Helping Workers Empathize With — and Plan for — Their Future Selves

Retirement confidence and retirement knowledge go hand in hand: According to the Retirement Confidence Survey, workers who are confident in their retirement prospects are far more likely to have calculated how much money they will need to live comfortably in retirement than workers who are less confident (53 percent vs. 18 percent, respectively). 

In recognition of this fact, the Employee Benefit Research Institute has long championed the idea that retirement savings calculators should be simple. Indeed, that was a key part of EBRI’s Emmy award-winning, multimedia Choose to Save® educational campaign, which started in the 1990s: to provide consumers with a wide variety of free savings tools and information to help them plan for all aspects of their financial security. Essential to that effort was the original Ballpark E$timate® retirement planning calculator, which was geared to quickly help workers estimate how much they need to save for retirement.

Today, retirement calculators like the original Ballpark E$timate have become commonplace. Yet, as recently as this year, the Retirement Confidence Survey finds that fewer than half of both workers and retirees have tried to calculate how much money they need for retirement.

One reason behavioral economists give for workers’ disinterest in planning for retirement is lack of empathy for their future retired self. Indeed, studies suggest that young people may identify as little with their future, older selves as they do with complete strangers.[1] That’s why, when EBRI recently reimagined its Ballpark E$timate tool, we designed it with an eye to helping people connect with their older selves — and therefore be more apt to engage and take steps to improve outcomes. EBRI’s new Ballpark E$timate achieves this by asking users to consider their current state of retirement savings and then to envision what their retired state might look like. Based on analysis from the Health and Retirement Study (HRS), the tool then categorizes users — much like an online personality-type quiz would.

Borrowing another concept from behavioral finance — social comparisons — the Ballpark E$timate further compares users by type (again, using data from the Health and Retirement Study). For example, say the user learns that she will likely be in the “Struggling” category in retirement. The Ballpark E$timate will explain that Struggling Retirees have average spending that is in the lowest quartile of retirees. This, ideally, prompts users to explore how they can move into a better retiree category. To help with that, the Ballpark E$timate shows other retirement types that users can aspire to — as well as what it takes to get to these outcomes in terms of additional savings.

Finally, the Ballpark E$timate shows how much retirees spend in retirement.  For example, Struggling Retirees would be told that based on their retiree profile, their average annual before-tax retirement expenses would be just over $18,000 in today’s dollars. Users would also be told that much of this spending tends to go to housing — 47 percent according to analysis of HRS data — with 13 percent going to food and 11 percent going to health care.

Ideally, the behavioral prompts within the Ballpark E$timate help users:

  • Envision themselves in the retirement reality for which they are on track.
  • Determine if that is the reality they want for their future self.
  • If not, change their approach to saving for retirement.

EBRI is excited to roll out its new and improved Ballpark E$timate. We thank the RRF Foundation on Aging for their support, as well as members of EBRI’s Retirement Security Research Center for their input on this important initiative.

[1]Hershfield, Hal E. and Daniel M. Bartels (2018), “The Future Self,” In Oettingen, G., Sevincer, A.T., & Gollwitzer, P.M. (eds). The Psychology of Thinking about the Future. The Guilford Press, 89-109

About ebriorg
President and CEO, EBRI

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