Experts Offer 4 Tips on Avoiding Financial Regrets in Retirement - NerdWallet (2024)

Many older adults have high levels of regret about their finances, according to responses to a 2020 survey of Americans over age 50 conducted by the University of Michigan Health and Retirement Study.

The survey found that nearly 60% of participants regretted not saving more for retirement, 40% regretted not buying long-term care insurance, 37% regretted not working longer, and 23% regretted taking Social Security too early.

But financial regrets aren’t inevitable and don’t have to be permanent. Even after you’re retired, you have options to make course corrections.

Here are four expert tips to help you avoid or mitigate financial mistakes in retirement.

1. Plan for long-term care expenses

“One mistake individuals might make after retirement is not considering long-term care planning, including the potential need for nursing home or assisted living expenses, which can deplete their assets and put a strain on their loved ones,” attorney Celeste Robertson wrote in an email. Robertson’s Texas law firm provides legal services related to family law, estate planning, probate and guardianship.

“Someone turning age 65 today has almost a 70% chance of needing some type of long-term care services and supports in their remaining years,” according to the U.S. Administration on Aging. And they need three years of care, on average.

Long-term care can cost thousands of dollars per month. Most long-term nursing home care isn’t covered by Medicare, so you’ll need to find another way to pay.

Robertson recommends looking into options for long-term care insurance and creating a comprehensive estate plan that addresses the potential costs of long-term care.

2. Account for inflation

Nearly two-thirds of retirees said inflation and the rising cost of living was the “biggest financial shock” in retirement, according to surveys conducted from January to March 2023 by Edward Jones and The Harris Poll.

Respondents cited inflation as a shock more often than the combined total of the next three top responses — unexpected medical or dental expenses (22%), major home expenses or repairs (20%), and significant declines in the value of investments (19%).

If your earlier retirement planning didn’t account for high inflation, it might be time to reexamine your retirement finances.

“It is never too late to take action — adjustments during retirement can still make a big difference,” Lena Haas, head of wealth management advice and solutions at Edward Jones, wrote in an email.

3. Keep managing your investments

Whether it’s to deal with inflation or for any other reason, you might want to revise your investing and/or withdrawal strategies to help your money last in retirement.

It’s a mistake to look at your retirement investments as “set it and forget it,” Andrew Meadows, senior vice president of HR, brand and culture at Ubiquity Retirement + Savings, wrote in an email.

“Even though you’ve retired, you’ve still got your retirement funds to manage and it’s best to ensure it matches your current lifestyle than the one that was actively working and contributing,” Meadows added.

4. Prepare for surprises

Even with a good monthly retirement income, your finances need to be ready to deal with surprises.

“When people do retirement cash flow, one thing that they don’t really plan for is large expenses,” says Justin Prasad, a financial advisor in North Vancouver, British Columbia. Unplanned expenses such as a roof replacement or a large unexpected medical bill could cause problems, Prasad says.

And those problems might be harder to deal with now than in the past. Higher inflation means those unexpected expenses might cost more than before, while you’re also spending more on the day-to-day cost of living.

There are options to recover from a big financial hit in retirement, but they might look different depending on your circ*mstances.

Prasad has seen clients take out reverse mortgages, delay retirement, take on part-time work or re-evaluate when to draw on certain sources of income, for example. He recommends working with a qualified financial advisor to find the best option for your circ*mstances.