Mental time travel and retirement savings

Artikel

We portray the valuation of retirement savings in terms of a mental time travel journey in which a proposed contribution to a pension plan is projected forward to the plan member's retirement date and this projected value is then discounted back to today, thereby giving a present or personal value. We set this within a broader framework of pension planning, which seeks to smooth consumption over the lifecycle. We explain how two psychological biases-exponential growth bias and present bias-can lead to a difference between the initial value of a pension contribution and its present value, such a difference reflecting an asymmetry between projection and discounting, and how such a difference might lead to inadequate retirement savings and hence to a lower than desired standard of living in retirement. We consider how the two biases might be mitigated.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: Journal of Risk and Financial Management ; ISSN: 1911-8074 ; Volume: 14 ; Year: 2021 ; Issue: 12 ; Pages: 1-13 ; Basel: MDPI

Classification and Topics

• Classification: Wirtschaft
• Subject: retirement savings ; lifecycle model ; financial investment valuation ; mental time travel ; time perception ; projecting ; exponential growth bias ; discounting ; present bias ; symmetric ; asymmetric ; valuation

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Blake, David ; Pickles, John
• Event: Veröffentlichung
• (who): MDPI
• (where): Basel
• (when): 2021

Further information

• DOI: doi:10.3390/jrfm14120581
• Handle: http://hdl.handle.net/10419/258684
• Last update: 2025-03-10T11:41:34+0100