5 retirement regrets and how to avoid them

Two in five retirees have ‘retirement regrets’ in later life, mainly revolving around money and their pensions, according to a survey by Canada Life. 

Fortunately, with the benefit of hindsight, those yet to retire can take steps to prevent having the same experience.

Here, Which? reveals the five most common regrets and ways to avoid making the same mistakes down the line.

1. Not saving enough into your pension 

One in six surveyed by Canada Life said they regretted not saving enough into a pension and would have increased pension savings while working – if they could go back in time. 

How to avoid it

For those who pay into a defined contribution pension, it can be hard to predict what your pension will be worth when you retire. 

By law, your employer must put at least 8% of your earnings into your pension pot. Your employer must contribute at least 3% of that amount, with the other 5% coming from you. 

But this might not be enough to fund your retirement. You can use our pension calculator to work out how much you’re likely to end up with. 

If you can afford it, you should consider increasing your contributions. For example, you could bump up the amount you put in if you've recently had a pay rise, or simply pay in a lump sum when you can.

Some employers match your contributions, so even a 1% increase could make a big difference to your pot in the long run.

• Find out more: defined contribution pensions explained

2. Not making lifestyle adjustments 

One in 10 said they would have made lifestyle adjustments while working to save more for their later years. 

This could be reducing the amount of holidays or big purchases to save more money. 

How to avoid it

It’s difficult to know exactly how much you'll need in retirement, but Which? can help.

Each year, we analyse thousands of pensioners' spending habits to create three ‘income targets’ to aim for in retirement, based on the type of lifestyle you want to lead when you stop working. 

Our research can give you get a better idea of how much money you'll need in retirement, and how much you'll need to save in advance to generate that income.

• Find out more: how much will you need to retire?

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3. Retiring too early

According to the survey, 8% of retirees wished they had retired later than they did. Just 2% wished they had retired earlier. 

How to avoid it

Whatever age you decide to retire, you won’t be able to access your workplace pension until you’re 55 years old (changing to 57 by 2028), and your state pension won't be available until you reach state pension age – currently 66 (rising to 67 between 2026-2028 and 68 between 2044-2056).

There are both pros and cons to deferring a defined contribution pension. The clear advantage is that your pension fund can continue to grow tax-free and pension tax relief is also available on pensions savings each year until you reach the age of 75. However, poor investment conditions could mean that deferral isn't worth it.

If you can access retirement income from other places, such as a company pension, deferring your state pension might be a good deal as the rate of annual increase is just shy of 5.8%. But as you're giving up more than £10,000 in income each year, you’ll need to be claiming the state pension for a number of years before you earn back what you've given up by deferring.

In both cases, it’s worth speaking to a regulated financial adviser before making any decisions about your private and state pension.

• Find out more: should you defer your state pension?

4. Not clearing debt before retirement

4% of retirees wished they had cleared non-mortgage-related debt before retiring. 

How to avoid it

If you have significant debt and you’re heading towards retirement, it might be worth releasing some money from your house to reduce it.

You could achieve this by moving to a smaller property. In fact, Which? research found downsizing could unlock as much as £414,000, even after stamp duty and fees. 

If you're over 55, you could also consider using equity release. A lifetime mortgage is the most popular type of equity release, where you take out a loan against your property that is repaid from the proceeds when it's sold. The amount you can borrow depends on your age and how much your home is worth.

However, borrowing via a lifetime mortgage can be pricey because of the way interest compounds over time. Unlike with ordinary mortgages, you don't have to make monthly repayments on a lifetime mortgage, but this can make them expensive as the interest rolls up.

• Find out more: equity release explained

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5. Not paying off your mortgage 

2% had regrets over not paying off their mortgage before retiring, but with the rise of ‘marathon’ mortgages being taken out by first-time buyers today, we could see more retirees with this regret in future.

How to avoid it

If you're worried about being saddled with mortgage debt as you approach retirement, there are a couple of things you can do to stay on top of it. 

As you repay your mortgage, you will build up the level of 'equity' you own in the property. This is important when the time comes to remortgage, as you will be borrowing at a lower loan-to-value (LTV). 

Mortgage lenders tend to offer better rates as your LTV gets lower. This can translate into a significant saving on your mortgage repayments.

You could also make overpayments on your mortgage where you can. Most lenders allow you to overpay up to 10% of your balance a year fee-free. 

Our mortgage overpayment calculator shows you how much quicker you could pay off your mortgage by making overpayments every month – and how much you'll save by doing so.

• Find out more: best mortgage rates and deals 2024

How to plan your retirement

Canada Life said its survey highlights the need to have a plan and seek advice at the earliest opportunity. 

We have a range of free Which? pensions guides – how to plan your retirement is a good one to start with.

You can get also free, impartial guidance from the Money and Pensions Service.

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