Do you consider yourself to be more of a spendthrift or a penny pincher—a spender or a saver? Like most things in life, your relationship with money is largely dictated by your personality.
And this is especially true when it comes to saving for retirement. A recent study conducted by Syntoniq, a behavioral finance research organization, found that there are four behavioral traits that lead to more retirement savings among workers.
According to the survey, people who display these behaviors are more likely to act on their intentions to save for retirement—and only 10% of people possess all these characteristics.
So, what are the four behavioral traits that make a person inclined to save more for retirement—and do you possess them? Let’s dive in!
1. Overoptimism
Psychology experts say that everyone’s brains have a built-in optimism bias that leads us to believe we’re less likely to suffer from misfortune and more likely to attain success than reality would suggest.
In some people, optimism bias can lead to poor decisions (like not building up emergency savings believing nothing bad will happen). In others, it can act like a self-fulfilling prophecy and motivate them to pursue their goals. These people tend to believe they have the skills and knowledge to control events in their life, making them more likely to succeed.
When it comes to saving for retirement, overoptimism inspires people to take steps that will help them achieve the retirement goals they see in their future. People with this trait are usually more willing to take risks and participate in a higher level of financial engagement.
2. Future Orientation
Future orientation is the degree to which a person thinks about the future and anticipates upcoming consequences. This ties in with the optimism discussed above—because people can have varying levels of a pessimistic or optimistic future-oriented mindset.
As you can imagine, having a positive future-oriented mindset is more advantageous when planning for retirement. People with this trait tend to be highly motivated, enthusiastic and have a high level of energy to plan next steps and goals. They’re likely to be smart when it comes to spending, saving and managing money for the future.
3. Financial Literacy
“Financial literacy is the ability to understand and effectively use various financial skills, including personal financial management, budgeting, and investing,” according to Investopedia. It’s no surprise that possessing a strong foundation of financial literacy can help support a person as they save for retirement!
The good news is that financial literacy is something that can be developed over time. Reading books, listening to podcasts, subscribing to financial content, and learning from a financial professional are all ways people can become more financially literate.
4. Higher Risk Tolerance
Some retirement savers focus on achieving goals by taking more risks. Others focus more on security and protection and are less likely to take risks. When it comes to building retirement savings, the group with a higher risk tolerance is more likely to be effective in reaching their goals because they’re more likely to take proactive steps.
One interesting note is that people are likely to have a higher risk tolerance the further they are out from retirement. That’s because investment returns can be erratic and unpredictable in the short run, but tend to be reliably positive over long periods of time. This highlights the importance of prioritizing retirement savings sooner rather than later.
85% of workers have a blend of these behavioral traits. Do you relate to any of them?
Bankers Life Securities is your partner in retirement planning no matter where you fall. Whether you’re an optimist or pessimist, a risk taker or avoider, we’re here to help you assess whether you’re on track to reach your goals and help you build a customized strategy to improve upon your financial security!
Want more retirement content? Get our simple rundown on IRA vs. Roth IRA vs. 401(k)
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