Don’t Let Past Money Mistakes Dictate Your Future
Have you ever wish you could go back in time for do-over? If you were suddenly twenty or thirty years younger, what would you do? What would you change? I watched the 1980’s movie, “Back to the Future” last weekend and I remembered how much I loved the movie as a teen. While the technology they had back then is laughable, the concept of time travel fascinated me. As I watched, I wondered what I might do differently if I had a magical time machine that took me back to my younger days.
My first thought was, I wouldn’t change a thing. Everything unfolded the way it was meant to be. I am today where I am because of the past. Of course, then I came to my senses and realized that, of course, I would change a few things. After all, we all make mistakes and who wouldn’t want the opportunity for a do-over? And it was Henry Ford who said, “The only real mistake we make is the one from which we learn nothing”.
Hmmm . . . That got me thinking.
What about financial mistakes? How would I manage my money differently if I had the chance to do it over again. Aside from the obvious, like maybe buying Apple stock at $10 a share, what other mistakes have I made – and could I still have time today to fix them?
This very issue was the topic of a recent survey by Nationwide Financial ₁. In the survey, respondents ages 60-65 explained some of the big differences between what they had expected and what they actually experienced in their retirement years. According to the survey, almost a quarter (23%) said they didn’t expect to need as much money as they actually do. Nearly 1 in 5 (18%) said they wrongly assumed they could work for as long as they wanted to.
Most of them followed the tried-and-true advice in their younger years. 63% started saving early, 41% started planning early, 34% stated that they lived within their means, and a 24% even created a budget. Yet most do not believe they have been successful, and they identified mistakes that damaged their plans for retirement. But you know folks, some of mistakes they made include outdated buy and hold accumulation investment systems, when they should have shifted to a downside risk mitigation to preserve capital. Other things include extravagant (and unnecessary) purchases, tapping into retirement savings early, and waiting until after age 30 to start saving.
According to the survey, the advice that respondents would give their younger selves highlights a gap between the realities faced by current retirees and the expectations of people age 60 to 65 who are still working.
For example, current workers underestimate the percentage of income they’ll spend on basic living expenses in retirement. They expect to spend 42% of their income on food, housing and other basic expenses, while retirees actually spend 53% of their income on those expenses, the survey found.
Almost two out of three current retirees stopped working earlier than planned which can affect what are often important – and high earning- years in which to save for retirement. The average age of retirement was 60, but the average age of expected retirement was 67.
Another 36% of retirees said they received less than they expected in Social Security benefits. While you can take Social Security as early as 62, you’ll receive more per month if you wait until full retirement age – as much as a third more each month for life.
Another key finding from the survey is just 37% of savers get information about retirement planning from a financial adviser. Others rely on a mix of sources, including the internet (39%), friends and family (35%) and resources from their employer-sponsored retirement plan (31%). And one in 10 older respondents has not sought out information about retirement planning at all!
Does any of this sound familiar to you? If you’ve made any of the above money mistakes, all is not lost. No matter where you are in the retirement planning process, you can employ tactics now to help make amends and improve your financial situation. A key step involves consulting with a financial professional, one who can help you identify any past mistakes and create a plan of action.
A good financial professional will work with you to create a comprehensive retirement system that anticipates your future expenses accurately and then calculates all of your potential income sources to cover them. The process includes calculating your Social Security filing options for maximim benefits, choosing the right age to retire based on both personal and financial factors, recommending strategies to minimize taxes in retirement, as well as downside risk mitigation investment system with a heavy focus on using quantitative data to help you protect the funds you’ve saved over the years.
While you can’t completely un-do past mistakes, it’s never too late to course correct. An exercise in revising the past allows you to identify past financial snafus and then take steps to rectify them. Remember what I tell my girls, always drive forward, you can look in the rear view mirror . . . just don’t stare.
And as always - be vigilant and stay alert, because you deserve more!
Have a great week.
Jeff Cutter, CPA/PFS is President of Cutter Financial Group, LLC, an SEC Registered Investment Advisor with offices in Falmouth, Duxbury, and Mansfield, MA. Insurance offered through its affiliate, CutterInsure, Inc. We do not offer tax or legal advice. Jeff can be reached at jeff@cutterfinancialgroup.com. This information is intended to provide general information. It is not intended to offer or deliver investment advice in any way. Information regarding investment services is provided solely to gain a better understanding of the subject of the article. Different types of investments involve varying degrees of risk, including the potential for loss. Therefore, it should not be assumed that future performance of any specific investment or investment strategy will be profitable. Insurance product guarantees are backed by the financial strength and claims-paying ability of the issuing company. Market data and other cited or linked-to content is based on generally available information and is believed to be reliable. Cutter Financial does not guarantee the performance of any investment or the accuracy of the information contained in this article. Cutter Financial will provide all prospective clients with a copy of Cutter Financial’s Form ADV 2A, Appendix 1, applicable Form ADV 2Bs and Form CRS as well as the firm privacy policy. Please contact us to request a free copy via .pdf or hardcopy. 1
