Retirement Planning and Behavior

First and foremost, retirement planning is about how you approach the subject. It is for most of us, a sort of behavior modification. We want to do better. We plan to do better. But in the end, we often fail and there are numerous statistics to prove that to be true.

While reading about some other person's failures is far more entertaining, reading yourself into some of the studies I present in this section of the (as-yet-to-be-edited) book can be eye opening.

Sharon A. DeVaney, who is a Professor of Family and Consumer Economics, Department of Consumer Sciences and Retailing, Purdue University and Sophia T. Chiremba, Ph.D. candidate, Department of Consumer Sciences and Retailing, Purdue University co-authored a paper discussing the different types of savings habits titled Comparing the Retirement Savings of the Baby Boomers and Other Cohorts

In that paper, they reveal some interesting statistics about who we are and how we approach savings. For instance, Ms. DeVaney and Ms. Chiremba noted the following:

There was at least one retirement account in 57 percent of the households. The average or mean amount in the retirement accounts was $49,944. The median amount held in retirement accounts was $2,000.
About 34 percent of households preferred not to take any risk when saving or investing, while 39 percent would take average risk, and 27 percent would take above average or substantial risk.




The Swing cohort was the smallest group mentioned in the paper, representing just 14 percent of households. They wrote that "On average, respondents had completed about 13 1⁄2 years of education. Forty-six percent of the households had children aged 18 years or younger living in the home. Thirteen percent of the heads of household were self-employed. The average or mean household income of the sample was $72,673; the median household income was $44,000.


Forty-four percent claimed that they had spent less than their income in the previous year, while 19 percent indicated that they had spent more than their income, and 37 percent reported that they had spent an amount equal to their income.

I mention several other studies in this section of the book including an update on what is known as "the Life-cycle Hypothesis", a suggestion that savings is determined by your age. Bracketed by younger people who borrow against future earnings and older folks who spend what they have saved, this hypothesis suggests that middle-aged people are most likely to save.

Icek Ajzen suggested something entirely different. He published a paper in 1985 that first appeared in an article titled “From Intentions to Actions: A Theory of Planned Behavior”. Mr. Ajzen believed that savings is determined by our approval rating among our peer group and the successes we may have had in the past.

To overcome that, we need to focus on what is not known, couple that with what is possible and soldier on without any notion of perceived gains. The possibility of a more comfortable future if we plan our retirement without the burden of our bad behavior is a huge but not insurmountable challenge.

Retirement Planning and Calendars

I began the discussion in section one of the book with calendars. Let's face it, time is what we are most focused on when it comes to retirement planning. While the book focuses on how we can make the best use of time and how to offset many of the problems along the way - each of which seems to act as a subtracting force - we often ignore the importance of our linear march to the end.

Time is a powerful, almost spiritual force that early peoples believed was better left to the priests. While I mention the earliest calendars in the book, the real breakthrough work was not being done in Europe or Egypt but here in the Americas.

Using the regularity of Venus, Mesoamerican Indians had calculated the rather regular movements of this planet.

This planet moves in a regular pattern. It spends 263 days in the morning sky, disappears for 50 days behind the sun and then spends 263 days as fixture on the evening horizon. But to these ancient Mayans, this was not enough. In fact, they developed a much more complex calendar of which Venetian observances became only one of three measures of time.

They also used a calendar that tracked a solar year much the way we do now and something called a Long Count, which meshed the other two calendars into one.

The Long Count calendar gave these early time keepers the ability to extend beyond the boundaries of secular and solar timekeeping where every day in a 52 year period had an exact and distinct name. According to Charles C. Mann, author of 1491, early peoples took their birth date as their name.

A Long Count calendar was important for numerous reasons. It gave coherence to the other two measures of time. And even more importantly, it gave them the ability to extend their thinking into the future.

How far? They were able to set a beginning date - somewhere around mid-August 3114 B.C. and an ending date 23 billion plus years into the future.

Because our retirement plans are based on a much shorter time period - our work years, we are left with a sense of urgency to accomplish great things in a relatively short period.

When we begin our saving for retirement later than we like, we are often left with feelings of guilt and apprehension. I hope to fix some of those problems. Not all of them, just the issues pertaining to your money.

When we begin early, we are often sidetracked as life begins its relentless quest for our attention and money.

Time is our foil. Perhaps we can fix that and turn this steady march into a more rewarding journey.

Retirement Planning and Chiaroscuro

One of the first words in the new book deals with the rather obscure term chiaroscuro. Described by Richard Larmann of the University of Evansville as "a method for applying value to a two-dimensional piece of artwork to create the illusion of a three-dimensional solid form. This way of working was devised during the Italian Renaissance and was used by artists such as Leonardo da Vinci and Raphael. In this system, if light is coming in from one predetermined direction, then light and shadow will conform to a set of rules."

Retirement planning is an art form that harbors subtle shadows and nuances that too often draw your eye away from where you need to focus. Painters using this method understand that it is the foreground the commands your attention but it is the background that lends the art its visual depth.

We often focus solely on how much we are saving for those after-work-years and not on the shadows, which because we do not pay as close attention to, often subtract from the effort.

You can see this used in the following paintings by Caravaggio and van Honthorst.

My personal favorite is by German artist Elsheimer seen here in the burning of Troy.