Why We Experience Regret Over Savings--and What We Can Do About It

Millions of Americans exiting the workforce--and many more actively participating in it--appear to exhibit a single financial regret that’s rooted in their youthful decisions: They cite not saving enough for their retirement as one of their biggest financial regrets.

Regret is probably familiar to us all and, just like with our other emotions, it's quite complex. In fact, beyond feeling regret about the decisions we've already made, we can also feel it about the ones that we have yet to make. This is an important point because regret over retirement savings can manifest not just after you retire, but while you are in the process of preparing for it.

Let’s take a closer look at the psychology of this fascinating emotion and see what lessons we can draw to help overcome regret that can stem from retirement preparation.

Reconciling Regret

Coping with regret is indeed a challenging feat. After all, it’s impossible to undo decisions made in the past. How can we cope with the unpleasant feeling that this emotion elicits? First and foremost, it’s counterproductive to simply try to stop thinking about the cause of your regret. Say someone tells you not to think about a white bear. What's the first thing you think of? A white bear!

To move toward the future with your best foot forward, you can consider these steps:

1. Re-evaluate your regret. First, think about why you are experiencing regret over your savings. It’s possible you may have nothing to regret at all. According to a 2018 study, as many as two thirds of retirement-aged adults reported wishing they have saved more. In fact, regret over savings was present among the wealthiest, the highest earners, and even the most financially literate in the sample! It appeared that an unanticipated financial shock, rather than sociodemographic or personality traits, was the most robust predictor of savings regret. Yet despite their regret, people also reported to be in generally good financial standings. In other words, people appeared to experience regret over savings even when they made good decisions.
2. Reappraise emotions. Regret is naturally a negative emotion that can have an impact on our well-being. When you're in a stressful situation, are you more likely to suppress your emotions or to reframe your situation to promote positive emotions? Research has shown that the second strategy, called reappraisal, is more beneficial than the first strategy (known as suppression). For example, “reappraisers” are generally less depressed, more satisfied with life, and are even more positively rated by others than are “suppressors.”
3. Forgive yourself. Self-blame is a significant source of regret, making it easy for us to ruminate over our savings account. There are, of course, numerous barriers to saving. People may want to save, but they simply cannot afford to do so. For most, paying the bills on time likely takes precedence over saving. Retirement savings aren’t all that different, as many have cited the inability to save as a major reason. Psychological science teaches us that self-forgiveness yields psychological benefits, such as decreased negative affect and bolstered motivation to improve. Clearing ourselves of looming regret by setting strategies that maximize financial well-being can help set us on a course to enjoy our retirement.

Can We Prevent Regret?

Regret isn’t limited to things that we’ve done in the past. In fact, sometimes our desire to avoid future regret altogether can discourage us from investing. Even if retirement is still decades away, there are some steps we can take now to prevent us from having any regrets down the line.

Here are three simple strategies derived from the literature that people have used to prevent future regret:

1. Apply specific rules to make and justify quality decisions. Think about why it’s important to save for retirement and identify strategies you can easily take to at least start saving. Translate these into specific rules for action. One simple way to apply rules in decisions is to use a worksheet, like the one we have created to help guide investors.
2. Have someone else make the decision for you. At first glance, this strategy may seem odd in the context of personal finance decision-making. Yet it can be an effective way to help people save for retirement, as demonstrated by the success of automatic enrollment workplace retirement plans. Defaulting people into a retirement plan removes the need to make decisions about this matter, which serves to make saving easier.
3. Anticipate regret anyway. Even the most studious of savers still experience regret over how much they have saved. This means that we can reach all of our retirement goals yet still feel like we could have done something better. Hindsight, of course, always has 20/20 vision: Our hindsight bias leads us to believe that something is more predictable after it has happened than before. In other words, as Zeelenberg and Pieters wrote: “Sometimes, the anticipation of possible regret is deemed to make the experience less aversive.”

With each decision we make we face the possibility of regret down the line. This emotion, of course, isn’t pleasant to experience and has potential to cloud our financial decisions. Ruminating on our decisions, however, will not help us make better decisions in the future--after all, we can experience regret even after making good choices.