Successful planning boils down to two key factors:
- Working with accurate information
- Managing behavior
It probably comes at no surprise that financial planners mostly struggle with the latter of the two. Planners, like myself, have considered and tried a number of techniques to motivate our clients. While retirement is typically my client’s primary objective, it seems like everything else takes priority. I believe it’s because smaller issues are cropping up in my client’s face daily vs the threat of retirement which may be way off in the distance.
Brian Stoffel, author at The Motley Fool, recently published an article on what they believe is the best motivational tool for clients to succeed, particularly when it comes to retirement. They agree that advisors have tried all sorts of behavioral tactics to encourage clients to save, but most don’t have a lasting effect. After reviewing a FedEx case study alongside a chart produced by Merrill Lynch and Age Wave, they determined that people are best incentivized to save when there is a specific target in sight. This means having a number to shoot for and simply saying – when you reach this target you can retire. Whether it takes you 5 or 15 years, that’s when you can retire. “Simply put, just about everyone loves life more once they’ve exited mandatory work.”
In addition, most people fear retirement because they are concerned about running out of money. It seems impossible to continue affording our current lifestyle. However, this study finds that the priority of affording all our lifestyle choices becomes less important if the trade-off is freedom. “What’s really important to your sustainable happiness is having freedom of time: to do the things you want to do, and see the people you want to see. That realization creates a titanic shift in your own personal finances: It cuts down dramatically on your spending, which raises your level of savings while at the same time lowering what you’ll actually need to have your basic needs met.”
If you combine these two findings your target should be easier to attain, making the idea of retirement possible and reason to save for it a top priority again.
Read the whole article at The Motley Fool.