The Road to Retirement Success
Insights from behavioral finance offer strategies to decode human nature and improve employee savings.
Over the past few decades, behavioral science research has revealed that financial decision-making can’t simply be explained as a series of rational choices. Cognitive biases, emotions and long-standing habits often outweigh reason. At worst, these tendencies can wreak havoc on financial plans—particularly those that rely on long-term thinking related to future events such as retirement.
Fortunately, insights from behavioral science can help people acknowledge and overcome these habits. With these insights in mind, plan providers have an opportunity to develop a framework that helps employees counteract their bad habits and encourages them to make more sound long-term investment decisions.
- Behavioral science can help financial professionals and employers understand some of the common biases workers bring to investing and saving.
- The presentation of investment choices can be structured to guide people to do what’s in their best interests.
- Understanding behavioral finance makes employers better equipped to make choices about plan providers, messaging, design and communication.