Stories | June 1, 2010

Forward thinking

Seeing an older version of yourself can boost retirement savings, a research paper suggests

It is possible that seeing a "future self" makes the implications of financial choices more vivid.

The Bucks blog from the New York Times reported on the interesting study, submitted in response to a US Treasury Department request for ideas to improve workers' retirement prospects.

Double my savings
It said people in an experiment shown a version of what they might look like in the future put twice as much money into a test retirement account than participants who were presented simply with their mirror image. It may counter what is known in behavioural economics as hyperbolic discounting - or our tendency to consider the consequences of choices less the more distantly they fall in the future. 

My "shy and retiring" savings account
Another idea in the blog was to promote having several retirement accounts and to name the accounts in such a way that the end goal is explicit.
"Researchers have also shown that people tend to divide their money into separate mental accounts for various purposes (think travel or dining out) and that earmarking savings to specific goals (college savings, for instance) tends to increase saving rates," wrote Bucks blog. "George Loewenstein, a professor of economics and psychology at Carnegie Mellon University, has proposed applying these concepts to retirement."

eZonomics team
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