Regret Is a Powerful Savings, Planning Motivator: New Study

Specifically, 57% of participants report regretting not having saved more. A smaller but sizable group (40%) regrets not buying long-term care insurance, while 23% regret that they did not delay claiming Social Security benefits and 33% regret not having purchased lifetime income payments. Other findings show 10% express regret for having to depend financially on others, while 37% regret not working longer.

Key Findings and Caveats

According to Hurwitz and Mitchell, a deeper dive into the data across the three groups demonstrates how providing individuals with objective life table information makes a significant difference in their outlook. Most importantly, respondents shown objective survival probabilities expressed twice as much regret about not having purchased long-term care insurance and 2.4 times greater regret for not having purchased lifetime income payments, compared with the control group.

Hurwitz and Mitchell say their analysis shows "important population heterogeneity" when it comes to the role of objective longevity information and the expression of regret. For example, self-reported "healthy" people given objective longevity information were 43% more likely to express regret about not having saved more, according to the authors.

On the other hand, the act of drawing people's attention to longevity actually seemed to reduce regret about saving too little or not purchasing long-term care insurance among Hispanic American respondents. Conversely, once provided with such information, African American respondents regretted claiming Social Security early by an additional 55% compared with the control group.

Conclusions for Wealth Planners

As Hurwitz and Mitchell point out, some prior studies have suggested that people experience regret when they compare the potential results from having made one choice to those from other choices. Regret is less likely, on the other hand, when people are unable to compare the results of the choice they made versus other outcomes.

"For instance, if someone does not understand or does not think about anticipated longevity, that individual may be less likely to experience regret in later life regarding financial decisions made when young," the authors posit. "Moreover, regret aversion could lead individuals to avoid information about other possible outcomes, as well as the risks of the chosen option."

Ultimately, Hurwitz and Mitchell hypothesize that, since many people avoid obtaining objective survival information, providing them with such information will increase their chances of experiencing regret and potentially alter financial choices relevant for old age.

"Our results illuminate a major reason older people end up with financial regret, namely because they had inaccurate perceptions of longevity when they made key saving, benefit claiming and insurance decisions," the authors conclude. "This has an important policy implication, in that providing people with objective longevity information when they make key financial decisions could help them avoid making mistakes and hence avoid regret in later life."

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