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Select spoke to CFP Julia Pham about some of the biggest things retirees wish they did differently.

By Jasmin Suknanan, CNBC Select featuring Julia K. Pham, CFP®, AIF®, CDFA®, Wealth Advisor at Halbert Hargrove

Saving for retirement isn’t always an easy feat — especially when you don’t know where, when or how to start. Often times, it’s only after retirees have left the workforce and are finally spending their savings that they realize there were a few things they could have done differently.Hindsight is 20/20 and while you can’t turn back the clock, you can avoid making some common mistakes that lead to regret when it comes to saving for retirement. Below, Select has rounded up some of the biggest things retirees wish they did differently.

  1. Not saving enough money

Not saving enough money for retirement often goes hand-in-hand with not starting earlier with your savings. According to Charles Scwhab, the later you start saving for retirement the more you’ll have to put away each month in order to sustain yourself once you retire — if you start saving in your 20′s, you’ll put away 10 – 15% of your income but if you start in your 40′s, you may have to save up to 35% of your income.Plus, when you start earlier, your money has even more time to compound, which means you’ll end up with a larger balance by the time you’re ready for retirement. Starting with something — however small — is better than not starting at all.“The most common regret I hear is people thinking they haven’t saved enough and that they wish they had started saving earlier,” said Julia Pham, a Certified Financial Planner at Halbert Hargrove. “Younger clients often make this mistake. You should save 10 – 15% of your pre-tax income. That seems like a lot but it’s okay to not hit that 10% right away. Just start with a smaller percentage and work your way up because saving for retirement is a need.”

  1. Not making catch up contributions

catch up contribution is a provision that allows people ages 50 and older to contribute extra money to their retirement accounts each year to “catch up” on their savings. The standard contribution limit for a 401(k) in 2021 is $19,500 while the catch up clause allows for an additional $6,500 in savings for those ages 50+, for a total contribution of $25,000. For a Roth IRA, the standard contribution limit is $6,000 but the catch up limit is $7,000.Catch up contributions are most useful to those who did not save enough for retirement while they were younger. Still, not many older people take advantage of this provision.According to Pham, a Vanguard study found that 15% of those eligible to make catch up contributions actually do so. This is essentially money left on the table since more contributions allow your balance to compound and grow faster, and it lowers your taxable income when you contribute to a 401k or traditional IRA.Even if you aren’t able to contribute the full catch up amount, putting away a little extra money now can mean more money in the future. You may also reduce the pressure of balancing catch up contributions with your everyday expenses when you’re older by starting early and maxing out your retirement savings when you can.

  1. Not diversifying their method of saving money

There are different ways to go about saving for retirement. Most people are enrolled in a traditional 401(k) plan through their employer where they contribute a percentage of their paychecks before taxes are withheld. With a 401k you’ll only pay taxes on withdrawals made in retirement. A Roth IRA, on the other hand, allows you to make after-tax contributions to an account so you won’t pay taxes on any withdrawals made in retirement. The difference in tax obligations really sets these two saving vehicles apart.And while having one is better than having none at all, it’s best to diversify where you save and avoid putting all your money in just one basket.“I do see retirees regret only putting their contributions toward pre-tax savings accounts,” Pham said. “It’s good to diversify and contribute to both pre-tax and post-tax savings accounts because if you’re only withdrawing from a pre-tax account — like a 401(k) or traditional IRA — you’re going to pay income taxes. Sometimes it’s not ideal to pay a tax when you have a large or unexpected expense in retirement.”Opening up a traditional IRA or Roth IRA is actually quicker than you might think; because it’s not an employer-sponsored account, you can set one up even if you’re self-employed or don’t work full-time. Fidelity is one Roth IRA provider that’ll get your account up and running in minutes (you’ll need your birth date, social security number, address and bank information to make transfers).You can invest your money in a target date fund or choose your own investments. But if you want a hands-off approach, you might look into Betterment or Wealthfront, since their robo-advisors can pick the portfolio that’s right for you and automatically adjust your allocation based on your needs and risk tolerance.

  1. Retiring sooner rather than later

Around 51% of Americans retire between the ages of 61 and 65, though, the average retirement age can vary by state because of different factors such as cost of living in those areas. While a few years may not seem like they make a difference, Pham asserts that those few years can provide a little extra financial security — and it can help you avoid running out of money and having to come out of retirement.“I definitely see more people regret retiring earlier rather than later because once you make that exit out of the workforce, it’s a lot more difficult to re-enter and find something that’s on par with what you were doing before,” she said. “I have some clients who think they should have waited it out a few more years to get that extra financial security. Waiting a few more years only bolsters your financial stability.”When it comes to figuring out when you should retire, it helps to have an idea of what your needs in retirement will be. This way, you can figure out how much it will cost each year to sustain your lifestyle and take the necessary actions — i.e., remaining in the workforce for a little longer — before you enter retirement. Only 19% of workers actually have a written strategy for affording retirement.Of course, sometimes things don’t always go as planned. According to AARP, nearly half of older workers reported being forced into retirement early, which can certainly take a toll on your savings strategy, especially if you were relying on another five to 10 years of work to fund your retirement. One of the most important ways to ensure your savings progress isn’t totally derailed if something like this happened to you is to start saving as early as possible so your money has more time to compound and grow.

  1. Not having a plan for what they want to do during retirement

According to Pham, some retirees exit the workforce but just wind up sitting on their hands because they didn’t make plans for how they wanted to spend their golden years in a fulfilling way. But there’s another equally important reason why you should have a plan for what you want to do in retirement.The lifestyle you wish to lead will help you figure out how much money you need to have saved up to fund that life. One 31-year-old Select spoke to, for example, hoped to travel the world in retirement but realized that he wouldn’t have enough money to do so since he started saving later in life.If your dream retirement is to settle into a lower cost of living area and participate in minimal activity, you’ll need less money to survive compared to someone who wants to travel or spend more on experiences.Take some time to consider what’s important to you and how you see those things fitting into your life when you’re retired.

Bottom line

While it may seem like there’s so much to consider when it comes to saving for retirement, one resounding piece of advice that stands the test of time is to start as early as possible — even if you aren’t putting away hundreds of dollars each month.Take advantage of your employer-sponsored 401(k) plan since a percentage of your paycheck is automatically contributed for you, and open up a Roth IRA to diversify your savings methods. And, of course, make sure you have an idea of what you’d like to do in retirement. This can help you figure out how much you really need to save for your golden years.

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