Compiling our personal Bucket List is a fun exercise. But, did you know that when you plan for what you want to do in retirement, you end up saving more?
In a recent study of this phenomenon, half of the 1,200 participants were first asked how much they should be set aside for retirement. Next, they answered a series of questions about the specifics of how they want their life to look like when they hit their 60s, 70s and 80s. For the other half of the group, these visualization questions came first – before they were asked how much money they should save for retirement.
The results showed that, on average, the group that first visualized their retirement years recommended saving 31% more than the other participants. Those who imagined the retirement they’d like to have said they should put 21.2% of their paycheck towards retirement savings, compared to only 16.2% for the non-imaginers.
Based on that data, it appears that when people envision the lives they’d like to lead once they reach their 60s, they are much more likely to say they should save a greater percentage of their paycheck than those who don’t give any real thought to the ins-and-outs of their desired retirement.
“The takeaway is simple but powerful — if you can envision your retirement, it can positively impact how much you’re saving,” said Heather Lord, senior vice president and head of strategy and innovation at Capital Group, which released the study.
And overall, Americans can use all the help and motivation they can get to save for the future. Proof: the Stanford Center on Longevity says people are generally saving only half of what they should actually be socking away for their post-career lives.
“Imagine having an envisioning exercise before making a decision,” Lord said.
Still, filling out a survey and taking actual steps towards saving more are two different things. Lord told CNBC that “the next step would be for 401(k) plan sponsors and the like to help retirement savers visualize what they’re saving for before deciding how much of their income to put toward their nest egg.”
It may pay (literally) to take a few minutes to really think about how you want to live life during retirement. Based on the research for my book, You Can Retire Sooner Than You Think, I’ve found that the happiest retirees spend an average of five hours a year planning for retirement. So, it’s worth sitting down and putting pen to paper for this critical next chapter of your life. Trust me.
There’s another reason to envision your retirement years – one goes beyond dollar and cents and enters the realm of overall life enjoyment.
The happy retirees I surveyed reported having a number of core pursuits – hobbies or activities they actively pursue with passion. The happiest retirees say they have, on average, 3.6 core pursuits. The unhappy ones report having only 1.9.
So, you see the importance of planning how you want to spend your time during retirement. Not only will it fatten your nest egg, but it will also help you see how you’ll be spending the bulk of your time. Will you be traveling the country, visiting new ones, volunteering, being active outdoors, spending more time with your grandkids, or a blend of all of the above?
No matter what your specific answer to this question is, it’s important that you think about your answer. And don’t worry – your plans may shift and change over time. Nothing has to be written in stone. It just matters that you begin making some rudimentary etchings, so you have something more concrete to plan (and save) for.