How Can I Save More for Retirement?

We are all just children staring at marshmallows.  

"Psychologist Walter Mischel… described the interaction between emotion and cognition in the famous marshmallow experiments of the 1960s and 1970s. They presented four-year-olds with a marshmallow, telling them that they could eat it at any time or wait and eat two marshmallows when the experimenter returned. They found that children who were able to wait longer did so by cognitive strategies such as covering their eyes, singing songs, or imagining that they faced a cotton ball rather than a tasty marshmallow." (Finance for Normal People: How Investors and Markets Behave)

Aren't we are all just children staring down the temptation of a marshmallow?   We know if we don't eat one now, we'll get two a little later.  So why is it so hard not to eat that marshmallow…right…this…second?

It's simple.  Our monkey brain places more value on rewards that are more immediate (even if they're smaller) than rewards that are further away (even if they're larger).  It's called "Hyperbolic Discounting".

That makes sense.   Our monkey brain has been around for millions of years.   It's been appropriately trained to worry about the present more than the future.  

Until the last 30 years, considering how your actions today affect your future wasn't all that important.  You worked.  You retired and got a pension for a few years.  You died.  

But now we need to survive for 30 years after the money stops rolling in.   This is a brand-new human experience and one we are not very good at yet.

So how can we beat our monkey brain and avoid eating cat food out of our kid's basement?

Cover your eyes.  Sing a song.  Imagine cotton balls. 

Just don't give your monkey brain the opportunity to decide.

Save first.   Don't give yourself the choice to save or spend because we know how that one goes.  PAY. YOURSELF. FIRST.

Set up automatic savings to put away at least 10% of your income - 401k, IRA, savings account.  Where you save it isn't nearly as important as just saving it.   And if you're an overachiever your bogey is 20%. 

Your monkey brain won't like eating cat food any more than you will.   Do both of you a favor and box it out of your decision-making process.  Your monkey brain is much better at running from saber-tooth tigers than saving for retirement.