Money can’t buy happiness, but more money saved for retirement can help make your golden years more comfortable and enjoyable.
Interestingly, the amount of money you save for that retirement can come down to how well or how often you picture your life in retirement, suggests a >new study conducted by Capital Group.
According to the study of 1,202 American adults, people who envision their lifestyle in their 60s, 70s and 80s recommend saving 31% more per paycheck in a retirement plan.
“Our survey reveals that people who envision the life they want in retirement recommend saving more of each paycheck in a 401(k) account,” says Heather Lord, senior vice president and head of strategy and innovation at Capital Group. “This simple insight — if you can picture your retirement, you can save for it — can help Americans secure the financial future they want in their later years.”
How individuals are getting motivated to save more for retirement
Capital Group’s survey included an experiment to better understand potential motivators for getting people to increase the amount they are willing to save for retirement. Half of the survey respondents were asked to envision the lives they want to lead in their 60s, 70s and 80-plus years before determining what percent of each paycheck to save in a retirement plan. The other half were only asked how much they wanted to save for retirement per paycheck.
“People who paused to envision their retirement years recommended saving 31% more per paycheck in a retirement savings plan on average than the other group of respondents,” Lord says. “For women and millennials, the result was a 40% to 50% positive swing in the average recommended 401(k) savings rate.”
When people pause to envision how they want to live in their retirement, they are motivated to save more, the study suggests. “This experiment demonstrated that if we can motivate a small behavioral change in people’s financial lives, the effect of compounding could significantly increase their nest egg over time,” Lord says.
People expect to live better in retirement than past generations
Nearly six in 10 survey respondents, or 58%, believe their retirement years will be more positive than that of their parents and older generations.
“Americans overwhelmingly view their own later years as a time of freedom and independence compared to their 20s and 30s,” Lord says. Most see it as a time to travel, explore new possibilities and aspire to more fulfilling experiences. “Top-ranked activities for 60 to 80-plus years include pushing themselves mentally and physically, making new friends and relationships, and making the world a better place,” she adds.
The survey also found that Americans see changes ahead for U.S. society, the workplace and the economy. Fifty percent view U.S. aging population growth as mostly positive, creating new life experiences, economic opportunities, consumer markets and jobs. Only 10% view these trends as negative, weighing down the economy and society. Some 40% believe we are in uncharted waters and that Americans need to do more to be prepared for these trends, Lord explains.
Many plan to self-fund retirement
Eighty percent of survey respondents expect that flexible and part-time jobs will play a bigger role in supporting retirement savings, and 79% feel that Americans will need more opportunities to work, earn and save later in life.
“This new definition of retirement requires a new kind of saving and investing behavior,” Lord says. “We want to tap into the optimism of most Americans about their future retirement years and help them invest for the long-term to build a bigger nest egg and protect against market downturns.”
Seventy-nine percent of people believe Americans need retirement plans that follow them seamlessly throughout their lives, as well as better financial advice and investment options to be prepared.
The takeaway: Put yourself in your retired self’s shoes. If you take the time to picture what your golden years will look like, you’ll likely be motivated to save more to help make your retirement dreams a reality.
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