Improve Your Retirement By Rewiring Your Brain
"When it comes to retirement planning, the greatest challenge often isn't the math -- it's our DNA," says Alicia Munnell, director of the new Financial Security Initiative from the Retirement Research Center at Boston College. "Our brains aren't wired to think long-term, and retirements now typically last decades." Munnell recently spoke on this topic as she introduced a new, innovative program from the Financial Security Initiative called Curious Behaviors That Can Ruin Your Retirement.
This online program guides you through decisions you must make regarding your retirement savings, spending, home equity, and ability to work. It shows how your DNA -- your behaviors -- get in the way of dealing with common retirement risks. The goal is to learn more about yourself and how to make better financial decisions.
Based on my experience conducting retirement planning workshops and the various surveys that I've seen, including the Employee Benefit Research Institute's 2011 Retirement Confidence Survey and the Society of Actuaries 2010 report Process of Planning and Personal Risk Management, I heartily agree with the approach taken by the Retirement Research Center.
Here's the problem: Most people live paycheck to paycheck while they're working. During your years of employment, all you really care about is that your paycheck covers your mortgage or rent, utilities, insurance premiums, and other daily living expenses. Probably you don't think very far into the future. In fact, the above survey from the Society of Actuaries revealed that very few retirees -- just seven percent -- and very few pre-retirees -- a scant 13 percent -- look 20 years or more into the future when making important financial decisions.
This paycheck-to-paycheck behavior gets reinforced and ingrained for decades during your working career. You don't think about covering your living expenses in 20 years -- as long as that paycheck shows up next month, you'll be fine.
But when you retire, the valve of monthly paychecks is shut off and you need to rely on your accumulated financial resources for the rest of your life. Most people haven't given this scenario much serious thought, and they'll need to change the way they make decisions in order to make that money last. They'll need to change their financial behaviors. And that's where the innovative program from Boston College's Retirement Research Center can help.
Check it out: It may be the best 30 minutes you spend planning for your retirement.
More on MoneyWatch:
- Your New Year's Resolution to Save More: How to Make it Stick
- Retirement Planning: Trick Yourself Into Better Habits
View all articles by Steve Vernon on CBS MoneyWatch»
Steve Vernon helped large employers design and manage their retirement programs for more than 35 years as a consulting actuary. Now he's a research scholar for the Stanford Center on Longevity, where he helps collect, direct and disseminate research that will improve the financial security of seniors. He's also president of Rest-of-Life Communications, delivers retirement planning workshops
and authored Retirement Game-Changers: Strategies for a Healthy, Financially Secure and Fulfilling Long Life and Money for Life: Turn Your IRA and 401(k) Into a Lifetime Retirement Paycheck.
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