According to a whole new area of science called behavioral economics, or BE — a blend of psychology, economics, finance and sociology — that could very well be. According to BE pioneer and Duke University professor Dan Ariely (author of the bestseller Predictably Irrational) and Rotman School of Management researcher Nina Mazar, our brains are hard-wired to choose short-term payoff over long-term gain.
I came across an article they recently published which takes the reader through six different decision points around spending today versus saving for the long term, and how we can help our brains make the “right” decision … assuming the “right” decision is saving for the long term.
When you take their hypothesis into account, it really makes one think about what all of us are doing each day to tackle the lack of retirement readiness in this country and if our historical approach — and even what each us is thinking about the future — is really going to be able to address the issue … especially when Ariely and Mazar propose individuals may actually need 135% of their current income in retirement, not the 60% to 70% we’ve historically used as an individual’s target.
