiful stars above your head each night.
The twist here is that sometimes, retirees feel the need to avoid excess debt in retirement and in this instance, you purchased the home in cash utilizing a substantial hunk of your retirement savings to avoid having debt in retirement.
And the problem is, among other things, the cost of maintenance on this dream home is something you never expected.
Taxes, landscaping, routine maintenance, you name it. It all adds up.
Now Regret number 3 is something we may all be able to find ourselves guilty of at some point in life, but that doesn’t make it any better.
Let’s see if this situation sounds familiar to you in any fashion:
“I’m going to travel cross-country so I just bought myself a 45 foot camper and the open road is calling my name.”
Things start off nice, planning out trips to national parks, driving along scenic routes, and traveling to warm climates for the winter.
Then comes the reality of driving the monstrosity, figuring out where to park, maintaining the vehicle, and even convincing yourself that you need to take more excursions to make the purchase worth your money.
Now we just use the camper to illustrate the point but we have also seen this happen with other purchases as well. This could come in the form of a luxury boat, a $300,000 classic car, you name it.
While the actual item may be different, the pattern tends to remain the same: big purchase, big dreams, small usage.
Regret number 4 is always a tough conversation to have because it not only can snowball monetarily but also emotionally.
We want to preface this by saying we’ve seen many times where this situation occurs and it works out in an amazing fashion, but we’ve also seen times where less than desirable outcomes unfold.
After saving your entire life and finally potentially feeling comfortable, the focus can shift in making sure your children are taken care of.
This could include paying down student loans, buying the child a home, or even giving them a substantial sum to save a business.
While this may seem like the right thing to do each time, and all you want to do is see your children succeed, not only can these costs add up quickly, they can also in some cases become dependencies.
The business investment can turn into a bailout; the house purchase can be upended when the child is out of work.
Next thing you know, you’re out hundreds of thousands of dollars and nothing to show for it.
A survey bySavings.comshowed that 50% of U.S. parents with children over the age of 18 provide them with some sort of financial support.
And a survey by Thrivent stated that 40% of U.S. parents have had their savings goals impacted due to supporting their adult children.
This next regret is one that in our opinion can turn one’s retirement upside down and can also make for major headaches during your working years.
It seems like everywhere we turn these days, the talk of “passive income” is around us.
You go to a seminar, or you see a commercial, and the next thing you know, you’re taking $1 Million of your retirement savings to invest in rental properties.
And while fortunes have been built in real estate, the situations which tend to be less thought of or spoken about, are the ones that can have a negative impact.
The tenants not paying rent, the time and money consuming eviction process, the repairs needed over time, and even the phone calls at random hours due to the unexpected.
Next thing you know, your passive income has morphed into a full time job and a massive headache.
And truth be told, when you add up all of those potential situations, it brings the question to mind if that’s really how you want to spend any portion of your time and money in retirement.
Each scenario we’ve shared follows a similar pattern.
The journey begins with excitement and the thrill of finally being able to afford or embark on something you’ve thought about many times before.
Then comes the justification that you’ve worked hard, you can afford it, and you deserve it.
And in many cases we’ve seen this is followed by the reality that there could be hidden costs and unexpected complications.
So, what we want to do now is outline some of the red flags you can look for when navigating through these situations:
Warning Sign #1: You're justifying the purchase.If you find yourself saying "I deserve this" or "I've worked hard for this," try taking a pause.
Emotion-driven decisions are not always logic-driven ones.
Warning Sign #2: You're not calculating the true cost.The sticker might not be the real price.
Consider factoring in maintenance, taxes, insurance, and opportunity cost. What could that money earn if invested instead?
Warning Sign #3: You're making the decision quickly.We believe large purchases or investments should not be impulse decisions.
In these cases, maybe sleep on it or talk to someone whose advice you value as a sounding board.
Warning Sign #4: You're not considering future you.Will 80-year-old you be grateful for this purchase, or will you wish you'd kept the money for healthcare, home modifications, or long-term care?
Warning Sign #5: You're buying happiness.If you're purchasing something to fill an emotional void or to recapture a feeling, you could be setting yourself up for disappointment.
Recognizing the warning signs can be a useful first step. Next comes the question: “How do I avoid these traps without living in fear?"
We don’t like to think about things as having to choose between enjoying retirement and protecting your future.
So instead, we use a framework to help gain a better understanding of what’s at stake.
First, we discuss never spending more than 1% of your total net worth on any single purchase without serious consideration.
Next,before making any major purchase, ask yourself: "Am I buying an experience or a thing?"
Experiences have the ability to create memories and happiness while things may create maintenance and regret.
Then ask yourself, “Will this purchase still bring me joy in five years?”
“Will I still be able to use it and will I still be glad I bought it?”
Then account for what you are not doing because you made this purchase- What opportunities am I giving up?
Lastly, will this purchase help you sleep better at night, or will it keep you awake worrying about money?
The Final Word:
The retirees who avoid these regrets follow a simple principle: they prioritize flexibility over possessions, experiences over things, and security over status.
Now we want to make clear that we are not telling you to avoid any of the purchases above. For some, their plan may be thought out and these purchases fit well into their new lifestyle. We suggest always working with your financial professional when considering these larger purchases or expenditures so that you can build a plan that will work for you.
Disclaimer:
Rockline Wealth Management (RWM) is a registered investment adviser located in Islip Terrace, NY. RWM is registered with the U.S. Securities and Exchange Commission. Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission.
Rockline Wealth Management does not offer tax or legal services. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation.
All information presented is believed to be factual at the date of publication. This blog should not be viewed as advice for any individual and is intended for general informational purposes only.
All investment strategies have the potential for profit or loss. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for a client's investment portfolio.
Asset allocation and diversification do not ensure or guarantee better performance and cannot eliminate the risk of investment losses. The opinions expressed and material provided are for general information and should not be considered a solicitation of financial advice or for the purchase or sale of any security.
Real-life and fictional examples given in this blog should not be viewed as guaranteed outcomes when investing. Past performance is not indicative of future results and every individual’s investment circumstances are different. Individuals should consult their financial professional before implementing their investment plan.
Certain information contained herein constitutes “forward-looking statements,” which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “project,” “estimate,” “intend,” “continue,” or “believe,” or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties, actual events, results or actual performance may differ materially from those reflected or contemplated in such forward-looking statements. Nothing contained herein may be relied upon as a guarantee, promise, assurance or a representation as to the future.