Improving retirement savings behaviors is ultimately an exercise helping people learn how to delay gratification. Convincing people that they can surmount the discomfort that comes with deferring pleasure for the benefit of their future selves is, well, really, really hard.
Researchers have identified a “Proteus effect”; differences in real-world behavior based on changes in how we are physically represented in a virtual world. In an exercise reminiscent of Calvin and Hobbes transmogrifier, researchers use software to “age-morph” photographs of young adult volunteers to create senior citizen avatars of the college-age study participants.
In one study, participants who saw their gray-haired future selves reported they would save twice as much compared to those who did not.
In another study, participants were shown avatars of themselves that smiled when the saved more and frowned when they saved less. Participants “whose avatars were morphed into retirement age said they would save 30% more than those whose avatars were not aged.”
Hal Ersner-Hershfield, a psychologist studying how emotion and time perspective impact long-term financial decision-making, and currently a visiting professor at Northwestern University’s Kellogg School of Management, led the study.
Any number of real-world applications might come out of the Stanford research. Dan Goldstein of London Business School, another psychologist who worked on the project, suggested an interesting one; “[a]n employee’s ID photo could be age-morphed and placed on the benefits section of a company’s website.”
Jason’s article mentions several other experimental ideas from academic laboratories that show promise. One finding that could form the basis of a host of applications comes from research sponsored by ING Financial and conducted by Shlomo Benartzi of UCLA, Sheena Iyengar of Columbia University, and Alessandro Previtero of the University of Western Ontario.
Their research illustrated that when participants were asked to think about their retirement in specific terms, they were more likely to take positive action. They found “that when people spend three to five minutes imagining and writing down how they would feel in a comfortable and worry-free retirement, they become roughly 25 percentage points more likely to increase their savings on the spot. “ (Emphasis added).
Given the disjoint between retirement savings behaviors people pledge to adopt and the actions they actually take (Jason mentions a couple interesting gaps in his article), the clear impact of the imagining and writing exercise is all the more impressive in its results.