Saying hello to your future self with gray hair and wrinkles may help you sock more money away for retirement. That’s what Stanford researchers found out with a virtual reality experiment that could turn into a new tool for retirement planning.
We’ve heard a lot about people not saving enough for retirement. AARP calls it the “Live Now, Worry Later” mentality among many of today’s young adults. Putting money away for retirement doesn’t seem to make sense if you can’t imagine a time when you’re not young and healthy anymore.
Enter Stanford researchers. In a 2009 study, they used virtual reality goggles and sensors to help test participants experience elderly versions of their selves. Images of the participants were morphed into what they might look like when they are much older. Another group of people were only shown current versions of themselves.
When people in the two groups left the virtual reality environment, they were given several tasks to do. One of them involved a money allocation test. According to the Wall Street Journal, they were each given a $1,000 check and were told they could use the money to do one of four things. They were allowed to buy a gift for someone special, to invest in retirement, to plan a fun event, or to put money into a checking account.
Researchers found that people who experienced their older selves put more than twice the amount of money into their retirement savings than people who only saw their younger, current selves. The WSJ says easier-to-use virtual reality tools are being developed to help tackle this aversion to retirement saving.
It’s a dire situation that’s getting worse. And if the incoming Trump administration makes any cuts to entitlements like Social Security or Medicare, retirees may find themselves in an even tougher situation.
The lack of retirement planning could become more of a crisis as Baby Boomers retire and pump more seniors into the U.S. population. As it stand now, many people dream about retirement. Unfortunately, they also dream about how they will have enough money to do so.
AARP did a survey about retirement strategies among workers in the Northwest state of Washington. The survey found that 77 percent of the participants were fairly confident they would retire someday. But, it also found that most people had not calculated how much money they will need for retirement, and that 45 percent had saved less than $25,000 to do so. Many had less than $5,000 in their retirement savings account.
Winning the lottery is a popular strategy to fill the retirement savings “gap”. The survey found that 9 percent of the participants expected a lottery jackpot would save the day, and their retirement plans.
Other great strategies include getting an inheritance, making wise investments, and working until late in life, possibly by starting a business. But according to AARP’s Washington state director Doug Shadel, you can’t rely on sheer luck. It’s also a good idea to start early with your plans.
The survey included responses from 1,000 people across three generations of residents ages 18 to 64. They were either working or looking for work from. So, some respondents had many earning years in front of them while others were on the verge of retirement.