Saving for retirement can seem daunting, but having a more positive frame of mind around the future can be beneficial to an employee’s financial readiness.
Goldman Sachs Asset Management partnered with Syntoniq, a behavioral finance research firm, to identify how mindset and attitude can impact a person’s experience preparing for retirement. They identified four optimal traits: over-optimism; thinking about the future when making decisions; pursuing goals based on risk versus reward; and having high financial literacy.
Those who displayed more of these traits had more savings and less stress about retirement. They also were able to better manage competing financial priorities and were more likely to have a personalized financial plan that adapted to various circumstances.
“These results demonstrate that possessing certain ‘optimal’ traits can help people navigate the financial vortex of competing priorities that all too often interfere with retirement success,” Chris Ceder, senior retirement strategist with Goldman Sachs Asset Management, said in a release. “People who are positive about their future may sacrifice for it in the present, establishing budgets, living below their means and prioritizing long-term savings.”
However, just 10% of those surveyed actually displayed all four optimal traits. Meanwhile, 5% of respondents displayed the inverse of these traits, and had a more negative view of their future financial status and plans. Overall, 85% of respondents had a mix of optimistic and pessimistic view points around their retirement readiness and prospects.
As employers work to strengthen employees’ confidence around retirement, considering these behavioral traits can help tailor benefits to more workers. For example, 78% of respondents who were highly optimistic about their retirement had a personalized retirement plan in place, compared to 50% for those who had a more negative attitude about their future goals.
“By digging deeper to understand these behavioral factors, [employers] may be able to better understand what motivates and influences retirement savings decisions,” Ceder said. “By integrating behavioral traits into plan design and financial planning services, financial professionals can better personalize education, advice and guidance to what motivates each individual saver, potentially leading to more positive retirement outcomes.”
Overall, optimistic savers are more likely to take proactive steps toward savings, and have a firmer understanding of financial literacy concepts. They check in more frequently on their investments, and make adjustments as necessary, the survey found. Employers should embrace these behaviors and attitudes to connect with workers and encourage these habits across their workforce.
“Promoting optimism and future orientation may be important to encourage a savings mentality,” Ceder said. “Educational initiatives, communication campaigns and expanded services that promote our future selves may engage workers in their retirement mindset.”