The psychology of growing old (and paying for it)

We don’t like to think about growing old. We like to think we can outrun the future, so we watch our diet and exercise to keep ourselves young and healthy. Thanks to modern medicine we now live longer than ever. Before we know it, the years we spend in retirement will match our time in the workforce. Imagine that!

"Customers bombarded with too many facts, figures, stats will feel less informed. It’s almost as if the knowledge cripples or paralyses them to do nothing."
Milena Malev, Head of Retirement Solutions, ANZ

The downside in this shift is we somehow have to pay for it. This is concerning when research shows Australians are disengaged with their superannuation. Almost two-thirds of 25 to 34 year-olds don't know the age they can access their super, while only a third bother to read their statements.

This will increase pressure on the financial services sector to shift from lending towards helping people manage their retirement so they can be self-sufficient.

Understanding spending behaviour and why people think the way they do about saving can help the industry better assist customers to make informed decisions about their retirement.


A look at Google trends data shows very few people have retirement front of mind. Search results show people are more interested in psychics and winning the lottery than saving for retirement. 

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There is plenty of information on the importance of planning for retirement, so why are more people looking to win money or know the future? There is a lot of irrationality in our decision making when it comes to saving and planning for retirement.

General levels of understanding of super are very limited; only 35 per cent considered themselves well informed about superannuation and just 40 per cent are confident they can assess super fund information without assistance.

An MLC whitepaper suggests nearly half (46 per cent) of Australians are living “pay-cheque to pay cheque”.  People are finding it more difficult to manage their funds due to high costs of living, lifestyle changes and an aversion towards saving.

Paradoxically, when Australians are asked to rate their self-assessed retirement preparedness level, 49 per cent said they believed they were prepared.

Why do people avoid financial planning? Why aren’t they saving for their retirement - which could last for more than 30 years?

Let’s review some of the psychological barriers that impact retirement planning and create an apparent aversion to financial planning.


• By 2025, one in three Australians will be aged 55 years and older.

• The proportion of Australians over 65 will more than double in 50 years.

• As working population shrinks, the cost of aged care and health services will increase.

• Only 42 per cent of those aged 40+ have a retirement plan, according to Investment Trends.

• Forty per cent of Australians have never sought a financial advice about planning for retirement.

• Fifty one per cent of pre-retirees anticipate they will outlive their retirement savings, and only 10 per cent have a plan to address this. 


Research shows the retirement decision-making process is influenced by the amount of information people receive, how easy it is to understand and its nature. The financial advice sector can give customers the confidence they need to make better decisions by providing them with education and awareness.

Improving financial literacy for all Australians is a positive step, although research suggests improved knowledge may not guarantee sound financial decisions. Confidence may be undermined when people are confronted by too many choices and feel their knowledge is limited.

Feeling inadequate affects individuals’ likelihood of participating in planning activities and/or may lead to people avoiding the decision altogether. Customers bombarded with too many facts, figures, stats and information will feel less informed.

Another consideration is people’s scarce resource is attention rather than information.  Professor John Payne of Duke University says by focusing on people’s values we can help them make better decisions.

After all, our values drive what we pay attention to, which subsequently dictates our choices.  But the financial industry is prone to using jargon, complicated product definitions and technical terminology people don’t understand.

In an environment with daunting publicity about the retirement saving gap, diminishing trust in financial advice and a changing digital landscape, it is the responsibility of the industry to embrace clearer and simpler communication to connect with customers on emotional level to promote value-based decision making.


The longer we delay things the harder it is to start. How many of us say “I’ll start my diet on Monday”, or “I’ll go for a run in the morning”, only to do nothing of the sort?

We often discount long-term benefits of our choices and focus on the immediate ones. Buying a new pair of shoes is way more fun than saving for the future.

Research shows people know they are forsaking long-term goals for instant gratification but still do it. So if we have the right intentions and aspirations, can digital technology play a role in controlling instant gratification? And help in incentivise saving?

Israeli non-profit organisation Round-Up enables credit card holders to have their transactions rounded up, with remainder donated to a charity of their choice. A similar program could be designed to divert the remainder to a customer’s savings account. By using this available technology, we could have our customers saving while they spend.

The financial services sector has an opportunity to change from rewarding spending to rewarding saving and deliver immediate benefits back to customers in an easy to understand manner that overcomes the issues of unproductive behaviours.

Such efforts need to be supported by an ongoing effort to understand consumers’ financial personality, identify their needs and help them with saving psychology so they can see how it impacts their future.


It can be hard to imagine what your life will be like in 20 years’ time. But what if we could use data to make images more vivid and build the emotional connection for our customers? Imagine the positive impact on our industry and also health and education.

Prof Dan Goldstein together with Hal Hershfield and Allianz use a behavioural time machine to test if people’s behaviours change when looking at a picture of their future selves. The software ages pictures of people in to their 60s, 70s and 80s so they can see themselves in the future, including the ability to make them look happy or sad.

The results show people who interact with their future selves had a propensity to save more and even doubled their retirement saving rates. It is a clear demonstration of how new technology can help motivate people to save through an emotional connection. 

There are already applications already available today to see how people might look if they smoke, get too much exposure to sun or gain weight. Soon we will be able to accurately model how our financial decisions can affect our future. 


I believe as leaders in financial services industry, we share a responsibility to help current and future retirees achieve a secure and dignified retirement. 

We have the insights on how we can assist and benefit the financial lives of our customers and we have the ability and knowhow to steer our customers towards better financial decisions by:

• Building strong emotional connections with customers to motivate the desired behaviours;

• Valuing customers’ emotions and goals in decision making;

• Assisting customers with clear, concise language and value based choice architecture; and

• Empowering customers with tools to realise goals and balance between present and future selves.

By doing this we can genuinely help change our customers’ financial well-being as well as attract and retain new and valuable customers.

This holistic approach needs to be embedded in the whole value chain from digital engagement to product development, service delivery and advice to be successful.

Milena Malev is Head of Retirement Solutions at ANZ


The issuer of this communication is Australia and New Zealand Banking Group Limited (ABN 11 005 357 522, AFSL 234527) (ANZ). The opinions expressed are those of the writer.

The information in this communication is current as at 20 May 2016 and is subject to change. The information is of a general nature and has been prepared without taking into account your objectives, financial situation and needs.

Before making a decision based on this communication, you should seek professional financial advice (including tax advice). You should consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. Before investing or deciding whether to acquire, or to continue to hold any financial product you must consider the relevant PDS.

An investment is subject to investment risk, including possibly delays in repayment and loss of income and principle invested.

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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