Most people would say they want to have a comfortable retirement, but putting the necessary plans in place is not a given, even when working with a financial advisor.
But there are certain traits that some people possess that make them more likely to adopt a “retirement mindset” and are likely to make it easier to work with them on their retirement savings and goals, according to a new study.
Goldman Sachs Asset Management partnered with behavioral finance research firm Syntoniq to discover what motivates and influences Americans to save for their retirement, based on a survey of more than 5,000 working and retired people.
Those with greater ease in preparing for retirement show four key characteristics: high optimism, high future orientation, high financial literacy and having a reward orientation rather than a risk orientation.
Respondents exhibiting the highest levels of these characteristics typically had greater retirement savings, were less stressed about managing their savings, and were better able to manage competing priorities.
Having high optimism has been shown to be the most important factor in boosting retirement savings. Highly optimistic respondents are more likely to report that their retirement savings are on track or ahead of schedule (83%), compared to 41% with low optimism.
Recent research from Goldman Sachs found that retirement savers are in better shape than last year, but should be aware of a worsening “financial vortex.”
Having an optimized retirement mindset also led to higher levels of engagement with tasks such as creating financial plans and pivoting investments in volatile markets, compared to those with low levels of the four traits.
Having a personalized retirement plan is more common for those with high optimism (78% vs. 42% with low optimism), reward focus (65% vs. 55% with risk or prevention focus), and high future orientation (70% vs. 55% with risk or prevention focus) 48% with low future orientation).
HOW TO FIND THEM
Now the bad news. These customers can be hard to find because the study found that only 10% of the work cohort had all four characteristics while 85% have a mix of these along with suboptimal characteristics – low optimism, low future orientation, low financial literacy and risk focus. . The other 5% had high levels of these negative characteristics.
“The analysis suggests that 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, while those who are primarily focused on their current quality of life may struggle with ; allocate to longer-term savings needs,” said Chris Ceder, senior retirement strategist at Goldman Sachs Asset Management.
Financial advisors can find using a behavioral mindset as part of personalizing their services by recognizing behavioral factors of clients and educating them to avoid their potential behavioral pitfalls.
“Promoting optimism and future orientation can be important in encouraging a saving mindset,” Ceder said. “Educational initiatives, communication campaigns and expanded services that promote our future selves can engage workers in their retirement mindset.”