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The Most Common Regrets About Retirement

Interest Rates vs. Inflation

The battle between interest rates and inflation is far from over. If the government continues raising interest rates to keep inflation in check, the resulting high rates will keep dragging down the economy. After all, high rates increase borrowing costs for everyone, from consumers trying to buy a house to business owners trying to build a new factory. Cost-cutting measures may even result in laying people off, leading to higher unemployment and more economic trouble.

Investing Fundamentals

Here at Nelson Financial Planning, we like to regularly review the two fundamental essentials of good investing:

  • Be consistent: Consider that over the last 30 years, the S&P 500 index gained an average of 10% per year. If you remove the very best 22 trading days from the total 7,554 trading days spanning those three decades, the return drops by half to just 5% per year. This statistic certainly underscores the importance of investing consistently rather than trying to time the market.
  • Be diversified: As of the end of July 2022, the 42 largest stocks in the S&P 500 drove 50% of the performance, essentially carrying the same weight as the 462 other stocks in the index. This is worth considering because it reveals that your portfolio may not be as diverse as you thought, particularly if you own a lot of index-oriented funds.

Our Thoughts on the College Loan Forgiveness Program

At Nelson Financial Planning, we don’t believe college loan forgiveness is an appropriate action. For one thing, this decision affects everyone, whether you have student loans or not. If we add everyone’s student debt—which is in excess of $500 billion—to our country’s existing balance sheet, it can only mean one thing—higher taxes.

We also take umbrage with the fact that this program throws personal responsibility out the window. Joel Garris, one of our Certified Financial Planners, grew up in a single-parent household where the only source of income was his mother’s salary as an elementary school teacher.

Because of this, he opted to attend a state school, where he earned his engineering degree for free thanks to the Pell Grant and scholarships. Then, Garris and his wife borrowed a cumulative $120,000 to attend law school. They made this choice of their own free will and squared their debts over time, so why can’t the rest of society do the same?

Don’t get us wrong—we know that the goal is to help folks who are floundering in college debt and can’t seem to pay down the principal. But the high eligibility limits should make you sit up and pay attention.

Single people who earn up to $125,000 are eligible for college debt forgiveness, and a married couple is eligible if they make up to $250,000. If someone earning $10,000 a month—or a couple earning $20,000—can’t figure out how to make student loan payments, that shouldn’t be anyone else’s problem. Maybe these people need to create a budget and control their spending if they can’t get their debts in order with that kind of income.

Debt forgiveness is typically treated as taxable income, but this program won’t even generate a reaction on the debtors’ tax returns. It is considered a “gift” from Uncle Sam, so it’s tax-free, running contrary to any existing tax principles involving debt.

Don’t we already have a problem with way too much money in the system creating inflation and causing high interest rates? And now the Feds are ready to just throw another $500 billion into the mix?

In short, we believe the college loan forgiveness program will have ripple effects through all aspects of Americans’ financial lives. Instead of transferring individuals’ debt to the federal government and throwing away any notion of personal responsibility, perhaps we should focus on helping people prepare for financial emergencies, make wise investments and debt decisions, and get ready for retirement.

Biggest Regrets People Have About Retirement

Hindsight is always 20/20, but when it comes to your retirement, you don’t want to look back and say, “Woulda, coulda, shoulda.” Here are some of the most common regrets people have about retirement and how best to avoid them.

“I wish I had planned earlier.”

Far too often, people put off retirement planning and somehow think they will still have a successful retirement. But you have to begin with the end in mind, which means you should start saving for the future now. The best techniques to avoid this regret include:

  • Pay yourself first: Set money aside for savings, retirement, or a big purchase you’re anticipating before paying your ordinary expenses.
  • Invest consistently: It’s all about time in the market, not timing the market.
  • Maintain a budget: Track “money in, money out” each month. If your income or mandatory expenses change, adjust your discretionary spending accordingly.

“I wish I had made a plan for my income in retirement.”

This regret comes from not understanding what retirement income will look like—the amount it will be, where it will come from, what frequency to expect, and what the tax implications are. Simply put, retirement income planning doesn’t get as much focus in the financial services industry as accumulating assets leading up to retirement. So it’s important to choose a financial planner who will integrate retirement income planning into your overall retirement plan.

“I wish I had made a plan for my spare time.”

A successful retirement is about more than just finances—it’s about figuring out the emotional aspects and how you’ll spend your newfound free time. Work routines create a sense of purpose for many people, and that changes dramatically when you retire. For your physical and mental well-being, consider now how you plan to spend your time in retirement—and determine whether you can fund such a lifestyle with the retirement income you expect to generate.

The Certified Financial Planners at Nelson Financial Planning can help you change your life with a successful financial plan that provides peace of mind for the future. We help clients of all ages and income levels plan now to help them avoid regrets when they retire. To learn more, please contact us online or call our Winter Park, FL, office at 407-629-6477.