Regrets, I’ve had a few: 6 common financial regrets (and how to avoid them)

Depending on the person, financial literacy could be learning how to create a budget or file taxes, or it could mean taking the time to better understand debt management or the investment options for your pension. Regardless of how we define it, taking the time to better educate ourselves on financial topics today can have a big impact on our ability to be financially secure in the future.

As the saying goes, history is a great teacher. And when it comes to personal finance, we can learn a lot from those who have gone before us – especially what they may regret.

In 2022, the National Bureau of Economic Research (NBER) released a study on financial regret at older ages, in which 1,764 participants aged 50 and older revealed six financial decisions they wish they had made to better prepare for the future.¹ While carried out in the U.S., the findings impart valuable lessons that are relevant to investors globally.

Below, I highlight six key findings from the study and provide steps investors can take to help ensure they don’t find themselves lamenting their past financial decisions.

1. 57% of respondents regretted not having saved more.

If you want to save more, simply including “savings” as part of your budget is a good place to start. But the key to an effective long-term savings strategy is, once you’ve started saving, don’t stop, and make sure you increase the amount you are saving periodically. While that clearly takes a bit of effort and planning, there are tools to make it easier. For example, utilizing the auto-escalation feature in your pension scheme is a great way to systematically make sure you are saving a little more each year.

2. 40% regretted not buying long-term care (LTC) insurance.

35% of people over age 65 have some type of activity limitation, and about 70% will need some sort of long-term care during their remaining years.^2,3 Furthermore, 24% will need more than two years of paid care, and 15% will spend two-plus years in a nursing home.⁴

Understanding that a growing percentage of adults will need these types of services may be the nudge investors need to start considering LTC insurance. Costs will vary based on how long one needs coverage and where they live, but it’s something that needs to be discussed sooner rather than later. Remember, as with any type of insurance, you can’t wait until you need it to buy LTC insurance.

3. 33% regretted not having purchased lifetime income payments.

Investors tend to have very specific feelings, both positive and negative, when it comes to annuities. While that is the case, it’s important to view annuities as a tool, just like any other investment vehicle. And although they may be more costly than other options, having a secure, guaranteed income stream may be worth it for some investors. Case in point, more than a third of respondents to the NBER survey regretted not using an annuity or paying a higher premium to have the peace of mind of guaranteed retirement income.

If you think an annuity may be right for you, be aware that there are several different types of products available, so be sure to educate yourself on the features, benefits, costs, and how they might fit into your specific financial plan.

4. 10% expressed regret for having to depend financially on others.

While a relatively small percentage of respondents regretted their lack of financial independence, this is still an important topic for investors to think about. Financial independence hinges on all the topics covered here, but it also speaks to one’s overall level of financial confidence. Part of that confidence may come down to how much one has saved and invested, but it can also stem from having a written financial plan and clearly defining your short-, mid-, and long-term goals, as well as being collaborative and communicative with your significant other and family regarding finances.

5. 37% regretted not working longer.

Although some may cringe at the idea, the 37% of respondents to this survey – as well as several research studies – indicate that there may be quite a bit of value in working a few more years. Doing so makes it possible to earn and save for a longer period and may also allow you to delay taking Social Security. Along with that, research has shown that working longer can decrease mortality risk, sustain cognitive function, and allow for greater social interaction.

6. The regret associated with all the above increased – and in some cases doubled – when respondents were given information about their objective survival probabilities.

Many of the regrets covered in the survey hinge on the amount of time one spends in retirement. After all, the longer you live, the more money you will need to live on.

How long you might live is an important consideration, especially considering that global life expectancy at birth for both sexes has been steadily climbing since 1950 and is projected to rise to 77.3 by 2050.⁵ It’s also important to note is that the likelihood of living even longer than the average – and consequently spending longer in retirement than you expect – is relatively high, so it’s important to prepare financially for that possibility.

Learn from the mistakes – and regrets – of others

Learn from the mistakes of others. You can’t live long enough to make them all yourself. – Eleanor Roosevelt

None of us can live long enough to figure out the right choices for every option we face. That’s why learning from others’ regrets can be one of the most useful ways of improving our lives. By knowing what older individuals wish they would have done to improve their financial situations, we may be able to find a path that avoids the bumps others have encountered along the way.

The information contained herein is for educational purposes only and should not be construed as financial, legal or tax advice. Circumstances may change over time so it may be appropriate to evaluate strategy with the assistance of a financial professional. Federal and state laws and regulations are complex and subject to change. Laws of a particular state or laws that may be applicable to a particular situation may have an impact on the applicability, accuracy, or completeness of the information provided. Janus Henderson does not have information related to and does not review or verify particular financial or tax situations, and is not liable for use of, or any position taken in reliance on, such information.

Annuities are long-term investment vehicles designed to accumulate money on a tax-deferred basis for retirement purposes. They limit access to the investment as a result of a surrender charges and are subject to a 10% tax penalty on certain withdrawals. Riders are generally available for an additional charge. Variable annuities are subject to investment risk, and investment return and principal value will fluctuate.