In the quest for greater personal savings, we are now resorting to mirror tricks. Coming soon to an HR department near you: a magical computer screen that adds 30 years to your face.
Jarring, for sure. That’s the point. Seeing yourself in the future makes plain the need for saving in the present, and this jolting image should prompt workers who are enrolling in a benefits plan to elect a higher 401(k) savings rate. Workers rarely change their contribution rate once it’s set. So they end up saving more during their tenure at the company.
Voila. Thanks to a simple rendering, employees build a nest egg and retire happy. This, at least, is the theory—and there is good science to support it. I’ll get to that.
The concept of paying your future self has been around a long time. I wrote about it in my 2005 book The Power Years (with Ken Dychtwald). But the specific benefits of showing younger employees a gray-hair image of themselves surfaced only about a year ago with research at Stanford University among other places. That research was highlighted in The Wall Street Journal at the time. I also wrote about it then for CBS.
The New York Times came back to the subject this week for good reason. The original researchers are now so convinced that what they’ve found is a game changer that they are developing the software needed to put it to work. Hence, a computer program that instantly ages your image may be headed to your company’s HR department soon.
As part of the research, students were placed in front of a computer screen that either showed them as they were or as they might look in 30 years. They were then asked what they would do with $1,000 given to them at that moment. Those who had seen their future self allocated twice as much of the windfall to a retirement account. In another experiment, students who had seen their wrinkled future self said they would put 6.75% of their paychecks into a 401(k) plan compared with 5.2% from those who weren’t exposed to their future selves.
A report, Behavioral Finance in Action by Shlomo Benartzi at the UCLA Anderson School of Management, argues that it is extremely difficult for humans to envision themselves much older but that those who can conjure a realistic vision have a significantly higher savings rate. Benartzi writes:
“Many young people view their older selves heading into retirement as strangers. … This unconscious assumption of a different self in the future is demonstrated graphically by brain scans … the disconnection between present and future selves is well recognized, and it correlates with a reluctance to save. … The question is, can the psychological gap between the two selves be closed, and would this affect willingness to save?”
That’s where the enhanced pictures come into play. Seeing an image of yourself in 30 years brings your mortality into sharp focus in a way that simply thinking about your future self cannot; it drives home that you will not be able to work forever, which should lead you to save more.