How We Trick Ourselves Into Retiring Too Early

Jan 4, 2019 / Amanda Chase, Horsesmouth Assistant Editor

When you ask your clients to think about retirement, what words and images come to mind? Usually they will paint a positive experience with words like relax, fun, happy. Why is it then that a large number of retirees are not as happy in retirement as they predicted? According to a research report from SSA, one of the main reasons is “affective forecasting.”

What is affective forecasting? Think of weather forecasting. You are trying to predict the future based on the limited information you have today. However, instead of predicting tomorrow’s temperature, affective forecasting is about predicting your future emotions and happiness. Similar to weather forecasting, though, we’re just as bad at seeing into the future as your local weather person.

For example, if you are considering retirement, you are likely to think about how your life and your happiness might be impacted if you continue to work or if you retire. If you inaccurately predict that working another three years will make you miserable and that retirement will be carefree and joyous, this can create both financial and non-financial problems.

Research on affective forecasting tells us that we tend to over or under estimate how an event will affect our future happiness—that is, we imagine the event to be much better or worse than it actually turns out to be. If you’ve worked thirty years and have had a bad day at the office, you will probably overestimate how wonderful your life in retirement might be. This mental “pre-experience” you envision may entice you to think about retiring early—even if you may not be financially or emotionally ready.

Find the full article, including why we are poor predictors of what will make us happy, at Forbes.


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