Seeing your avatar exercising in a virtual world can spur you to add an hour a day to your exercise routine in the real world people whose avatars do the dirty work of sawing down a virtual tree use less real paper later in the day. Experiments have shown that if you are sent into a virtual-reality environment with a particularly good-looking "avatar," or digital self-image, you are likely to become more sociable. These researchers are tapping into what is called the Proteus effect, behavioral alterations in the real world that are triggered by changes in how our bodies appear to us in a virtual world. Sharpe asked to monitor the research and became a co-author of a forthcoming study on its effectiveness. The Nobel Prize-winning economist who co-founded Financial Engines Inc., a firm that provides investment advice to retirement savers, says, "The idea of getting people to feel sorry that 'Poor old me, at age 70, is going to need help if I don't save more now'-I regard this not as persuasion, but as additional information." After he heard about the technique, Prof. By enabling the young to see themselves as they will be when they are old, virtual-reality technology can transform their urge to spend for today into a willingness to save for tomorrow. The project underway at Stanford seeks to close this gap between the present self and the future self, without turning young people into misers. Buffett often asked, "Do I really want to spend $300,000 for this haircut?" He was thinking about the vast amount of money he wouldn't have decades in the future because of the small outlay he might make in the present. When he was a young man, according toīiography "The Snowball," Mr. Yet it is highly unusual for people to think more vividly about their future selves than about their present selves, say psychologists. That is true for those of all ages, but the lost opportunity is greatest for young people, because money set aside at an early age has more years to grow. Of course, if you spend tomorrow's savings today, you won't have cash when you need it in the future-but that day of reckoning is decades off. And when you save money today on behalf of your remote future self, you deprive your immediate present self of cash you could use right now. Viewed this way, it isn't surprising that the young typically don't want to save for their retirement, since that stage of life feels as if it will be lived by someone else. Thinking vividly about the future, however, could bring a diet of sushi in old age. What will you want or need when you are 65 or 70 or 80 or older? Who knows? You don't know your future desires, because you don't know your future self. But perhaps the most basic cause is a fundamental human frailty: We view our future selves as strangers.Įstimating with any precision what you will want 30 or 40 years from now is almost impossible. Why is it so difficult for people to set aside money for the long-term future? Low earnings and high temptations are obvious reasons. Other research found that 35% of workers who said they weren't saving enough in their 401(k) intended to raise their contribution rate over the next few months-but that only one in eight of them did so. A 2008 study showed that one in five older people who said they were contributing to a 401(k) or other retirement plan weren't putting any money in the typical employee overestimated how much he was contributing by 79% (reporting $2,328 a year, versus the actual amount of $1,300). One key obstacle is the stubborn gap between beliefs and actions. In sum, despite decades of badgering, Americans are farther behind than ever in their struggle to save.Ī model poses with an "avatar" of her future self generated by age-morphing software.į. The center estimates that savings shortfall at $4.2 trillion, or roughly $120,000 per household at risk. Mutual-fund and insurance companies, sniffing trillions of dollars on which they could earn management fees, have pushed relentlessly to get people to save more.Īnd yet, according to the Center for Retirement Research at Boston College, 51% of American households are at risk of being unable to maintain their standard of living in retirement, up from 43% in 2004. Policy makers have tinkered with tax and other incentives to encourage savings. Employers, having cut back on fixed pensions for years, have pushed workers into 401(k)s and other voluntary retirement plans that offer variable rates of return.
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