Money Magazine’s Penelope Wang came up with some interesting techniques in her recent piece “7 Secrets to a Richer Retirement“.
In order to overcome our natural failure to truly identify with our older selves (and thus short change retirement), Wang’s experts suggest you think about the details of what you’d like to do in retirement and write them down to make them more real and increase the chances you’ll take action to get them. Another idea: visualize your favorite grandparent — if you’re male, a grandfather, if female, a grandmother — to make the older you more realistic. Research done at Northwestern has found that’s likely to spur you to save more.
Other examinations have shown that we can tap into our naturally competitive nature, Wang finds. One way to do that is to make a public promise to hit certain financial goals and broadcast that on Facebook, Twitter or StickK.com.
This point reminded me of a story that ran in the New York Times Magazine. Written by one of the paper’s personal finance columnist, Ron Lieber, it’s about people posting their financial progress — often how they’re climbing out of debt — on public forums like Networth IQ. What at first it struck me as another “look at me!” anomaly of modern American culture, eventually started to look like a pretty good system for some. Stephanie Grant, a 31-year old divorced mother of twins from Edina, Minn. explained the power of people watching when she decided to put her tax refund toward paying down debt rather than a Nintendo Wii, and blog about it. “I know people are visiting, and it makes me want to pay something else off so I can post another entry that’s something good.”
There are many many other suggestions in Wang’s story. Here are just a smattering:
- Protect long-term saving from short term distractions with automatic, specific, and permanent reminders, like e-mail alerts to yourself to “put $1,000 in my Roth IRA on Dec. 1”. Good times for set reminders: “tax time, bonus time, and after your year-end statements arrive (to prompt you to rebalance).”
- Force yourself to think of your retirement savings broken up into monthly income projections, not as one lump sum you’ve saved. There’s a calculator that helps you do that at troweprice.com. I did it and it only takes a few minutes.
- Know that as we get older we tend to become more optimistic – and vulnerable to scams. So keep up with those spam filters and “Do Not Call” list registrations.
In the piece, Wang explains this “positivity effect”:
In hunter-gatherer days, when you got older, you were no longer called upon to grab a spear and defend the tribe. “You no longer needed to be so focused on all the things that could go wrong,” says Laura Carstensen, director of the Stanford Center on Longevity.
Hat tip to reader Jason W., for pointing this piece out.