Research indicates that people who viewed computer-generated older versions of themselves took financial planning more seriously.
There’s no such thing as a crystal ball when it comes to investing. But a little peek into the “mirror” might shed some light on the financial path investors may take.
In research by Hal Hershfield, an assistant professor of marketing at UCLA’s Anderson School of Management, test subjects who viewed computer-generated, age-progression photos of themselves were more inclined to say they’d save and invest more seriously (compared with those who did not see their future selves).
Apparently, seeing gray hair atop a wizened face staring back at them, from decades yet to come, prompted a reality check.
In one of Hershfield’s studies, participants looked at digitally altered photos, some un-aged and some aged (figure 1). Participants were then asked what they might do with a sudden $1,000 windfall. Responses showed participants allocated twice as much to a long-term savings account if they saw an older version of themselves versus seeing just their current selves.
FIGURE 1: FACE TIME.
These photos display Hal Hershfield in a present-day candid photo (a), in a digitally altered, same-age rendering (b), and in an age-progressed rendering (c). Hershfield’s experiments in behavior-based investing use digitally altered imagery to determine investor attitudes toward financial planning when they get a view of their future selves. Source: UCLA Anderson School of Management. For illustrative purposes only.
Hershfield started this exploration a few years back while at his old job at New York University’s Stern School of Business. He continues to give lectures on his studies, and has participated in Federal Reserve advisory panels.
As with many experiments, this one was born in a lab (a high-tech lab with really accurate digital progression) and appears to be a little lacking in real-world application. Admittedly, there’s a lengthy list of factors beyond investing psychology that will likely determine if we retire comfortably or work well into our golden years. Those include career advancement; portfolio diversity, including plans for retirement income; market performance; expensive personal or family setbacks; and so on.
Still, let’s not discount how mood, behavior, stress, and psychology fit into the mix.
Since most of us won’t make it into the lab, and if you have the stomach for time travel, you can find a simple age-progression app or software for your own photo enhancement. There are quite a few options out there, but some you might consider include:
It might be worth checking to see whether a little taste of “reality bites” inspires you to get healthier about saving and investing (and maybe healthier in general). Maybe your future self is gorgeous, confident, and clearly still full of vigor—but that’s all the more reason to plan for a long, active, and comfortable retirement.
Maybe your retirement plans are less about golf and leisurely lunches and more about riding a career well into your sunset years, or pursuing a second dream job. In that case, consider this little age- progression experiment a hint at what your work ID badge could look like in a few decades.
Anyone else thinking it’s time to buy high-octane sunscreen, like right now?
Speak with your local Investment Consultant to discuss how TD Ameritrade’s four-step guidance approach can help account for life's ever-evolving circumstances.
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