This may sound painfully obvious, but I swear it’s backed up by solid research: Those who plan have more money. In fact, the research indicates that people who even think about planning save more and spend less.
I know it sounds too simple, but decades of research say that the average person who thinks even a little about retirement planning ends up with almost twice as much money in retirement as those who reported they didn’t think about it at all.
It’s called the Theory of Planned Behavior, and it states that the pure act of thinking about the future affects our behavior.
But the numbers I am seeing about retirement funding tell me a whole lot of people aren’t planning or thinking about it at all.
The research says if we are asked about or have someone talk to us about how we are going to do something, the results are always better than they would be if we just did it.
In retirement terms, the simple act of thinking about the cost, length, and goals of our golden years actually reduces spending and increases savings.
The author of the study stated that her team has gone to great lengths to find other explanations for why the numbers all point to less spending and more saving, and especially why those who only thought about planning but didn’t actually do it still report having a lot more money saved.
The “thinkers” also have higher equity exposure and better investment performance, and they are more aware of options.
But, as with all things, too much is not a good thing. Obsessing about retirement has been shown to have a negative effect on account balances and performance.
Some thinking is better than too much. The report didn’t go into specifics about what constitutes as too much. I guess that’s for us to decide.
Our retirement situation can’t get any worse—at least I hope it can’t. And just thinking about your retirement plan can’t hurt.
So if you haven’t already done it, take some time and think about how much it will cost to leave your job… how long you could conceivably be retired… and what you would do with 18 to 30 years if you had the money.
As John Belushi said in Animal House, “Don’t cost nothin’!”