Saving regret19th November 2018
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:
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