Very few people determine how much they need to save for retirement and then actually put aside the necessary amount. And once in retirement, not very many spend time ensuring their savings will produce a reliable, lifetime income.
Behavioral scientists have been scratching their heads over this phenomenon for years, studying how people make tradeoffs between present and future rewards.
Your ‘Future’ Self and Retirement
Researchers affiliated with the Stanford Center on Longevity recently conducted research with a provocative new twist: linking your current self with your future self to see how that affects your behavior. Picture yourself in a few decades (your 70s, 80s and 90s), they say, and you’re more likely to take steps to ensure that you’ll be financially secure in retirement.
One common explanation for the typically low savings is known as “excessive future discounting.” Simply put, it means that when faced with a choice of spending today versus saving for the future, people can’t resist pulling the trigger now. Present needs are more concrete; so is the gratification from meeting them. It’s hard to grasp the measure of your future needs, because they’re vague.
Buying vs. Saving
For most of us, buying stuff today provides a much bigger psychological boost than delaying a purchase. Immediate needs may also overwhelm future planning, particularly for those living close to the edge financially.
So the trick is getting yourself to think more about the long term.
A paper written by researchers affiliated with the Stanford Center on Longevity, Increasing Saving Behavior Through Age-Progressed Renderings of the Future Self, found that when people think about their future self, the neural patterns activated in the brain are often surprisingly similar to those sparked when thinking about a stranger. As a result, they tend to have trouble picturing themselves in their retirement years, which means they accumulate fewer financial assets than the minority of people who can vividly imagine their future.
But the researchers used a technique to help people visualize their life down the road — and it had a powerful effect on potential savings.
The Importance of a Photograph
The Stanford team found that test subjects who used software that turned a current photo of themselves into one showing how they might look in a few decades were willing to increase the amount they’d save for retirement by 40 percent compared with those who didn’t use the software. The reason: They could see their future selves.
“The face-aging software lets you interact with your future self,” says Hal Hershfield, an assistant professor at New York University and one of the paper’s co-authors. “When you do this, you’re more likely to be much nicer to you in the future.”
To meet your future self and help you see the point in saving more for retirement, all you need is to link to Merrill Edge’s free software called Face Retirement on a computer with a built-in camera. The software takes your photo, asks your age and sex and then shows photos of what you could look like every 10 years for the next 50 years.
Once you see yourself in the future, you can spend the time to estimate how much you’ll need to save for a comfortable retirement when you will look that way. You can run the numbers with the Employee Benefit Research Institute’s Ballpark E$timate calculator, which can be found on Next Avenue.
3-D and Your Retirement
So what are the prospects for picturing your future self?
Here’s where it gets really wild. Soon, “virtual reality labs could let you enter a virtual world where you can see realistic, full-body 3-D renderings of your future self,” says Dr. Jeremy Bailenson, founding director of Stanford’s Virtual Human Interaction Lab and author of Infinite Reality: Avatars, Eternal Life, New Worlds and the Dawn of the Virtual Revolution. “You might see yourself in an impoverished state if you don’t prepare sufficiently for retirement and then you could see how good your world would be if you take steps now to save more. That would really amp up the emotional impact of the financial messaging.”
Remember that famous quote from Yogi Berra? “The future ain’t what it used to be.” Well, don’t let it be said that the future you just ain’t what you used to be.
Take steps now to envision life in a few decades and you’ll thank yourself when you get there.