Finance

Want to save more for retirement? First, imagine your future self

Published

3 months ago

March 19, 2025

It isn’t always easy to save for retirement, in part because for many people it is so far away that there’s no sense of urgency.

New research suggests a solution: Make the future feel closer.

“People struggle to save for the future, and part of the reason why is people struggle to connect with the future,” says Katherine Christensen, an assistant marketing professor at Indiana University and the study’s lead author. “We wondered, based on past research, if people felt more connected to their future selves, would they be more likely to save?”

After conducting and analyzing a series of 20 experiments to test this hypothesis, Christensen says the answer is yes.

The research found that when we think about the future, more than 80% of the time, we actually start off by thinking about the present.

“What we did is essentially flip that,” Christensen says. Start the thought process by imagining that future before you turn your thoughts back to the present and the savings goals you need to meet to make it happen.

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While the difference is subtle, it has been shown to motivate people to save more. In one experiment carried out by the research team with more than 6,700 customers of a Swedish fintech company, people with low-balance savings accounts were 14% more likely to invest in a long-term savings product when they received a notification with language prompting them to think about the future first.

Hal Hershfield, professor of marketing, behavioral decision-making and psychology at the University of California, Los Angeles, and one of the study’s authors, says the prompts were designed with deliberately simple verbiage. “[We] had language along the lines of: ‘The year is 2034…rewind back to 2024 and consider saving for 2034 you,’ ” he says.

While the research was tailored to give institutions like banks insights into how to make customers save more, Hershfield says individual savers can apply their findings using similar wording.

“The key here is to start in the future and rewind back,” Hershfield says, “rather than the traditional approach of only starting now and zooming ahead to the future.”

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The authors of the new study based their hypothesis on earlier findings that people perceive trips to unfamiliar locations as lengthier than return trips of identical duration. In other words, we perceive traveling home as quicker than journeying to an unknown destination.

This cognitive quirk takes place because uncertainty creates mental distance, Christensen says. That is, people perceive the unfamiliar as being further away than the familiar. This “going home effect,” as scientists call it, holds true for how we think about years as well as miles—which is where the connection to saving for future events or life stages comes in.

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You’re more likely to save for a future that feels imminent, Christensen says. “Since the present is more certain than the future, we’re reducing the feeling of uncertainty” by anchoring subjects with a mental destination of familiar present-day reality, she says. “In our nudge, you basically move towards certainty.”

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Martha C. White is a business and finance writer in New York. She can be reached at [email protected].

Appeared in the March 10, 2025, print edition as ‘Set Savings Goals By Picturing Future.’

Document WP-WSJ-0002246561

Finance

Stocks making the biggest moves midday: WOOF, TSLA, CRCL, LULU

Published

1 day ago

June 6, 2025

Business Finance News

Finance

Swiss government proposes tough new capital rules in major blow to UBS

Published

1 day ago

June 6, 2025

Business Finance News

A sign in German that reads “part of the UBS group” in Basel on May 5, 2025.

Fabrice Coffrini | AFP | Getty Images

The Swiss government on Friday proposed strict new capital rules that would require banking giant UBS to hold an additional $26 billion in core capital, following its 2023 takeover of stricken rival Credit Suisse.

The measures would also mean that UBS will need to fully capitalize its foreign units and carry out fewer share buybacks.

“The rise in the going-concern requirement needs to be met with up to USD 26 billion of CET1 capital, to allow the AT1 bond holdings to be reduced by around USD 8 billion,” the government said in a Friday statement, referring to UBS’ holding of Additional Tier 1 (AT1) bonds.

The Swiss National Bank said it supported the measures from the government as they will “significantly strengthen” UBS’ resilience.

“As well as reducing the likelihood of a large systemically important bank such as UBS getting into financial distress, this measure also increases a bank’s room for manoeuvre to stabilise itself in a crisis through its own efforts. This makes it less likely that UBS has to be bailed out by the government in the event of a crisis,” SNB said in a Friday statement.

‘Too big to fail’

UBS has been battling the specter of tighter capital rules since acquiring the country’s second-largest bank at a cut-price following years of strategic errors, mismanagement and scandals at Credit Suisse.

The shock demise of the banking giant also brought Swiss financial regulator FINMA under fire for its perceived scarce supervision of the bank and the ultimate timing of its intervention.

Swiss regulators argue that UBS must have stronger capital requirements to safeguard the national economy and financial system, given the bank’s balance topped $1.7 trillion in 2023, roughly double the projected Swiss economic output of last year. UBS insists it is not “too big to fail” and that the additional capital requirements — set to drain its cash liquidity — will impact the bank’s competitiveness.

At the heart of the standoff are pressing concerns over UBS’ ability to buffer any prospective losses at its foreign units, where it has, until now, had the duty to back 60% of capital with capital at the parent bank.

Higher capital requirements can whittle down a bank’s balance sheet and credit supply by bolstering a lender’s funding costs and choking off their willingness to lend — as well as waning their appetite for risk. For shareholders, of note will be the potential impact on discretionary funds available for distribution, including dividends, share buybacks and bonus payments.

“While winding down Credit Suisse’s legacy businesses should free up capital and reduce costs for UBS, much of these gains could be absorbed by stricter regulatory demands,” Johann Scholtz, senior equity analyst at Morningstar, said in a note preceding the FINMA announcement.

“Such measures may place UBS’s capital requirements well above those faced by rivals in the United States, putting pressure on returns and reducing prospects for narrowing its long-term valuation gap. Even its long-standing premium rating relative to the European banking sector has recently evaporated.”