Daily Gains Letter

Picturing Yourself at 65 Can Help You Save for Retirement

By for Daily Gains Letter |

DL_John_7On January 1, 2011, the first raft of baby boomers began celebrating their 65th birthdays. All told, 77 million Americans were born from 1946 through 1964, and, for the next 17 years, 10,000 a day will be retiring. The Woodstock generation has become senior citizens.

Are they prepared for retirement? Americans’ confidence in their ability to retire comfortably is at historic lows, with only 21% of retirees confident they have enough money to last throughout their golden years. In 2007, before the market meltdown, 41% were confident. (Source: “The 2012 Retirement Confidence Survey; Job Insecurity, Debt Weight on Retirement Confidence, Savings,” Employee Benefit Research Institute, March 2012.)

What’s more, many American workers believe they just don’t have enough extra money to set aside for retirement—not surprising when you consider 43% say job uncertainty is the most pressing issue facing America today, with many saying they have virtually no savings or investments. The same report shows that 60% of workers report the total value of savings and investments (excluding primary home and defined benefits plan) is less than $25,000.

What will it take for those baby boomers born in the late ’50s and ’60s to better prepare for retirement? Experts think some of the biggest barriers to saving for retirement are psychological. And the best way around that could be as simple as picturing your aged self at retirement.

New research has found that providing a virtual glimpse into the future could help motivate people to save more for retirement. The study showed that people who saw age-enhanced images of themselves were more likely to save more for retirement and take a more proactive approach to long-term financial planning, as compared to those who weren’t exposed to their future selves. (Source: Hershfield, Hal E., et al., “Increasing Saving Behavior Through Age-Progressed Renderings of the Future Self,” Journal of Marketing Research November 2011; 48: S23–S37.)

In an experiment conducted by New York University, people who saw age-enhanced images of themselves said they would put 6.8% of their paychecks into a 401(k), compared with 5.2% from the paychecks of those who didn’t see their future selves.

In a similar experiment, when participants came out of a room, they were asked a number of questions, including what they would do with $1,000. Those who had seen the image of themselves as older allocated twice as much to the retirement account as those who did not see themselves as they aged. (Source: Hershfield, Hal E., et al., “Increasing Saving Behavior Through Age-Progressed Renderings of the Future Self,” Journal of Marketing Research November 2011; 48: S23–S37.)

The big question is: how much do we care about our future selves? If you care a lot, you might plan for retirement. If you care a little, you’ll probably end up entering your golden years less financially prepared. That said, regardless of self-esteem, a vivid, realistic image of our future selves can change the way we save.

Ignoring the needs of your future self is one way to create problems for your present self. By procrastinating, we put all our retirement and financial responsibility on a future self—one that will be, we can only presume, more patient, organized, financially aware, and fiscally prudent than we are today.

Sadly, that mythical future you does not exist. Why? When the future arrives, we’re still the same person we were last week, last month, and last year. If we don’t want to save for retirement today, what’s to say we’re going to want to at some future date?

Our attitude toward retirement is not going to change unless we change. That’s why we sometimes need motivation; like seeing an age-enhanced image of ourselves.

Want to see how you’ll age? At Face of the Future, from the University of St. Andrews, visitors can input their age and gender, upload an image, and see what they will look like at various ages.

Once you have that image, why not make it the screensaver on your computer or hang it somewhere in your home to remind you of your future self.

What are some simple ways to begin saving for your retirement? Consider creating two bank accounts: one for spending and one for saving. Ensure you cannot get access to the savings account from the ATM.

People rarely change their 401(k) deductions once they’re set. Whether you saw your future self or are just motivated to start planning for retirement, consider making a bigger deduction.

Fast-forwarding the aging process might seem like a gimmick, but solid evidence suggests that seeing your future self can help motivate you to kick-start your retirement savings.

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