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Savings and Retirement Decisions

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How many Americans aged 30-54 believe they will not have enough money put away for retirement? According to the U.S. Census Bureau (retrieved from Statistic Brain Research Institute), as many as 80%.Savings and Retirement Decisions 1

How many Americans don’t save anything for retirement? The U.S. Census Bureau estimates 38%.Savings and Retirement Decisions 2

How many Americans who started working at the age of 25, have adequate capital stowed away for retirement by age 65? The correct answer is 4%, again according to the U.S. Census Bureau, as retrieved from Statistic Brain Research Institute.Savings and Retirement Decisions

Decision scientists have long been interested in savings decisions. They have found many reasons why people don’t save enough, and many tricks to get people to save more, which I may write about another time.

One important reason though is probably simply that people are overwhelmed, because there is no one correct answer as to how much we need to save, and how to get there.

However, there are calculators to help you estimate how much you need to save for retirement. I found one by Fidelity that I liked more than others, because it doesn’t ask for a lot of details about your financial situation. You can enter just a few rough estimates and then play around with sliders to see what variables make a difference. Two things I’d like to point out:

  • It’s important to understand how the calculator treats your income: it assumes you’ll want an income during retirement that’s 85% of your pre-retirement income, so that you can maintain a reasonably similar living standard. That means the lower your income, the less you need to save in order to reach that goal and be able to maintain your living standard after retirement. It took me a while to figure this out: that if I enter a lower income, I’ll be more likely to have enough savings. It’s a little counterintuitive, but makes sense.
  • What I found striking and encouraging is how much of a difference the monthly savings can make, regardless of whether you already have a lot of previous savings. It can really hit home to see those estimated bars jump around on the screen just by adding another $100 per month.

Be brave and try it for yourself!

Sources and additional reading about savings and retirement decisions:

by Ursina Teuscher (PhD), at Teuscher Decision Coaching, Portland OR


Book Recommendation: Strategic Decision Making

Posted on by by Posted in Book Recommendations, Financial Decisions, Strategic Planning, Business Decisions, Organizational Development

Craig W. Kirkwood (1997). Strategic Decision Making: Multiobjective Decision Analysis with Spreadsheets.

*** Geek Alert! ***

Skip this month’s book recommendation if you don’t like spreadsheets. This book by Craig Kirkwood is all about spreadsheets, and how to use them to make smart decisions.

It goes way beyond anything I’ve ever taught in my own classes, and beyond anything I will probably ever use, even in my consulting work. But it’s great stuff! So yes, this is a book for geeks.

If that’s you: I have a copy that you’re welcome to borrow (it’s out of print and very expensive to buy at this point). AND: when you pick it up in my office in Portland, I’ll treat you to an excellent Affogato at Spella Caffe. Just because I like to talk to geeks, and I assume you like ice cream too.

by Ursina Teuscher at Teuscher Counseling, LLC


Featured Video: Baumeister on Self-Control

Posted on by by Posted in Achieving Goals, Financial Decisions, Health Decisions, Procrastination, Productivity, Time Management

Here’s a great talk by Roy Baumeister about all the cool research he and others have done on self-control:

Self-control seems to be one of only two human traits that can predict success through a broad range of situations. The other one is IQ. But the good news about self-control is that we can train it, even as grown-ups, while IQ is much harder to increase. (Only recently have attempts to increase people’s fluid intelligence shown some success, but the effects are small, not very robust, and very hard-earned.)

One of the intriguing findings that Baumeister mentions in his talk: effective self-controllers actually show LESS frequent resistance towards desires, less guilt, and lower life stress. Instead, it looks like they have more proactive coping mechanisms, which set in before the desires even show up. In other words, they have learned to avert crises in advance and therefore have to cope with them less.

Interesting also that depletion of willpower (after exercising it) does not come with any particular emotion, but it intensifies emotions in general. This means that it is difficult for us to become aware of that moment when we have depleted our willpower and have stopped to behave at our best. It also means that as we resist temptations, they become stronger, which I’m sure is an experience we’ve all had.

There’s a lot more in the talk, which takes about 40min, and also in the Q&A with the audience afterwards.

by Ursina Teuscher (PhD), at Teuscher Decision Coaching, Portland OR


Book Recommendation: Smart Choices

Posted on by by Posted in Achieving Goals, Book Recommendations, Career Development, Financial Decisions, Health Decisions

John S. Hammond, Ralph L. Keeney, & Howard Raiffa. (1996). Smart Choices: A Practical Guide to Making Better Decisions.

It’s time to recommend another classic. This book is a short and very useful guide, presenting a variety of decision tools. It doesn’t offer too much in the way of psychological explanations of why we need the tools and how they work, but it is a nice little toolkit.

by


Book Recommendation: Strategic Planning

Posted on by by Posted in Achieving Goals, Book Recommendations, Career Development, Financial Decisions, Strategic Planning, Business Decisions, Organizational Development

Erica Olsen. Strategic planning kit for dummies.

If you’re a decision-maker in an organization and you’re serious about strategic planning, I highly recommend this book by Erica Olson as a very thorough but practical reference. It will give you more than you need, but it is very clearly structured so that you easily focus on whatever aspects are relevant to you. It also includes a DVD with worksheets, templates, and videos.

Book Cover Strategic Planning Erica Olson

Why does strategic planning matter?

Strategic planning offers a systematic process to figure out where you’re going – as a business or as any kind of organization.

Erica Olsen reports that CEOs of the Inc. 500 spend 50-90 percent of their time on strategy and business development. Why? Probably because they realize how much it pays off. According to her research, the firms with a high commitment to strategic planning had higher sales volumes as well as net incomes than those with  lower commitment.

A good strategic plan informs not only your current obvious decisions, but will help you look for decision opportunities that you might otherwise miss. In other words, it helps the decision-makers be proactive, rather than reacting to problems.

Where a team is involved, the process of developing a strategic plan, and more importantly the culture of continued strategic planning, builds commitment and empowers group members to make their own decisions on a daily basis.

If you’re interested in a brief overview of the process, I’ve written an outline that will walk you through the classic steps of a strategic planning session. You can access it  here (link at the bottom of the page). You can use it as a very simple cheat sheet in preparation for a team session, or, if you don’t have a team, you can go through the questions by yourself.

 

by Ursina Teuscher (PhD), at Teuscher Decision Coaching, Portland OR

 


Book Recommendation: Nudge

Posted on by by Posted in Achieving Goals, Book Recommendations, Financial Decisions, Health Decisions

Richard Thaler and Cass Sunstein.
Nudge: Improving Decisions About Health, Wealth, and Happiness.

This book offers very well-researched insights into how “choice architecture” can successfully nudge people toward making the best decisions for themselves, such as choosing healthier food, exercising more, saving more money, etc. Nudges consist simply of changing the way choices are presented, without changing or restricting the options or adding any incentives.

The book is especially interesting for people who care about the promotion of human welfare in public policies, but the knowledge can also be help us change our own environment to help us make healthier long-term decisions.

As a very useful practical addition, Dilip Soman, Min Zhao, and Nina Mazar have published a free online-report called “A Practitioner’s Guide to Nudging”, presenting a number of short case studies, and giving the choice architect guidelines on how to develop nudges.

by Ursina Teuscher


Book Recommendation: “Decisive” by Chip and Dan Heath (2013)

Posted on by by Posted in Achieving Goals, Book Recommendations, Career Development, Creative Thinking, Financial Decisions, Health Decisions, Strategic Planning, Business Decisions, Organizational Development

Chip and Dan Heath (2013). Decisive: How to Make Better Choices in Life and Work. New York: Crown Business.

Book Cover: "Decisive" by Dan and Chip Heath

I was impressed with this new book by the Heath brothers, a very helpful guide to decision making. It does not offer any formal tools to evaluate options, but a process with powerful ideas that are easy to apply to any personal or business decision.

They call their approach the WRAP process, an acronym standing for (1) Widen your options, (2) Reality test your assumptions, (3) Attain some distance, and (4) Prepare to be wrong.

Here’s a sample of some ideas that I’m finding very effective with clients as well as for my own decisions:

For widening your options, they propose the “Vanishing Options Test”: what would you do if the current alternatives disappeared? This question forces us to think creatively, oftentimes bringing better solutions to mind than the ones that seemed most obvious at first.

Also, consider opportunity costs: if I didn’t do this, what else could I do with the same resources?

Always think AND, not OR. Can you follow multiple paths at once?

For attaining some distance, they suggest the simple but powerful question: “What would I tell my best friend to do in this situation?”

For preparing to be wrong, they introduce the idea of a “tripwire”: set a date or trigger for revisiting the decision. This will not only prevent you from getting stuck on a bad track, but it will give you a certain period where you will have the permission and peace of mind to fully commit to your current action plan, without tormenting yourself about whether this was a good decision or not.

Chip and Dan Heath also offer a great resources page on their website, with free cheat sheets and worksheets summarizing their process.

by Ursina Teuscher (PhD), at Teuscher Decision Coaching, Portland OR

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Book Recommendation on Consumer Decisions: “Spent”

Posted on by by Posted in Book Recommendations, Financial Decisions

I guess I could call this a “seasonal pick”, as Amazon keeps counting down the days to Black Friday:

Geoffrey Miller (2009). Spent: Sex, Evolution, and Consumer Behavior 

Book cover (cropped) of "Spent" by Geoffrey Miller

Geoffrey Miller presents an evolutionary psychology perspective on consumer decisions: why do we buy so much, and why do we buy the stuff we do?
(No, it’s not about cave dwellers and their preference for fur.)

Just like his earlier book “The Mating Mind”, it was very much worth reading the whole book, rather than just leafing through it and thinking that I “got the message”. The main message may indeed be simple (conspicuous consumption as a mating signal to indicate fitness), but there is a huge richness in data and an elegance of theory that make this book thought-provoking, amusing, and insightful on many levels. It also helps that Miller is a fearless, eloquent and humorous writer.

As far as food for thought goes, this book is delicious and satisfying.

Happy Thanksgiving!

by Ursina Teuscher (PhD), at Teuscher Decision Coaching, Portland OR

 

 


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