Reframing retirement savings

Saving in a piggy bank

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Tess Vigeland: It is "America Saves" week this coming week. Get out the party hats and streamers... as long as they're on sale.

The biggest advice from the pros is to make saving automatic: set up your accounts so some money goes right into rainy-day and retirement funds. You won't miss it, because you never see it in your paycheck.

Why don't more people do this already? It's a question that drives financial planners crazy, so some are trying a little armchair psychology.

Marketplace's Steve Tripoli says they're reframing the whole idea of saving for retirement.


Steve Tripoli: Misplaced worry and a sense of helplessness often stop people from moving on retirement saving. Seemingly daunting numbers can freeze them into inaction, but financial planners say if they can show clients a good outcome's within reach, that changes things, which is why Oregon planner Peter Toll says a lot of planning starts off on a very wrong foot:

Peter Toll: The focus always tends to be on the numbers and so we wind up being distracted and driven by the numbers, when in fact the numbers have to be remembered as only a vehicle to reaching what you're looking for.

So Toll's reframing method flips the focus away from numbers.

Toll: It's a backwards process. Instead of saying, "OK, if you can have $50,000 a year or $100,000 a year to live on, what would you like to do with it?" The backwards process is "Let's figure out what you want to do and then figure out if you can afford it."

That way people start saving for a specific thing -- a new life -- which makes it more doable and less overwhelming.

Bedda D'Angelo is a planner in North Carolina. She says her clients often can't see beyond today's bills enough to start saving. They may know some cost cutting is in order, but they can't work out how to get there, so she re-orients them toward retirement with a small trick -- taking the focus completely off that goal to start.

Bedda D'Angelo: If I feel there's a need for rigorous cost cutting, I find a short-term goal that I know they can achieve. It's really just getting people refocused on a positive short-term goal. That really is the way you do it.

Once a few bills get paid. a retirement fund can start. Then D'Angelo holds clients' attention with monthly statements showing their assets growing.

D'Angelo: And most people are very goal-oriented. Once they see that the way you play this game is to have more, they get focused on it.

Focused to the point where clients often start upping retirement contributions on their own.

Suburban Boston planner Matthew Schott is a pioneer of the reframing approach. He advises getting clients to think about today's purchases differently -- especially big ones.

Schott uses the example of a new car where you can finance the luxury model for $600 a month or get a more basic model:

What if I could say, for that same $600 a month, I can get the basic edition at $400 a month and I can pre-purchase a half a year of retirement with that other $200 a month?

This approach has two benefits. It can kick-start saving and establish the mental budgeting that keeps spending down, leaving even more to save. That's because every needless expenditure gets reframed as a sort of theft from your future self. Schott says it makes you think twice about the true cost of living large.

Matthew Schott: It gives you a way that you can see there in front of you and you can balance out when you make those decisions of, you know "do I want the 3-bedroom house, the 4-bedroom house or the 5-bedroom house?"

So here are the take-home messages:

First, think of today's spending curbs not as a sacrifice, but as a down payment on your own future freedom.

Second, pay off bills in small steps if you must -- whatever it takes to start the saving cycle.

And finally, put big, scary future retirement numbers out of your mind. You don't need half a million or a million dollars today. Focus only on what you need to save now.

All three ways of reframing retirement thinking have this advantage: they'll launch you on a path where the rest, over time, often takes care of itself.

For Marketplace Money, I'm Steve Tripoli.

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