Behavioral finance experts say these 5 things can make you richer in your old age
Americans face so many financial responsibilities — housing, family, transportation, student debt and health care — but they are also on the hook for funding their own retirement, especially as many companies in the private workforce have moved away from providing pensions. Not everyone in their 20s and 30s, or even 40s, are thinking about retirement, or strategizing how best to amass enough money for when they get there.
Behavioral finance experts shared a few mental tricks people can use to save more, and better, for retirement: “It is a push and pull,” Calvin said “There are positive aspects and pitfalls people can suffer with.” The standard rule of thumb is to contribute as much as the employer match, and then some if possible. They can also balance investing in a 401 with other savings vehicles, such as a health savings account or individual retirement account.
Envisioning yourself in the future — having accomplished a successful career and achieving goals you saved for, perhaps with some gray hair — could make a huge difference in how you perceive the value of today’s dollar. Many young adults couldn’t picture themselves older, and likened saving for their future selves to giving money to strangers, a 2016 Prudential study found.
Workers should consider when they’d like to retire, though, which will help them understand how much money they need to save, how much time they have left to save, and how they should invest those savings. Target-date funds are investments tied to a specific year in which investors may retire. For example, someone in his early 30s may invest in a 2050 target-date fund, assuming he will retire in his mid to late 60s.
The key is to spend on what you value, said Erin Lowry, author of “Broke Millennial Takes on Investing.” She has a line item in her budget for lattes, because she enjoys them and going out for one takes her out of her home . “We won’t be perfect at it all of the time, but if you prioritize what you value and spend in alignment with that, it gives you more control,” she told MarketWatch.
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