Brett Arends ROI: Might This Thoughts Hack Enhance Your Retirement Financial savings By 25%?

If you're looking to get your retirement savings going but are struggling to get going, think of a new start date like an upcoming birthday, the first day of spring, or the start of the new year.

The power of this simple mind hack has just been revealed by a detailed research study at four major universities in which pension plan administrators sent mailings to more than 8,000 people.

Such a “fresh start framing… increased the accumulated savings contributions in the eight months after the mailing by around 25% more than other mailings,” they found out.

Hengchen Dai, a finance professor at UCLA and a co-author on the study, explains how the study worked.

Working with plan administrators, the researchers sent mailings to university professors and staff urging them to increase their pension contributions.

In some mailings, recipients were asked to top up their savings immediately or in two or six months, for example.

In others, they have been encouraged to top up their savings immediately or on a specific “restart” date; B. "after your next birthday", "after the first day of spring" or "after New Year".

What happened?

Of those in the first group, 7.6% have topped up their retirement savings.

But in the second case it was 9.8% – a remarkably higher figure.

In other words, if you only get people thinking about “reboots” and important dates, they'll increase their pension contributions, now or later. In addition to Dai, the researchers included finance professors John Beshears from Harvard, Katherine Milkman from Penn, and Shlomo Benartzi from UCLA.

The authors say this is the first study to conclusively demonstrate the power of this type of mind hack, known as "framing," to increase savings.

Why does it work Arranging an increase in retirement savings for a future "restart" date is effective for several reasons, the authors suggest.

Because it won't start until sometime in the future, it seems somehow less painful than starting today, they say.

After certain new start dates, we humans are more irrationally optimistic about the future, they argue.

And when we think of dates like a new season or a birthday, we focus more on the big picture, they add.

There is a lot of social science research to support these arguments, they point out.

Why do we start a new austerity program, a new diet or a “new leaf” sooner in a new year than tomorrow? It's irrational, but so are we. Zoologist Jared Diamond points out that humans are only the third branch of the chimpanzee family and share 98.4% of our DNA with other chimpanzees. (Some say it could be even more). Genetically, we are closer to our fellow chimpanzees than, for example, orangutans or gibbons. Oh, and the average human IQ is around 100. So to expect us to be wise or rational is … pretty foolish and irrational.

No wonder we tend to do so many stupid things, including spending money on total junk today and saving too little for the days when we are old and need it badly.

And no wonder it takes a little irrationality to defeat irrationality. How to trick our chimpanzee brains by agreeing to increase our 401 (k) contributions on the first day of spring, for example.

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