If you follow financial news, you see the statistics all the time. The average 401(k) balance is $10,000. Or less, depending on the report. Seventy percent of Boomers haven’t saved nearly enough for retirement. Only fifteen percent of people eligible to participate in an employers’ retirement plan do so. Even less participate to the full extent allowed by law. By any measure, all of the reports tell us that no one saves for retirement.
Why does no one save for retirement? We all know it’s coming; it’s not a secret that retirement is out there. With every passing birthday we get older. We see the articles in the news and the advertisements for retirement products. Whole books are written about what to do in retirement. Intellectually we know that doing the things we want to do in retirement — traveling, pursuing hobbies, or doing nothing at all — requires money. Not to mention the expenses we know are coming for health care. Yet very few people in this country save anything for retirement and many of those who are saving are saving far too little. Why?
I hit upon a possible answer a few weeks ago in a book about global warming, although I didn’t know it at the time. I wish now I could remember the title of the book so I could give credit, but sadly I cannot. (This is what happens when you read a lot. Books start blurring together and you can’t remember who said what. ) Anyway, the author was arguing that the reason why humans don’t react more quickly to global warming is because we’re not evolutionally trained to deal with the far future. For most of human history, our existence was defined by the immediate future. Where was the next meal coming from? Would the sick person live until the next day? Would the bear kill us before we could kill it? Just getting from one day to another was an accomplishment and it left us no time to contemplate the distant future. Why think about the future when there is a very real chance that you won’t be here tomorrow?
It’s only been in the last two hundred years or so that technology and medical care have evolved to the point where we now have the luxury to think about the future. Unfortunately, now that we can think about the future, we aren’t fully prepared to deal with it. We have no trouble envisioning the future and thinking about it in abstract terms. However, when it comes to taking action, we are still hampered by our ancient selves. We want to take action and we know we should, but the ancient part of our brain is still saying, “Why bother? We might not be here tomorrow and, even if we are, the future is so far away as to be less important than what’s going on today.” It’s this way when we try to deal with global warming and I think it’s this way when we try to tackle retirement savings.
You see this every day in the excuses we give for not saving. “I could be hit by a bus tomorrow and I wouldn’t have had a chance to live for today. I want to spend today.” Or, “I’ve got plenty of time. I’ll tend to it later.” Or, “I know I should, but that’s so morbid I’d rather think about the happiness of today.” We know what we need to do, but our actions place the present ahead of the future. It takes a real act of will to overcome our evolutionary programming and save for the future we know is coming.
So how do you overcome the innate tendency to avoid saving for the future? First, don’t use your evolutionary fault as an excuse. Don’t tell yourself that it’s okay not to save because you’d rather live for today. Don’t tell yourself that you might not be here tomorrow so you should spend. True, you might not be here tomorrow, but the odds are good that you will be and you have to be ready for tomorrow. When you give in to that kind of thinking, you’re setting yourself up for failure.
Second, practice your willpower. It takes willpower or a conscious act to overcome a lot of our evolutionary tendencies. We overeat because, some argue, that evolution taught us to eat as much as we could when it was available because there might not be food available tomorrow. You have to consciously decide to eat less. It’s the same with saving. You have to consciously decide to save and then take action. If you just go with your tendency, you’ll spend all of your money today because you might not be here tomorrow.
Third, automate all of your retirement savings. If it’s automatic you have less chance for your ancient self to talk you out of saving. That little voice isn’t there telling you that you could die tomorrow, or that you have plenty of time so why worry. Just put it all on automatic and silence that voice. You might miss the money for a little while, but eventually you will adjust to living without it and you won’t miss it.
I’m not saying that it’s not your fault if you aren’t saving. It’s tempting to say, “Oh, see, we’re not programed to save so it’s not my fault.” Just because it may not be a natural tendency to prepare for the future doesn’t absolve you of responsibility for doing so. You know what you need to do so you have to make the conscious decision to take action and prepare for the future. Don’t be one of the sad statistics we see in the news. Save for your future, teach your kids to save, and maybe in another thousand years we’ll have evolved to the point where preparing for the future is innate. Assuming global warming doesn’t get us first…