Mon. Feb 6th, 2023

If you’re having trouble increasing the amount you’re saving for retirement, it might be time for a fresh start.

That’s right, a fresh start. Researchers recently conducted a field experiment to study the effect of framing future moments in time as new beginnings or “fresh starts.”

In the experiment, university employees received mailings with an opportunity to choose between increasing their contributions to a savings plan immediately or at a specified future time point.

And what the researchers found was this: Framing the future time point in relation to a fresh start date – the recipient’s birthday or the first day of spring, for instance – increased the likelihood that the mailing recipient chose to increase contributions at that future time point without decreasing their likelihood of increasing contributions immediately.

“Overall, fresh-start framing increased retirement plan contributions in the eight months following the mailing,” wrote John Beshears, an associate professor at Harvard Business School, co-chair of the Behavioral Economics Executive Education Program and co-author of the study.

In other words, fresh-start framing works.

So, how might you apply the results of this research to your retirement savings plan?

Increasing your savings on your birthday. “It’s very easy for people to get discouraged if they have been intending to contribute more to their 401(k) plan but haven’t gotten around to it,” says Beshears. 

His advice: Use your next birthday, or another date that marks a new beginning, as a moment to create a “psychological break” from their past patterns and to set yourself on a new path toward a better financial future. 

Auto increase. Check whether your plan sponsor allows you to schedule an auto-increase through your online portal. “If that’s an option available to participants, I’d recommend thinking about an upcoming life transition that represents positive growth or a fresh start,” suggests Sarah Newcomb, a behavioral economist for Morningstar and author of “Loaded: Money, Psychology and How to Get Ahead without Leaving Your Values Behind.”

By senior