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By Dr. Jim Dahle, WCI FounderOlder people are full of wisdom. While not as revered in Euro-American culture as in many, elders simply have more experience than the rest of us, and that experience can be very relevant. History might not repeat, but it often rhymes. So, I pay attention when they talk, especially when 1,000 of them talk.
Business Insider recently did a survey of 1,000 “older Americans” about their regrets. Given the source, it was no surprise that those regrets had a pretty heavy financial tilt. Although not terribly surprising, I found them very relevant to white coat investors. I plan to see what I can do to avoid having those same regrets, and I hope you do, too.
#1 Not Saving Enough for Retirement
The median retirement savings in America is $87,000, although the average is $334,000. If your household is headed by someone 65-74, that average moves up to $609,000. Let's apply the 4% rule to those amounts and then add in the average Social Security benefit of $21,408 to it to see how much someone could safely spend per year.
- $87,000 × 4% = $3,480 + $21,408 = $24,888
- $334,000 × 4% = $13,360 + $21,408 = $34,768
- $609,000 × 4% = $24,360 + $21,408 = $45,768
Considering the median American household income is now just over $80,000, I don't find it hard to believe that many retirees, presumably now living on $24,888-$45,768 per year, wish they had saved more for retirement.
If the median American household saved 15% of its $80,000 income for 30 years and earned 5% real on it, it could retire with a portfolio of $797,000 in today's money. That might not seem like a lot, but it's 1/3 more than average. If a household got its income up to $120,000 a year and saved 20% of it, that would be $1.6 million, supporting an income of $64,000 + Social Security—more than the median household income.
White coat investors are presumably earning a median income closer to $400,000. Twenty percent of that grows to $5.3 million over 30 years at 5% real. The math is the math. If you want to avoid regrets in your later years, you need to save enough for retirement. The more you earn, the easier that becomes, but trust me when I say it's not that hard to spend an entire $200,000, $300,000, or even $500,000 of income.
More information here:
Some Sobering (and Scary) Statistics on People’s Retirement Preparedness
How to Start Saving for Retirement
#2 Making Mistakes During the Retirement Process
I found this particular regret fascinating, although it appears from the article and its comments that the main mistake was simply claiming Social Security early. That is almost always a mistake (ill health being the main exception), yet 30% of Americans claim Social Security at the earliest age possible, 62. Only 10% wait until age 70. Delaying Social Security is the only “inflation-adjusted Single Premium Immediate Annuity (SPIA)” you can buy these days, and let's be honest, most Americans need one. Don't miss out on your opportunity.
Other mistakes might include failure to do Roth conversions, poor choices around pensions, paying too much for advice, getting bad advice, failing to get needed advice, poor investment selection, bad asset allocation, bad investment behavior, buying too much house, poor debt management, and failing to have a plan for dealing with Sequence of Returns Risk (SORR). You either need to learn to do this stuff yourself or pay a fair price for good advice. Many WCIers who have otherwise done a fine job as their own financial planner and investment manager would benefit from at least a one-time consultation with a fee-only financial planner when approaching retirement. Don't be penny wise and pound cheap.
#3 Not Making the Right Career Choices
The best career advice I know of is to do something you love, that you're good at, that does a lot of needed good in the world, and that pays you well. If you do that, it's hard to say you made bad career choices. Even with good career selection, however, you can still end up with a bad job, work too much or too little, retire too early or too late, fail to negotiate fair pay, or make a plethora of other career-related mistakes.
For now, try to maximize the enjoyment and income you can get from your career, but pass on this knowledge to young people making career choices now. They need to know that many older people really regret their career choices.
More information here:
Will More Money Make Me Happier?
Is Dentistry Worth It? Comparing It to Being a Pediatrician, a Planner, and a Plumber
#4 Not Prioritizing Education Enough
This is probably somewhat related to #3. “I should have been a lawyer, but I didn't want to go to college and ended up in cubicle hell instead.” Or maybe someone ended up working with their hands in a trade and then found their body was worn out by their 50s, before they had accumulated much. This probably isn't a huge issue for white coat investors. But taking on too much education is at least as common for this crowd as not getting enough. Doctors can't seem to resist another fellowship, degree, or certification—even when it doesn't increase their career enjoyment or income.
There is also plenty of education that is not related to your career. Learning is usually a good thing, and it adds enjoyment to life. Certainly, it makes you more interesting to other people. Docs tend to be lifelong learners. Don't let that habit stop when you become competent, much less retire.
Regret minimization is an important aspect of building a happy, purposeful life. Learn from the mistakes of others so you don't have to make all the mistakes yourself. Do what everyone else does and you'll get what everyone else has, for better or for worse.
What do you think? What are your biggest regrets? What regrets have you heard from older Americans?
I like to listen to older people. Especially wise older people. I asked a retiring ward clerk with 30+ years of work at the same job in the same chair her happiness index and she said 10/10. Later she told me she took off a point because she could have gone to college longer to get a better, more important and fulfilling job.
I’ve asked many older men their happiness index number and almost none of them give a number higher than eight, suggesting they are still looking for something: meaning, purpose, money, accolades, influence, legacy, lost years, or something else.
Women seem to do better and I have talked to many of them that are above 8/10 on happiness and life satisfaction. Maybe we should do a post on why women are more able to reach the top of this scale.
It seems that men have “farther to fall” after retirement, although this is changing. Women frequently have broader social networks. It also may be in the framework for evaluating this that the women have lower expectations?
It seems that if you invest wisely, make few large mistakes, practice retirement by going part time for a while, and have lower expectations, you have a better chance of reaching the elusive 9/10. It helps to stow your “work ego” in a box and accept less influence while having a handful of meaningful activities to focus on besides work.
Being at 9/10 also has some luck in it: avoiding serious happiness sapping injuries and illnesses. Money can’t buy new brains and joints, although these days you can get shoulder, hip, or knee surgery…with varying results.
Perhaps a fit middle-aged professional woman would get higher scores when asking men and would get lower scores asking women. Dr. Ellis, it may lower satisfaction scores when a same sex physician asks an older individual their happiness. The “grass is greener” when a benchmark for comparison is standing in front of you asking the question.
I miss your longer posts, Jim. Everyone else still writes long posts; I think you should too.
Don’t worry, DoctErk. Jim has got a 4,300-word post coming on Nov. 11.
This might be the first time I’ve been accused of being too succinct. I actually try very hard to come up with short posts.
This is one of those bird’s eye views of career planning that I really like and appreciate. In fact I will forward it to my son when he is receptive enough.
#1, 2 and 4 I have handled well.
My own biggest regret is within #3. I made the correct career choice as a family doc, but joining a corporate medical practice owned by a university has been a big mistake. Now I can say that I should have seen it coming, but initially it looked ideal. Giving a corporate entity full control over your schedule and time commitment is a colossal mistake. Even at part time I was working over 60 hours a week. It was not the cause of my retirement, but it certainly would prevent me from returning.
I have told this to every young doc and resident who asks my advice. I understand that not every corporate practice is automatically evil, but I have yet to hear of one that is not.
At 73 maybe I’m not “elderly” enough for this survey, as none of them seem to apply, but we all have regrets.
1. #1 on the list is not talking to one of my elderly neighbors enough to find out that he had been investing in the
Vanguard S&P500 index fund since it came out in 1976. I did not even learn about Vanguard until around 2010 and index funds a few years later. Much lost in that mistake. As they say experience is gained from our mistakes, that was my biggest.
2. Right behind the above is too much trading during the working years before about 2010. Lots of “experience” gained here, but the cost is sort of lumped in with #1.
3. Not doing enough traveling in the first 10 years of retirement. Though we did travel pretty much every year, now that we can’t do it for health reasons, it is missed.
Great points for consideration in preparation for retirement, Dr. Dahle. Social security claiming strategy is one of the most debated topics in retirement planning. There was a very interesting debate recently between a proponent of the early SS claiming strategy published in Kitces.com, with a rebuttal by Laurence Kotlikoff. Both made very interesting points.
I think every situation is very different, and a decision must weigh a lot of other variants. Is the claimant still working? Does he/she have enough in a cash cushion to sustain a downturn of the market happening right at the time of retirement? What is the SS of the spouse? What is the health status of the person? And, finally, what percentage of annual income will SS benefits support? Personally, I had always planned to delay till 70. But I am not sure how I will answer those questions in a few years when a decision needs to be made. I hope that will not be one of my regrets!