Hickock & Boardman Retirement Solutions

Behavioral Impediments Can Stall Retirement Preparations

Tue, 07/28/2015 - 05:19 -- Shaun.King

There are many behavioral barriers to saving for retirement, but have you ever likened those hurdles to picking fruit salad over cake? This light-hearted analogy kicks off Curious Behaviors That Can Ruin Your Retirement, an interactive program on behavioral impediments to retirement planning by the Center for Retirement Research at Boston College.

The Center’s program invites users to explore how their DNA gets in the way of making smart financial decisions. The goal is for the user to learn some key insights about themselves and with that knowledge, better understand how to plan for retirement.

The 10-minute series of exercises starts with a few warm-up questions, and then the host suggests a break and asks users if they prefer fruit salad or cake. While he notes that most respondents pick fruit salad at the onset of a quiz, he says people are more likely to pick cake afterwards since our impulsive side takes over when we are stressed.

“Our capacity for rational thought is limited,” explains the host. “As these questions stress the rational part of our brains, the bigger bit (the instinctive, impulsive bit) takes over and we go for the sugary snack.”

“Retirement planning is choosing fruit salad; it’s less tasty but far more nutritious. It also takes rational thought,” the host adds, and suggests: “When planning for retirement, take things a step at a time and don’t overload your circuits; you’ll have plenty of time later for a slice of cake.”

This Mind Jam exercise, and each following chapter, includes a Learn More page of interesting statistics, data, and videos. For instance, to further illustrate the problem with brain-overload, two images show what happens to brain activity when drivers multi-task.

Other chapter topics delve into the following subjects:

  • Living in the Present – Longer life spans and retirement years mean people need to consider making mindful changes now to better prepare for future needs.
  • Ignoring the Numbers that Matter – Understanding the relative value of dollars in terms of what those dollars can or cannot buy in the future. The follow-up Learn More section goes onto explain how past profits and losses are history, and that people must focus on improving their current well-being.
  • Too Optimistic – Self-assessments may not be accurate, so it’s important for individuals to think smart, take reasonable precautions, and have a plan for costly events or situations.
  • No Time for Sad Thoughts – Aging means less tolerance and people increasingly put off sad thoughts, such as old age or death. Individuals need to take these events into account and plan for their future as well as the future of a surviving spouse.
  • Foolish Pride – Being prepared to make changes and adjustments, such as working for a younger boss, since one-third of people over 65 remain in the workforce.
  • Hyper Cautious – Realizing there are safe ways to draw a reasonable amount out of retirement savings so a money-in-the-bank sense of security does not come at the cost of a person’s living standards. Without this realization, a sense of security could be misplaced and make it difficult for the brain to consider how best to use retirement savings.
  • Trapped by the Past – Downsizing is an emotional decision, but a move to a home that includes a better layout and location can be beneficial during retirement.
  • Procrastination – The number one barrier to making retirement more secure since it gives people “the illusion of more time tomorrow” and puts off important decisions.

As the program points out in closing, people tend to be optimistic and live in the here and now. However, a secure future means people need to start making plans now, by utilizing a step-by-step approach since retirement planning takes time.

This program and others by the Center are available for use or distribution free of charge. I invite you to try it out for yourself and see if you don’t find some value in this fun, friendly, but thoughtful approach to improving retirement planning. The self-paced program could be another great training tool for your retirement plan participants.

The opinions voiced in this material are for general information only and are not intended as authoritative guidance or tax or legal advice. You should consult with your attorney or advisor for guidance on your specific situation.