Whether it’s deciding when to start saving for retirement, what investment option is best or how much to contribute, there are many behavioral finance barriers at play when plan participants make decisions about retirement. These tendencies have been examined at great length to help predict how common behavioral finance biases can deter participants from making retirement planning decisions in their best interest.
Fortunately, key findings have proven that specific tips advisors provide upfront can help combat plan participants’ typical behavioral tendencies and make retirement planning seem simpler and more attainable.
Here are a few common plan participant behavioral predispositions and ways you can help them overcome these retirement planning barriers.
“I Have Plenty Of Time”: Help Visualize The Future Self
The first behavioral hurdle many plan participants struggle with is understanding the urgency of retirement planning. This tendency is frequently seen among younger generations. For the recent grads who are starting their first job out of college, saving for retirement can seem far away. Young professionals think they have the rest of their lives to save, so what’s the big deal if they wait a few years before contributing?
To help combat this mindset, try helping plan participants envision their future self. Ask questions such as:
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Where do you see yourself in 5, 10, 15, 20, even 30 years from now?
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What would your ideal retirement lifestyle look like?
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At what age would you like to retire?
Whether plan participants have considered these questions before or not, asking goal-oriented questions can get participants thinking about the lifestyle they see during their retired years. Once plan participants start thinking 30 years down the road, it will be much easier to dispel other behavioral biases about retirement planning. And, while some plan participants may not know the answers right away, it can help get the wheels turning about how to set their retirement savings goals.