Beware of Save-ageddon!

Marketplace Staff Jul 22, 2011

Beware of Save-ageddon!

Marketplace Staff Jul 22, 2011

Tess Vigeland: Last weekend was supposed to be one of the worst weekends ever here in the City of Angels. One you’d someday tell your kids and grandkids about. It was going to be chaos. Panic. Gridlock like we’ve never seen.

Montage of news stories: Carmageddon — but it was anything about apocalyptic. Absolutely guys, it was very quiet on the road! Sixty-five percent fewer cars on the road. Traffic around LA was a breeze. And yes, it is wide open. It has been a really smooth go of it. Carmageddon is… I was trying to think of some other word, Lame-ageddon.

Yup. Lame-ageddon. They closed the busiest freeway in the country. And we all stayed home and took a nap. Which got us wondering, if we can respond to warnings about saving ourselves from untold hours in traffic, why don’t we do the same for warnings about saving for retirement?

Suzanne Shu is here to discuss this with us. She’s a marketing professor down the street at UCLA. And Suzanne, you happen to live close to the 405 don’t you?

Suzanne Shu: I do. I live very close to the university of the 405 is almost in my backyard. So once they had it shut down at about midnight on Friday, it got very Friday and we really enjoyed it.

Vigeland: So, what we’re talking about here is the fact that warnings for something worked. Why did they work in this instance do you think?

Shu: A few reasons. One was, it was a very specific time period — two days. The other thing is that when I teach marketing to my students at UCLA, we talk about using fear in advertising. And it’s a tricky thing to use, because it can go both ways. Sometimes you scare people so much that they just block it out altogether.

Vigeland: “I don’t want to hear it!”

Shu: Exactly. So fear in advertising only works when it’s not too scary and it’s very clear what you have to do to avoid those bad outcomes. And with Carmageddon, we knew. It was easy, you stay home on your couch with a bowl of popcorn and watch a movie and you avoid the whole thing!

Vigeland: Well, basically, we saw what happened over the weekend. We came in on Monday and said there have to be some lessons here that take us from Carmageddon to what we started calling “Save-ageddon.” The message got through and the message is not getting through to the American people about saving for retirement. What can we learn?

Shu: There’s a bunch of things that we can learn here. Now, on the face, there are a lot of differences between Carmageddon and savings for retirement. At the same time, you’re absolutely right — people reacted to the message and did the right behavior.

Vigeland: But when something is so far off, I guess that’s where the problem comes in. Because you just can’t imagine what it’s gonna be like if you don’t save.

Shu: Absolutely. That lack of ability to really imagine. Go back to Carmageddon: We sit in traffic here in LA on a pretty frequent basis.

Vigeland: For very very long periods of time.

Shu: Exactly. And you sit there fuming the whole time and it’s very salient how painful that is.

Vigeland: Visceral.

Shu: Yeah, exactly. Retirement isn’t like that. You can’t put yourself forward by those 20 years to think about what it’s going to be like. There’s some research that’s starting to get at that problem. Hal Ersner-Hirschfield who’s at NYU and some of his colleagues, they’ve used a computer program that takes a picture of your face. Ages it by 30 or 40 years.

Vigeland: Oh no.

Shu: Which of course people don’t really like to see. And then they make that old face of you smile or frown depending on how much you’re saving — and all of a sudden, people want to save!

Vigeland: I actually like the observation of Russ Baker. He said in a recent comment, “Threatening us with the imminent end of civilization as we know it is the only way to get us to behave rationally for our own good.” Is that the case?

Shu: That’s a great observation. I hadn’t heard that one. But I think even there, again, it comes back to what can I do about it. If the end of civilization is something that’s way outside of my hands and my perception, I’m just gonna go home and hide under the covers.

Vigeland: Right. Or have an extra bowl of ice cream.

Shu: Yeah, exactly! So I was trying to think about what can we learn from Carmageddon to apply to Save-ageddon.

Vigeland: There have to be some lessons here that could be used.

Shu: Absolutely. So the short time frame I think is a key one. And if I could take one thing we learned from Carmageddon and apply it to retirement savings, I could imagine a 401(k) provider or some sorts of retirement savings provider that would give you a website that says, “OK, in the year 2040, there’s a chance you might not make your rent.” And you know, that’s something I can deal with. I can put aside an extra $1,000 today if it’s gonna pay my rent in July of 2040 — but it needs to be that very clear “I need to take a specific action today to get a specific result on a specific future date.”

Vigeland: I wonder how much of this is the messaging. I mean, Carmaageddon, Carpocalypse. I wonder if there’s some word or phrase that we could all come up with that could really kind of get acrossthisi notion that it’s not gonna beprettyy if you don’t start doing this.

Shu: Yeah, exactly. So you know, the word we have right now is “retirement.” What do you think of when you think of retirement Tess?

Vigeland: Lazing on the beach, traveling. It really is not very actionable, right?

Shu: No,exactlyy. It sounds fun!

Vigeland: Well, you know, I’m so interested in finding a Carmaageddon-type phrase, that while we’ve been talking I’ve actually gone on Twitter and asked my followers if they have any ideas. And there’s a couple of really fun ones that have come in. Caroline Delbert writes, “Arma-gettin’-older.”

Shu: I love it.

Vigeland: It’s not too bad. not too bad. And “AARP-mageddon,” and Marie Halverson Gainapola says, “401(k) horsemen of the Apocalypse.”

Shu: I like that one too. That one’s very good.

Vigeland: So let’s get listeners to be writing in this weekend and telling us some of there suggestions as well. Suzanne Shu, thanks so much for coming in.

Shu: Thanks so much for having me Tess.

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