How to get investors to save more for retirement? Perhaps by saying hello to their future self

Jamie Hopkins, director of retirement research at Carson Group
Key Points
  • Research demonstrates that people think of their future selves as completely different people.
  • Getting clients to save more for retirement means getting them to identify with their future selves. How to forge that emotional connection? Technology, advisor help and even old-fashioned letter writing can help.
  • Planning for life insurance needs, long-term care, Social Security claims and Medicare could all yield positive benefits when you are more connected to your future self.
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The number of Americans prepared to meet their basic expenses in retirement has drastically declined in the last 20 years, according to research published by Boston College.

This study confirms, at least to some degree, that it's not only the millennial generation that has difficulty knowing when to cut out the avocado toast or whatever luxury de jour may be standing in the way of retirement. Retirement planning is a source of anxiety for all demographics.

The question for financial advisors now becomes "How can you get investors to turn the tide?"

Perhaps the answer is getting those people to meet their future self.

With advances in technology, researchers can create virtual avatars of our future selves using face-aging programs. An April 2019 CNBC story detailed how meeting a virtual version of yourself could help solve the problem of saving for retirement. To some degree, that notion is correct, but research shows that just thinking about our future self may not be enough.

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The problem is that we don't care enough about our future selves. Sure, we care in the abstract, but our uncertainties as to what will unfold, as well as our tendency to underestimate the pace at which time passes, creates a cognitive dissonance. This disconnection from our future selves could help explain why we often prioritize the near-term over the long-term in our decision making.

Saving for the future often means suffering now. So, when faced with the decision to spend more today or save for the future, we often revert to spending today. We push the pain of saving off to a future version of ourselves in favor of today.

This dilemma can be seen all across our lives; for example, with eating and working , too, we often say "let's start that diet tomorrow." We plan to push the pain of a new diet, workout regime, or savings goal out into the future.

The reason for part of this, even if it seems odd, might be found in research that shows that we often view our distant future selves as almost entirely different people. In fact, neurological studies have found that our brain activity when thinking about the future self closely resembles the thought patterns which our brains conjure when thinking about other people. As such, we feel okay pushing the pain of these decisions off to this person because we are not connected with the future version of ourselves.

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This disconnection between the current you and the future you could partially explain why Americans don't save enough for retirement. Why save for someone to whom you don't feel connected?

Conversely, those who perceive a closer continuity or connection with their future selves were more likely to set money aside for their future needs. A 2017 study by the Institute for the Future found that the majority of Americans (53%) rarely or never think about what life will be like in 30 years. As such, these individuals are not all that likely to feel a sense of connectedness with their future self.

Getting to know yourself

The reality is that we don't know our future selves, so we tend to discount their pains, pleasures and needs. Finding a closer sense of connection helps bridge that gap. So, what can we do to better connect with our future self and start planning for a more fruitful retirement?

Well, you could start with what was uncovered in 2011, that interacting with an avatar or photo of your future self can boost retirement savings.

Professor Hal Hershfield of UCLA's Anderson School of Management partnered with Daniel Goldstein of Microsoft Research; Jeremy Bailenson, director of Stanford's Virtual Human Interaction Lab; and several other Stanford researchers to see if connecting people with their future selves could affect their willingness to save for that future self.

The issue for many is we often get caught up in getting by today, at the expense of our future goals. But the more we can connect ourselves to our future self and goals, the more we will act in alignment with these goals.
Jamie Hopkins
director of retirement research at Carson Group

They took photos of college-age research subjects and digitally altered half of them to create virtual avatars at age 65 — complete with jowls, bags under the eyes and gray hair. This simple, but effective, technique increases the brain's connectedness to your future self, allowing to you save or take on some pain for that person today.

Additionally, with advances in virtual and augmented reality technologies, you may be able to have a conversation with a digital version of yourself or test out future retirement goals through technology.

In some cases, people who experienced this digital interaction roughly doubled what they were willing to set aside for retirement as compared to those who did not. But it is not just seeing a future version of yourself that triggers this response, it's getting connected to that person.

The "Dear Me" letter

The perspective we take when thinking about our future self can also enhance our capacity for self-reflection. Start by thinking about your future self and how it relates to the current you as opposed to starting with the current you and comparing it to your future self. This simple technique can help you connect more closely with your future self.

Research by Hershfield has shown that writing a letter to your future self, even just a few months away, can improve your connectedness and improve behavior. His research has also demonstrated that continuity between our current self and future self can have positive impacts on areas beyond simply retirement savings, including improved health and increased exercise.

While these lessons can be applied at the individual level, they can also be adopted at the institutional level. For instance, 401(k) plan providers, financial advisors and financial service companies could help improve client behavior by having them engage in exercises that better connect them with their future selves.

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Additionally, the connectedness to your future self doesn't have to stop just at your retirement savings. It can be applied to your entire retirement planning process.

Those who are more connected also positively view products and companies that their future self will utilize. So, planning for life insurance needs, long-term care, Social Security claims and Medicare could all yield positive benefits when you are more connected to your future self.

It starts by increasing your connection with the future you, so you are more willing to act on behalf of future goals.

The issue for many is we often get caught up in getting by today, at the expense of our future goals. But the more we can connect ourselves to our future self and goals, the more we will act in alignment with these goals.

Get to know your future self, write a letter to yourself, look a digitally aged photo and think about how you get from where you are today to where you want to be. In the process, you might get to know your future self and be more likely to save for retirement, since that future you might no longer be a stranger.

— By Jamie Hopkins, director of retirement research at Carson Group