An ambitious project from the Stanford Center on Longevity (SCL) attempts to improve retirement outcomes by encouraging pre-retirees and retirees to plan ahead for the challenges they face as they transition into retirement.
The widespread lack of forward-looking planning among people approaching their retirement has vexed retirement planners and researchers for many years. Often, people put off making important decisions, only to later find themselves in a serious crisis with limited options. By planning ahead, many problems in retirees’ later years could have been prevented.
The SCL study explores the interventions and messaging that could be used by practitioners and researchers to help people anticipate future challenges and be more proactive in addressing these challenges. SCL recently released its findings in a report titled Disconnected: Perception vs. Reality in Retirement Planning.
As part of the study, SCL researchers interviewed 21 experts from the financial industry and academia. These experts agreed that in most situations, people will experience better outcomes if they engage with the important decisions instead of ignoring or putting off these decisions. However, many people need a boost to encourage and motivate them to spend time learning about their options, the positive outcomes they might enjoy if they take action, and the risks of inaction.
One message from the study comes through loud and clear: Pre-retirees and retirees want and need help with the critical retirement decisions they face. This represents a significant opportunity for financial advisors, financial institutions, and anybody else who wants to help people plan ahead for a better retirement.
The SCL study also reveals that there are no silver bullets that can be used to encourage people to spend time making these important decisions. Instead, it’s going to take some effort to carefully structure effective interventions and messaging that will influence pre-retirees and retirees to plan ahead.
Consider a three-phase framework to structure help
Based on research in psychology and behavioral economics, the SCL report suggests a three-phase approach for developing communications that will help people make better retirement decisions:
Phase 1: Engage and Educate. Draw attention to the importance of making the decision and motivate people to spend time learning more about their options.
Phase 2: Guide. Provide a step-by-step approach that helps then address the various decisions they need to make.
Phase 3: Enable. Address, mitigate, or remove any barriers to making each decision.
Unfortunately, financial advisors and other practitioners often skip Phase 1 and jump straight to the solutions in Phase 2, overlooking the importance of motivating their clients to engage with the decisions and helping to remove any barriers to implementing their decisions. This can also happen to individuals who might have good intentions to make good decisions but just don’t seem to follow through. Phases 1 and 3 of the above framework can help give them a boost to follow through on their intentions.
10 tips for motivating behavior change
Here are 10 tips practitioners can use to help pre-retirees and retirees spend the time it takes to address the important decisions they face:
- Connect them emotionally with the impact of their decisions.
- Influence them with stories of people who faced similar decisions, and ask them to reflect on the stories of their family and friends.
- Emphasize the peace of mind and control that can result from making important decisions.
- Ask thought-provoking questions to encourage their curiosity.
- Break the process into small, manageable steps, so it doesn’t seem overwhelming.
- Carefully balance positive and risk-avoidance messages—encourage them while not being too rosy, and warn them without paralyzing them with fear.
- Strategically use loss aversion and framing. Most people prefer to avoid losses, but it’s important to define the loss they want to avoid.
- Ask people to reflect on their strong points, and use affirmations to strengthen their resolve.
- Consider timing and life-stage factors, such as their age, family situation, and the environment at work.
- Provide lots of encouragement and congratulations as they complete each decision.
Both the framework suggested here and the 10 tips can help close the substantial gap that exists between people’s expectations for retirement and the reality of their modest financial resources.
And if you’re an individual planning your own retirement, you can use both the framework and tips to give yourself a boost. Given the importance of these decisions, you’ll need all the help you can find!
The Link LonkOctober 12, 2022 at 04:44AM
https://www.forbes.com/sites/stevevernon/2022/10/11/new-study-tackles-one-of-the-hard-problems-of-retirement-planning/
New Study Tackles One Of The Hard Problems Of Retirement Planning - Forbes
https://news.google.com/search?q=hard&hl=en-US&gl=US&ceid=US:en
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