Saving regret

Suppose everyone were rational in their saving decisions.  Now assume that a social scientist decides to interview 10,000 people, to see if they regret how much they had saved when young.  Of this group, 8000 are old people who are still alive, 650 are in heaven, and 1350 are in hell.  The average person expresses no regret—they saved the right amount.  However, there is an interesting pattern.  On average, the 8000 living interviewees express regret for not saving more, while the 2000 who are dead express regret for saving too much when young.

This thought experiment may have some relevance to a study by Axel H. Börsch-Supan, Tabea Bucher-Koenen, Michael D. Hurd, and Susann Rohweddery, linked to by Tyler Cowen:

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.

This study excluded the dead population, and only interviewed those still living.  Further support for my “survivor bias” hypothesis comes from this finding, on page 29:

A third conclusion is that, by a number of self-assessed measures, a substantial percentage of respondents view their economic preparation to be adequate, yet they nonetheless express saving regret.

I’m unusual in having extremely strong saving regret in the other decision.  I strongly regret saving too much when young, and even when middle-aged.  (I’m now 63.)

Off topic, here’s the county where I live, and where Reagan said good Republicans go to die, in the two most recent elections:

Screen Shot 2018-11-18 at 2.02.34 PM


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21 Responses to “Saving regret”

  1. Gravatar of bill bill
    18. November 2018 at 11:02

    I too had/have the type of savings regret you have. But I remind myself that I’m only seeing one of the possible futures that could have come about. So in this particular life path, I should have spent more during my 20’s, 30’s and 40’s but it was not fore-ordained that I couldn’t have found myself on a less prosperous path now in my 50’s and needed the savings I made during the first 50 years of life. We are fortunate.

  2. Gravatar of Phil Phil
    18. November 2018 at 11:35

    Interested to know what you wish you had spent more on?

  3. Gravatar of bill bill
    18. November 2018 at 11:47

    skiing.
    (I know you’re asking Scot, not me)

    🙂

  4. Gravatar of H_WASSHOI (Maekawa Miku-nyan lover) H_WASSHOI (Maekawa Miku-nyan lover)
    18. November 2018 at 12:49

    I wonder why people feel the saving necessity. You can’t die with functional government without saving.

  5. Gravatar of ssumner ssumner
    18. November 2018 at 14:51

    Phil, Having fun, avoiding hassles. I can’t mention my greatest regret.

  6. Gravatar of Benjamin Cole Benjamin Cole
    18. November 2018 at 16:32

    I’m unusual in having extremely strong saving regret in the other decision. I strongly regret saving too much when young, and even when middle-aged. (I’m now 63.)—Scott Sumner

    Well, me too maybe.

    On the other hand, I can’t think of any material thing that ever gave me that much pleasure. The best food I ever had was backyard barbecue over oak.

    I have a sincere regret that I was acerbic and even antisocial through much of my life. I regret not having kept old friends in touch.

    Perhaps I regret that I was not a handsome celebrity with the attendant benefits (girls).

    But as they say, I did it my way.

  7. Gravatar of mbka mbka
    18. November 2018 at 19:12

    Great train of thought, Scott.

    Savings propensity implies personal discount rate, and should also scale inversely to risk-taking. Your high savings rate implies great trust in an enjoyable future where your accumulated savings can be used to great effect. That’s a nice thing if you think about it.

    And I on the other hand, sincerely don’t know why my confidence in the future is so low. For whatever reason, the present always seems to be more important than the future to me, meaning I discount the future very heavily, and concomitantly when I look at my life, I keep taking on larger economic risks than the average person.

  8. Gravatar of E. Harding E. Harding
    18. November 2018 at 19:46

    Off topic, here’s the county where I live, and where Reagan said good Republicans go to die, in the two most recent elections:

    Sad they lost (Issa and Rohrabacher especially will be missed), but the suburban realignment is, indeed, a necessary step to a healthier Republican party in the future.

  9. Gravatar of Christian List Christian List
    18. November 2018 at 20:19

    I thought for a second it’s a wildfire map.

    I told you California is the state of natural disasters.

    Don’t save so much Scott. Not in this state.

    Or is that why you are saving so much? Now, that actually makes some sense.

  10. Gravatar of ssumner ssumner
    18. November 2018 at 20:53

    mbka, My high saving rate merely implies that I was foolish.

    Christian, You can tell when someone’s lacking in perspective. They form their images of places based on scary stories in the media. California is not especially prone to natural disasters; not like the eastern half of the US. with its hurricanes and tornados.

    It”s beautiful out here this time of year.

  11. Gravatar of Phil Phil
    18. November 2018 at 22:28

    Interesting Scott.

    I’m 34, in a professional couple, and we live in a really nice house. But I’m generally averse to spending money on most things… and I do worry it’s a problem!

    Like, should we get a cleaner? I think I have an almost religious aversion to hiring a cleaner, or a gardener. It just feels wrong. It’s like I have a protestant work ethic guilt trip thing, without the actual work ethic (the garden is a mess, and so is the house (2 kids under 5). All this puts pressure on the relationship with my wife (only a little – we’re fine)

    This is really thought provoking, because I have suspected I spend too little money, but it never occurred to me to look forward 30 years and assess whether I should have spent more.

    Maybe I should get that cleaner…

  12. Gravatar of Christian List Christian List
    18. November 2018 at 22:30

    Scott,

    according to Time Magazine Orange County is the second most dangerous county in the US. Now, you are right, you can’t really trust those risk maps, I saw many of them and all of them are quite different.

    http://time.com/safest-counties/

    Nevertheless the risk of wildfires, and then mudslides and flash floods is certainly there.

    According to Cal Fire Mission Viejo looks like one of the better catches though, at least compared to places like Laguna Beach, and Cameo Shores/Cameo Highlands in Newton Beach.

    It seems a bit weird that the richest/smartest people seem to buy houses in the riskiest parts of Orange County. Or maybe it’s the other way round: They settle there because only they can afford the risk.

  13. Gravatar of ChrisA ChrisA
    18. November 2018 at 22:37

    I made the same comment over at Marginal Revolution when Tyler linked to this study.

    I regard as to what I would have spent more on – as well as vacation probably I would have given more money to my parents and other family so they could have visited us more and perhaps help my dad retire a year or two earlier.

  14. Gravatar of H_WASSHOI (Maekawa Miku-nyan lover) H_WASSHOI (Maekawa Miku-nyan lover)
    18. November 2018 at 23:04

    Is there any study of borrowing constraints frustration?

  15. Gravatar of Andy Andy
    19. November 2018 at 02:41

    Phil: definitely get the cleaner! You will be a lot happier. Just be grateful that you are in a position in life to be able to afford a cleaner, pay a good wage, and enjoy all the wonderful gains from trade that are occurring.

  16. Gravatar of Todd Kreider Todd Kreider
    19. November 2018 at 03:05

    “Phil: definitely get the cleaner! You will be a lot happier.”

    Phil: definitely don’t get the cleaner! You will be miserable. Your Protestant work ethic won’t let you sleep at night, knowing what you did.

  17. Gravatar of Doug M Doug M
    19. November 2018 at 09:47

    In an uncertain world, it is rational to save more than you think you will need.

    I am nearly fifty, with a large savings and no children to inherit my wealth. I feel no savings regret. I continue to work, and I continue to contribute to my retirement accounts.

  18. Gravatar of ssumner ssumner
    19. November 2018 at 12:30

    Christian, You said:

    “according to Time Magazine”

    Seriously?

    OC is one of the safest places in America.

  19. Gravatar of Christian List Christian List
    19. November 2018 at 15:20

    Scott,

    Yes, sir, seriously. I even gave you the link. I suppose many people in Orange County don’t even know they live in the riskiest wildfire hazard area California knows.

    http://www.fire.ca.gov/fire_prevention/fhsz_maps_orange

  20. Gravatar of H_WASSHOI (Maekawa Miku-nyan lover) H_WASSHOI (Maekawa Miku-nyan lover)
    19. November 2018 at 15:42

    Q.Higher global savings rate will push up capital price under NGDPLT?
    (It depends on portfolio preference?)

  21. Gravatar of mbka mbka
    20. November 2018 at 17:08

    Doug M,

    “In an uncertain world, it is rational to save more than you think you will need.”

    Actually I believe quite the opposite, and it relates to economic theory. In an uncertain world, the future is less predictable. This raises the discount rate and therefore reduces the propensity to save – you’d rather consume now than in the future, or ask for a higher reward to defer consumption. Anything that makes the future more predictable will increase savings and investment.

    This is also why order and stability are the most important factors in economic development, and why poor people in poor countries often prefer despotic government over chaos, including the perceived chaos of democracy.

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