The Regret/Optionality Tradeoff

The Retirement Manifesto Blog had a post about the "5 Top Regrets of Retirees." It's a good short read and maybe you will agree with the author or disagree but an underlying current to what he isolated as regrets seemed to be about optionality that was either not preserved or was just given away. 

The first regret was not saving enough money. We've been talking for ages about the idea of doing favors for your future self. The idea there is that you never know what the future you might want to do so it makes sense to make it as easy for your future self as possible. At 30, it might be difficult to see yourself at 50 but 50 is coming and the more optionality you have at 50 or any age, the better obviously. A couple of good decisions at 30 can make life at 50 much easier. 

The second regret is starting Social Security too early. It's not clear to me why that would be a widely held regret. This certainly is the sort of thing that someone could make a mistake with. The basic building block here is that the longer you wait, up to 70, the larger your monthly payout in nominal dollars. There is a lot of nuance beyond that basic building block that is beyond the scope of today's post. If you have regret about this, there are a couple of things that can partially mitigate the mistake. You'd need to dig in further but Social Security can be paused for up to a year which will nudge the payment up when resumed and you can also pay the money back and then wait until later (doesn't seem like too many people would do that but who knows). 

For every year you wait to take Social Security, the payout goes up by 8%. That is optionality. It may not be best for your situation to take that optionality, but it is optionality and anyone who regrets their decision arguably regrets the optionality of waiting that they gave up. 

Retiring with too much debt? Observationally, it seems like people either avoid debt altogether or they are perpetually in debt whether they never pay it off or pay it off only to go right back into debt. Every aspect of life is easier when you're not making a bunch of different debt-service payments every month. There are obviously plenty of people who retire while still having a mortgage but it's not totally unreasonable that someone could be mortgage free by the time they retire or maybe have their payoff date and retirement date coincide.

If you have a lot of consumer debt, and assuming no sort of horrible medical event you're paying for, then sorry, you're living beyond your means. 

The post cited that 58% of retirees retired sooner than they expected which would cause stress even if not regret. I mean if you get let go at age 60, that wouldn't seem to cause regret as opposed to a lot of stress. This chart from the post was interesting. 

Having your hand forced either because of health reasons or something going on at work is a very real phenomena regardless of whether 58% is the actual number or not. This dynamic argues for doing whatever you can to build general resilience and optionality against any sort of unknown that might come along.

Jay Pelosky, appearing on Yahoo Finance said "we want to anticipate everything and be surprised by nothing." He was talking about tariff and political stuff but the sentiment can apply to our conversation today. I would frame it a little differently, to be able to avoid being completely undone by any surprises that come along.

Occasionally, things at home break and fixing them can sometimes be very expensive. Spending $10,000 you weren't expecting on some sort of repair would suck but having that completely undo a retirement plan would suck worse. 

If you're hand at work is forced at age 60, earlier than you planned to retire, optionality might look like not having to necessarily replace your full income by virtue of having just about enough saved to retire while preferring to not start taking from savings. With a mortgage paid off, kids up and out, expenses in that scenario at 60 could be much less than they were at 45. At 60 though and grossly undersaved for retirement there would not be that optionality to earn less without it being a problem. 

The final regret listed was neglecting health and fitness. That's a big one for me obviously. Every aspect of life is easier when you're not taking a bunch of prescriptions and spending a bunch of time in doctors offices. Certainly not in every instance but many chronic health maladies that are commonly associated with older age can be avoided and/or reversed by adopting good habits related to diet (cutting sugar) and exercise (lifting weights). 

Avoiding regret over something that I could have put more effort into is high on my personal priority list. The stoic in me realizes we can't control the outcomes but we can control our efforts and behaviors. 

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