Got a few minutes to really think about how you want to live your life in retirement? It might motivate you to save more.
New research that involved a hidden experiment shows that when people first envision the lives they want to lead once they reach their 60s, they recommend saving more per paycheck in a retirement plan than those who did not first give any real thought to life in later years.
“The takeaway is simple but powerful — if you can envision your retirement, it can positively impact how much you’re saving,” said Heather Lord, senior vice president and head of strategy and innovation at Capital Group, which released the study this week.
The research, which also explored the changing views of retirement, involved a survey of 1,202 adults in April. Half of the respondents were first asked how much should be set aside for retirement. After that, they answered a variety of questions that explored specifics about how they want their life to look like in their 60s, 70s and 80s.
For the other half, however, those questions came first — and then participants answered how much should be saved. On average, that group recommended saving 31 percent more. Among millennials, the suggested amount to save averaged 52 percent higher.
By and large, retirement savers can use all the help they can get. New research from the Stanford Center on Longevity suggests people should generally be saving twice what they actually are.
Of course, filling out a survey and actually taking action to save more are separate things. Lord said the next step would be for 401(k) plan sponsors and the like to help retirement savers visualize what they’re saving for before deciding how much of their income to put toward their nest egg.
“Imagine having an envisioning exercise before making a decision,” Lord said.
The survey also showed that 58 percent of survey respondents believe their retirement years will be more positive than that of their parents and older generations.
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