One of my favorite types of stories to write about is when people say one thing and do another. This gap between what economics call “declared preferences” (what you say you’ll do) and “expressed preferences” (what you actually do) does not necessarily constitute a lie. Sometimes we say we will do something with the full belief that we will do it. But as willing as the spirit may be, the flesh is often less so.
Today’s Wall Street Journal has a special section on retirement. One article contains a chart, with data derived from McKinsey & Co. research, showing the kind of things that pre-retirees expect they will do upon retiring, and then what they actually do once they retire. Here are the examples:
Will take on work upon retirement
Pre-retirees’ expectation: 36%
Retirees’ reality: 10%
Will significantly reduce discretionary spending
Pre-retirees’ expectation: 32%
Retirees’ reality: 10%
Will downsize home/relocate
Pre-retirees’ expectation: 31%
Retirees’ reality: 7%
Will take on home-equity loan/line or reverse mortgage
Pre-retirees’ expectation: 13%
Retirees’ reality: 13%
It is pretty telling that the only category in which the reality meets the expectations is the last one, in which people need to borrow money. But I am guessing that this match is a bit misleading. The 13% of people who expect they will leverage their house are probably not the same 13% who actually do leverage their house.
If I were a financial advisor, I would collect these and similar data in an effort to scare my clients into believing how capable they are of lying to themselves. They may not mean to lie, and they may have no idea they are lying. But just as people are bad at predicting how happy something will make them, they are probably just as bad at picturing how unhappy they will be once they are retired with less money than they planned on having.
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Interesting.
“I can live on 70% or 80% of my pre-retirement income.”
but
“they were living in retirement on 95% or more of their pre-retirement income.”
How do they make up the 15%-25% difference? That’s big. Considering the fact that not too many senior people in US starve to death, do they (I mean, you people) lie to yourselves again and save as if you will spend about 95% or more of what you spend now, while saying you think you will spend about 70-80% after retirement?
Interesting.
“I can live on 70% or 80% of my pre-retirement income.”
but
“they were living in retirement on 95% or more of their pre-retirement income.”
How do they make up the 15%-25% difference? That’s big. Considering the fact that not too many senior people in US starve to death, do they (I mean, you people) lie to yourselves again and save as if you will spend about 95% or more of what you spend now, while saying you think you will spend about 70-80% after retirement?
Many people lie to themselves about how much risk they are willing to accept with their investments too. They have a “high” risk tolerance until their stocks fall 10-15%.
Many people lie to themselves about how much risk they are willing to accept with their investments too. They have a “high” risk tolerance until their stocks fall 10-15%.
Following the same line of reasoning, you could argue that children are lying when they claim they want to grow up to be astronauts, rock stars, or presidents, since most of them don’t go on to work in those occupations. I’d guess that most pre-retirees are being as truthful about their intentions *at the time* as school children are about theirs.
When the adults actually do retire and discover that they are or are not bored, do or do not have enough money, do or do not need all the space (for Christmas with the grandchildren, etc.), then they adjust their plans for the reality they’ve found themselves in, just as children adjust their plans when they realize that there are not quite enough astronaut, rock star, and president slots available for everyone.
Following the same line of reasoning, you could argue that children are lying when they claim they want to grow up to be astronauts, rock stars, or presidents, since most of them don’t go on to work in those occupations. I’d guess that most pre-retirees are being as truthful about their intentions *at the time* as school children are about theirs.
When the adults actually do retire and discover that they are or are not bored, do or do not have enough money, do or do not need all the space (for Christmas with the grandchildren, etc.), then they adjust their plans for the reality they’ve found themselves in, just as children adjust their plans when they realize that there are not quite enough astronaut, rock star, and president slots available for everyone.
Sometimes we inadvertantly lie about ourselves and tell the truth about our neighbors– according to contemperary archaeologist, William Rathje (“Rubbish: What Our Garbage Tells Us About Ourselves”) homeowners tend to overestimate the amount they recycle, but when asked how much they think their neighbors recycle, they come much closer to the true figure.
Sometimes we inadvertantly lie about ourselves and tell the truth about our neighbors– according to contemperary archaeologist, William Rathje (“Rubbish: What Our Garbage Tells Us About Ourselves”) homeowners tend to overestimate the amount they recycle, but when asked how much they think their neighbors recycle, they come much closer to the true figure.