Saving regret

We define saving regret as the wish in hindsight to have saved more earlier in life. We measured saving regret and possible determinants in a survey of a probability sample of those aged 60-79. We investigate two main causes of saving regret: procrastination along with other psychological traits, and the role of shocks, both positive and negative. We find high levels of saving regret but relatively little of the variation is explained by procrastination and psychological factors. Shocks such as unemployment, health and divorce explain much more of the variation. The results have important implications for retirement saving policies.

That is from Axel H. Börsch-Supan, Tabea Bucher-Koenen, Michael D. Hurd, and Susann Rohwedder, in the NBER working paper series.


A tricky aspect to this is expectations. Say at age 40 someone's on track to have $4M saved for retirement. Then a divorce and a health problem greatly reduce saving and they end up retiring with 1.5. Objectively that number is not so bad, but compared to their expectations it's very disappointing.

This could mean that personal traits might be still be good for explaining overall level of savings, but regret might be more driven by shocks that force expectations to be reset.

There is an entire blog and organization dedicated to retiring in your 20's through greater savings while working and spending less your entire life.

Mister Money Moustache. It's interesting, for sure.

Bad for GDP on the whole. These are typically productive and smart people, society would benefit if they had a full career. The real problem might be choosing the wrong career or to much friction in a mid life career change.

Society might benefit, but would they?

In the event of divorce, is not the ideal amount of savings precisely $0?

Someone plays a vicious ultimatum game.

And also paying for college

In retrospect I saved too much as a young adult. As my income climbed with my career the amount I saved in say my twenties is basically trivial compared to what I was able to save later in life. I would have been better off enjoying life more and especially taking more holidays. I am not super rich by the way - just started at a very low income. But I suspect I have usually strong future time preference.

Chris, same. The extra vacation per year that i didn't take in my 20s probably 2% of my net worth in my 40s, even accounting for growth of principal, in retrospect i would have appreciated more travel and enjoyment back then.

Depends on your career. Many People in engineering, technical, and IT will earn their most in their 20s and early 30s and see their incomes collapse later

I am an engineer.

I'd say stagnate, but collapse seems wrong. And even for this it's for those developers in SV that are out the door at 40. The rest of the worlds cares not too much as long as you can do the work. I'm 51 in IT that made a lot earlier, stagnated, then hit another income growth spurt later. I have more work than I can handle.

see their incomes collapse later

See the barracks filled with H1B serfs.

I saved in those early days, but did not really run the math on the difference between saving and investing. Some of those safety funds should have been put in Apple stock.

Of course I could have learned what an index fund was a decade or two earlier ..

My regret is having retirement investments in cash during the Dow Industrials rise from 10,000 to 16,000.

the "extra" vacation? I didn't take any vacations in my 20s and I still have that money compounded over. As for the memories ya da ya da'

Robert Herrick the Cavalier poet

Pleasure remembered is pain

I would suggest that without the habit of saving when you were younger you'd likely be saving much less now you're older.

Same experience, except that I came to realize that overwork in my initial years in the field was a key reason why my income continued to ramp when peers plateaued. The accumulated experience is worth something, and work is a learning experience as much as it is a deliverable.

"... and the role of shocks, both positive and negative."

Speaking of shocks, it will interesting to see how emerging A.I. alters people's views of savings and retirement. We are about to find out in the 2020s as it becomes clearer what increasing levels of A.I. are capable of. It isn't easy to plan for the future if you are a 35 year old radiologist...

I thought you were going to say that many people would realize they saved too much as AI makes society richer as a whole. But if you are in a country that is in a habit of letting the chips fall where they may, there's probably some cause from concern technological change may put you at the bottom of the heap.

I actually do think some are over saving because of coming A.I. but then realized maybe you need to save up for the coming Robot Wars in the 2040s.

"But if you are in a country that is in a habit of letting the chips fall where they may": I suppose the past is another country.

Why doesn't anyone ask about the "savings regrets" of businesses sekking to workers while saving, or not, for retirement, then when retired?

Of do economists today believe in free lunches?

The by cutting savings today, workers greater consumption will grow their incomes from increased demand, producing more saving and more lifetime consumption?

Economies are zero sum. Workers can't spend more than businesses are willing to give workers. In the 80s, free lunch economics led to businesses giving workers more money IF THEY SPENT IT IMMEDIATELY, relying on unelected Federal government technocrats to pick winners and losers, when workers couldn't service the resulting debt.

"Economies are zero sum". You what?

Costs - benefits = 0

You can not get a pay hike from your employer cutting your pay and benefits.

And the businesses you buy from will not get more revenue from your slashed wages and benefits.

The only way businesses can sell more is by paying workers more, in the aggregate.

What the stingy employer needs is generous employers who dominate the economy, employers the stingy employer considers stupid.

When every employer slashes wages, the economy suffers.

Wages are very low in Africa, so if low labor costs leads to the best economy, Africa must have economies that are far better than the US economy. Logically, everyone should move, not from California to Texas, but from the US, especially Texas where they believe economies are not zero sum, to Afrrica,

What the immigrants to Texas do is demand higher wages so they can spend more than native Texans, including by way of government. Except the immigrants from south of the border who will happily accept 80% of the wages of native Texans citizens, and spend only 60% of native Texans, sending the difference south, but that is not durable and so they farm more and spend more growing the Texas economy. But when they earn more that's higher costs. And when they spend more, that's higher living costs.

I'm a scientist, the realm where "zero sum" originated. Zero sum never means static, but means dynamic systems have lots of "inputs" and "outputs", which must balance precisely: zero sum.

If you are a business that wants to sell more, your first question should be "where will my customers get higher income to spend?" Tanstaafl

I'm reminded of what Mickey Mantle said: "If I had known I was going to live this long, I'd have taken better care of myself". Then there is what Jesus said (Matthew 6:34): "Therefore do not worry about tomorrow, for tomorrow will worry about itself. Today has enough trouble of its own." The problem with this advice is that, eventually, tomorrow will be today. But Jesus, being an apocalyptic prophet, believed there wouldn't be a tomorrow.

Of course, for many of us there won't be a tomorrow. My lifelong best friend was very frugal, saving and investing his passion. Then in his fifties he was diagnosed with leukemia. Eventually too sick to work, he lost his job and group health insurance. Clinging to life, he spent the entirety of his savings on doctors and hospitals. His savings exhausted, he depended on the mandatory care of hospitals, care that isn't free, and he spent his final time in this life being hounded by bill collectors hired by doctors and hospitals. Did he have saving regret? His story isn't that unusual, as many sacrifice today in order to save for tomorrow, but the ultimate beneficiaries of the savings turn out to be someone else.

Did the doctors who were forced to deny treatment, and hospitals forced by Reagan's signature to provide care they would never be paid for, have regrets for opposing tax and spend for universal health care?

Did the savings they imagined from lower taxes offset the costs they had later for impoverished sick people?

The irony being US tax and spend for health care is the same share of GDP as in Canada, UK, ... But the higher non-government cost is a boost to the health care industry revenue, employment, profits.

In other words, much higher costs are a great thing for the US health care system. Sure, bill collectors don't make people healthier, probably sicker, but they are health care industry revenue growth.

Which consumption did people regret? The authors designed their survey to remind people of this question, and the paper would be more useful with an answer.

+1 Always nice to reframe the question. Reminds me if you start asking questions about people who make a lot, and turn it to people who produce a lot.

Of course i’d rather be rich than poor, but when you add the context of skilled nursing facilities and late life medical care expenses, the answer to the question of “what does it cost to retire?” is: “how much do you have?” The system us designed to take whatever youve got.

On a related note, i’d like to see a survey of former young republicans and libertarians who are now in their 80s and 90s

Once you see the centrality of soc sec, medicare and medicade on peoples ability to age with a modicrum of grace, do they change their tune?

Once they see the abuses and scams and parasitic predators, do they still cling to the centrality of the individual consumer as all powefull?

Pyramid schemes are great if you manage to collect before they collapse. Starving the beast moves up the day of reckoning.

Or, we could do something to manage the cost side.

All elderly Republican voters in favor of cutting Social Security and Medicare raise your hand!!!

Don't Y'all realize that Social Security and Medicare are not government programs. Those elders "earned" every penny penny they get from them.

Is that Warren back there with his hand up, Warren Buffet?

I have no savings regret. We got along in modest comfort, never got rich, lived fairly frugally (which suited us) but still lived in some wonderful places, courtesy of postings for work. For many years our saving efforts consisted only of paying down mortgages, contributing to DB pensions, and accumulating a bit of cash. When I eventually tried investing it turned out well - the secret is market timing, it transpired. Heresy, I know, but there you are.

We should be financially OK until death, with one proviso. If one of us enters "care" while the other is still alive then things might be very tight.

The answer to that ought to be insurance, but nobody offers it in the UK - earlier attempts proved unprofitable.

A couple things jump out here:

1. Defined BENEFIT plan. Heresy indeed.

2. The "Big If" is of course what happens when the medical bills and skilled care come into play. Many people coast on their savings just fine, so long as they are relatively healthy and have their wits. When one or both start having health issues, need to be accompanied by 24/7 caregivers just to eat and poop, and God forbid end up in memory care, then all bets are off.

You can't really plan for, and most people can't save for item #2.

If the first of us dies cheaply and survivor of us goes into "care", the house will pay for it. But, as we agree, there are other possibilities. Do Americans tend to insure against such costs?

Medicare is the insurance program that provides the baseline. When your assets have been used up, it's medicaid.

For a while long term care policies were a thing. My experience with them is they fall pretty far short, and the provider pricing pretty much evolved to negate it anyway.

2. Yep. It’s almost as if we should have a program for seniors that pays for nursing care.

Oh, we do? It’s 42% of a $554 billion budget?

If your argument is that $233 billion a year isn’t enough (this is on top of $670 billion spent on non nursing home medical care for seniors) then just say that.

If your argument is that ALL THE STUFFS SHOULD BE FREE then just say that.

If your argument is that it shouldn’t be means tested, and rich people shouldn’t have to pay for nursing care, then just say that.

But quit bullshitting.

You seem to be wrestling with your own imagination

Unsurprisingly, you’re wrong.

But hey, just like Trump, don’t let facts get in the way of your Feels Parade.

It ain’t like the government spends $900 billion on medical care for seniors.

My god, we deserve a better left.

Who on earth are you ranting at? Do you have an imaginary enemy?

Memory loss is the worst thing.

You can beat loss of your wealth two ways: invest every dime you can in an index fund or, alternatively, spend every dime on current consumption of travel, education and building memories.

When you age, disease can rob you of all your savings but only dementia can rob you of those saved memories. That's why memory loss is the worst thing.

I wish I could forget my cuckoldry

I would think savings regret would be pretty common, as things you enjoyed in the past are gone, and the things you want now are in the present. That does not necessarily mean that poor decisions were made.

Also, you rarely hear people talk about a key risk of saving - any time you defer a reward into the future, you incur risk that it will lose all value because you won't be around to enjoy it. My grandparents saved and scrimped for decades, hoping to use the money to travel in retirement. But by the time they retired my grandmother had arthritis so bad she couldn't travel, and my grandfather developed Alzheimers. They wound up leaving all their money to their children, who fought like crazy over it. Much of their hard earned savings wound up in the pockets of lawyers.

How do you square the idea of 'savings regret' with the often-repeated observation that people near the end of their lives wish they had worked less and spent more time with family and friends? You can't have it both ways.

You could have it both ways if people reflect on the rubbishy consumer goods they had bought and now wish they hadn't. Or needlessly extravagant holidays .......

I didn't work at all in my 20s, 30s and a lot of my 40s. I smoked a lot of dope, laughed a lot, and got blow jobs, and read a lot. I'm 63 now, and penniless, but I have my own company that is now beginning to make a profit online, and I have a gorgeous, if crazy, Irish wife who I adore. I wouldn't have it any other way. I had fun when I was young, handsome and full of life. If I have to work till I'm 70 (and I'm pretty sure I will) I'll have had a fantastic run. Carpe diem.

My grandmother evidently regretted not buying a new car when she was young and could afford it. That's saving regret the other is spending regret.


My grandmother evidently regretted not buying a new car when she was young and could enjoy it. That's saving regret the other is spending regret.

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