Retirement Savings Regrets, I've Had A Few

by Sherrill St. Germain
April 2016

In celebration of Financial Literacy Month, the Web site NerdWallet recently interviewed employees on the topic Lessons We’ve Learned About Retirement.  I thought it might be fun to do the same....

What were the biggest or most unexpected lessons you learned when it comes to saving for retirement? 

I was surprised to see how quickly a retirement nest egg can grow when you “set it and forget it.”  In my first job, I was fortunate to land at a company where money was a popular topic for discussion among employees, who were mostly number-loving engineers.  So although I’d never heard of a 401(k) before this, their input prompted me to jump in with both feet right from Day 1.   As a kid who’d never been exposed to anything more interesting than a bank savings account, I was amazed at how the account grew. Of course, it didn’t hurt that this was back when Peter Lynch was still managing Fidelity Magellan.

Some time later, after becoming a financial planner, I was taken aback to learn the extent to which “set it and forget it” can be taken too far. Not infrequently, new clients in their 40’s and 50’s would come in with their entire retirement savings invested in exactly the same two or three funds they chose right out of college. Surprisingly often, these were, in fact, Fidelity Magellan and Fidelity Contra.  Those funds undoubtedly served them well early on, but didn’t provide anywhere near enough diversification, especially as they became mid-lifers.                

What do you wish you would’ve done differently when it comes to saving for retirement? 

Speaking of diversification, a second big retirement savings lesson was to take advantage of company stock plans… wisely. At my second job out of college, I was having a field day with the Employee Stock Purchase Plan as the company’s stock rose quarter after quarter, year after year, along with its prospects for success. Then I found out the hard way that a stock can drop 60% in just a few days. There is a silver lining though. Later, as a CFP®, I found myself relating this story often to convince reluctant clients to diversify out of overly large company stock positions.

What is your most challenging point when it comes to saving for retirement? 

As a serial career changer, I’ve taken time off periodically to go back to school and/or pause to revisit the question of what I want to be when I grow up.  This has meant periods of little or no retirement saving, along with missed time contributing to Social Security. In the end, I wouldn’t have had it any other way, but sure am grateful for the coworkers who clued me in about starting early.

Anything else? 

Yes! Back in the early 2000’s, I was a new self-employed expecting to have limited retirement saving opportunities.  Instead, I was delighted to learn about the recent creation of the Solo 401(k), which allowed significantly higher contributions than the SEP-IRA traditionally used by self-employeds.   While not available to all self-employeds, solos can make employee contributions at the same level as W-2 employees. And unlike W-2 employees, they also get to decide if the employer (i.e. themselves) makes a contribution as well.  This turned out to be a boon for me and several financial planning clients.