The other day, I was looking at some prom pictures our friends posted to Facebook - prom pictures of their high school senior son, that is. Not only were they great photos, but they also hit me with a bit of a shock. I very clearly recalled when that young man was born, along with where I was working at the time, where we lived, and a host of other very vivid life details. Mostly, though, I suddenly felt older…much older.
Think about who you were, where you were, and what you were doing 10 or 20 years ago. Those memories are pretty vivid, aren’t they? Is there anything you wish you would have done differently back then if you could? Of course there is.
Do any of those regrets include past financial decisions? Of course they do. Looking back at our younger selves with a critical eye is relatively easy, if not cliché, with hindsight being 20/20.
Now, try to imagine what your life will be like (and what decisions you haven’t made yet that you may then regret) when you reach your 70’s, your 80’s, and your 90’s. What if you live to be 100? Difficult to imagine, but perhaps living to a much older age is more likely than many of us think.
If you find it challenging to picture yourself at one of these future milestones or beyond, you are not alone. Most of us get “stuck” in the present and assume that we are, for the most part, going to be the same person in the future that we are now, with the same knowledge, preferences, attitudes, outlook on life, and so forth that we have today. Social psychologists Daniel Gilbert and Timothy Wilson have labeled this tendency the “end of history illusion.”
This is an interesting phenomenon in that we assume our future selves are not likely to be too different from whom we are now. Yet we can clearly look back and note how much we have changed over the past years and decades with respect to how we make decisions and view life in general. Why, then, shouldn’t our future selves have the same experience? The logical answer is, of course, that we will. It is just difficult for us to see ourselves as older.
According to Hal Hershfield, Assistant Professor of Marketing at UCLA’s Anderson School of Management and former Assistant Professor of Marketing at New York University’s Stern School of Business, we struggle to see ourselves as getting old primarily because we view our future older selves as strangers, not as who we actually are. Unfortunately, this disconnection from our future selves can also lead us to postpone or even avoid entirely making important financial choices that will ultimately benefit us in the future, such as saving and investing enough money during our younger working years. Temporal discounting also plays a role, which is our tendency to place more value on choices and experiences that give us more immediate gratification, rather than waiting or investing for a future outcome that we have difficulty visualizing as a potential reality.
Have you noticed how television campaigns that raise money for shelter pets or orphans always include vivid images of the animals and children? They do this because imagery positively affects how much money people contribute to these causes. Those puppies, kittens, and little children tug at our heartstrings because the images are very real to us. If only we had access to a time machine and could travel forward to snap a few selfies of our future older selves, perhaps we would feel more inclined to contribute more to our retirement plans at work…
Fortunately, you don’t need a time machine to see exactly how your older self might look. Most of us do not have access to the same sophisticated imaging software that professional research specialists use, but we do have the next best thing: smartphones! The AgingBooth app is a free and convenient way to instantly “age” yourself by adding some wrinkles, grey hair, jowls, etc. to a recent photo and begin to connect with your future, older self. Using this idea, research conducted by professor Hershfield revealed that people who used a tool that included aged photos of themselves tended to contribute on average 6.2% – 6.8% of their earnings to a workplace retirement plan, compared with only a 4.4% – 5.2% average contribution rate among workers who used a tool that included images of their “current self.”
Not convinced an additional 1% or 2% contributed to your retirement savings will make much of a difference? Use this qualified plan calculator to help you visualize how much more money your older self might have if you increase the percentage of your paycheck that you contribute to a retirement plan at work. Better still, if your retirement plan offers it, take advantage of a contribution rate escalator to automatically increase the percentage of each paycheck that you contribute to your retirement plan each year. Your older – and wiser – future self will thank you.
