Strangers to ourselves – why we don't save enough for retirement

Strangers to ourselves – why we don't save enough for retirement
09 May 2013

Every day presents us with new decisions and challenges. The small choices of daily ‘survival’ eat away at our cash and energy resources and deplete us of the ability to thrive. I call this the cost of being human. But here is the sad thing, it is the choices we make that define us and hold us tied to what many of us classify as ‘mundane daily existence.’Do we stay stuck in a financial rut and make our life ‘ordinary’ by focusing on the small choices and ignoring the big decisions?Do we put off the financial decisions that are optimal for the long term but are often very uncomfortable to live with in the short term?

Is it because we are wired this way?

Scientists have studied how our brain reacts to immediate stimuli and the thought of instant reward over thoughts of future reward and conclude that the ‘pleasure or reward area’ of the brain is stimulated in a very special way when we think of future reward against present reward. 

The area of the brain that is engaged when we think about immediate reward is a region of the ventromedial. This area of the brain is not stimulated when we think about future reward; in fact the area that is stimulated when thinking about future reward engages the same neural processes as thinking about another person. The ventromedial is especially engaged when we are making financial decisions – or as researchers Mitchell and colleagues conclude: ‘this region is especially engaged by participants that made shortsighted monetary decisions.’

So hold that thought for a moment – the brain region engaged when we are thinking of decisions that will impact our ‘future self’ is the same brain region engaged when we are thinking of someone else.

The conflicted brain

The human brain is in conflict with two parts – the cerebral cortex where rationality and logic prevail, and the area beneath the cerebral cortex (the limbic system, insula and nucleus accumbens) that responds more to emotion, present needs, pleasure, temptation, instinct and pain avoidance. Colloquially, the cerebral cortex is referred to as the “executive” and the area beneath as the “lizard”, both these terms mirroring the nature of choice that is taking place in these two areas of the brain.

The lizard part of the brain is the part engaged when we are thinking of our present needs and the executive part of the brain is engaged when we are thinking of our future needs.

Money changes people.

University of Minnesota Professor Kathleen Vohs and her colleagues carried out an empirical study to determine the impact of money on people’s behavior - Merely Activating the Concept of Money Changes Personal and Interpersonal Behavior. They examined the potential cognitive, motivational, emotional, and behavioral changes that result from the activation of the idea of money in people’s minds. The researchers state: “We found that even subtle reminders of money produce robust changes in behavior.”

By priming participants with subliminal messages of money, for example asking them to rearrange short sentences with words associated with money, but not the word money, e.g. ‘salary,’ small stacks of monopoly money nearby, or a computer screen saver with dollar bills floating in the background, they found participants reminded of money were less helpful than were participants not reminded of money.

When experimenters clumsily dropped pencils on the floor those primed unconsciously with money messages were far less likely to help pick them up.

When offered the choice to work on a task alone or with another person, 84% of participants who had been reminded of money chose to work alone than were those not so reminded. They also moved their chairs further away from others than those not primed with money reminders – the findings ‘suggest that living in a culture that surrounds us with reminders of money may shape our behavior and attitude towards others which we do not realize and of which we may not be proud.

This study has been repeated time and time again, always with the same outcomes. The researchers shy away from using the word selfish but do state ‘money renders people distrusting of others, anxious, or prideful.’

Changing the way we think of saving for retirement

So now we know  two things. Reminders of money primes individualism, and a reluctance to help or be involved with others. And our brains are wired to think of our future selves as another person.

Do these two studies answer why we save so little for retirement, even when we know it is in our best interest and what can we do to improve our ability to save for our future?

Neuroeconomist William T. Harbaugh measured neural responses in the ventral striatum when individuals have made an outlay and see a monetary gain received, let’s say interest payments, the ventral striatum area of the brain is closely related to the region engaged when we seek immediate pleasure (ventromedial), scientists call this area of engagement the ‘warm glow.’

Harbaugh’s work is best thought of as treating our future self as something we care about, like our favorite charity. Our brain is more likely to accept the pain of taking money today for our retirement if we think of it as our favorite charity. Through fMRI scans his work can be considered to lead to three key areas we should think of for retirement: “monetary payoffs to oneself, observing our favorite charity get money, and a warm-glow effect related to free choice,” all these elements activate similar neural substrates, the one’s that give us the biggest feeling of immediate reward… and unless we activate the immediate reward part of the brain we will struggle to make the most optimal choices for our retirement planning.

If that fails then you can always think that the lizard brain is controlling your spend today and preventing the executive part of the brain from planning for retirement. How do you feel about your lizard brain trumping your executive brain?


  • ConsumerWatch

    Within small groups a research team found that introducing an incentive makes people less likely to share than they did before. In essence, even an artificial currency reduced their natural generosity.

    The study is published in journal PNAS.


    When money becomes involved, group dynamics have been known to change. Scientists have now found that even tokens with no monetary value completely changed the way in which people helped each other.. or rather don't!

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