401k participants who are decades away from retirement most likely haven’t considered what life will be like post-work. There are probably even employees approaching retirement age who haven’t given it enough thought.
But we all should—especially if we want to retire comfortably.
New research out from Capital Group found that when people envision how they want to live in their retirement years, they are motivated to save more.
“When people think about their 60s, 70s, 80s and beyond, they overwhelmingly view that part of life as a time of freedom and independence compared to their 20s and 30s,” said Heather Lord, senior vice president and head of strategy and innovation at Capital Group, home of American Funds.
“Our survey reveals that people who envision the life they want in retirement recommend saving more of each paycheck in a 401k account. This simple insight—if you can picture your retirement, you can save for it—can help Americans secure the financial future they want in their later years.”
The investment management firm surveyed over 1,200 Americans, assigning respondents to one of two groups. Researchers instructed one group to envision the lives they’d like to lead when they’re 60+. Then, they were asked how much of each paycheck they wanted to put aside for retirement. The other group wasn’t prompted to envision anything; they were simply questioned about how much they’d like to save.
Respondents who pictured their retirement years before answering “recommended saving 31 percent more per paycheck in a retirement savings plan on average than the second group of respondents.” For females and Millennials who imagined their later years, the results were even more drastic—a 40 to 50 percent upswing in savings.
“The financial services industry sometimes accentuates worries and guilt to get people to pay more attention to planning and saving for retirement. Fear doesn’t generally work,” Lord concluded. “This insight could contribute to innovative retirement plan design and behavioral techniques to help Americans build bigger nest eggs for retirement.”