Marshmallows and Retirement

Walter Mischel, author of a well-known experiment within behavior psychology circles, recently published his book on the 1960’s study, famously known as the “marshmallow test.” Mischel was investigating strategies four and five year old kids use to delay gratification. Researchers would offer a reward, a doubling of their treat, to these young participants who demonstrated self-control by not eating the tasty prize in front of them for a period of 20 minutes. [In modern culture this can only be described as “cruel and unusual” for children, and I suspect ethics boards would no longer allow this type of experiment on campus.]

Years afterwards, and somewhat randomly, Mischel discovered the more successful of these early study participants also tended to perform better in other areas, such as sports, academics, careers, etc.

Who knew a gelatinous blob of colored sugar could inform us of so much?

Retirement savings is a special, longer form of the marshmallow test. We are essentially asked to trade the marshmallow of today for the quadrupling of marshmallows 20 years (or more) in the future.

Some implications for our own retirement marshmallows:

1. Very few decisions must be made today. Stock market up, down, buy this, buy that, few elections will impact your “you” 30 years down the road if approached the right way. Except:

2. Impulse decisions may be your worst enemy. Showrooms contain shiny objects for a reason; we are mentally (and emotionally) distracted by things that glimmer. Whether they be autos, mutual funds, furniture or manicured lawns on homes for sale, polish has a way of lowering our defenses and increasing our desire. For big ticket items in particular, count to 10 or perhaps wait 15 minutes (or 15 days) and ask yourself whether you indeed “need” a particular item. Chances are you don’t.

3. If you are truly playing the long game, then make decisions that matter in the long term. Follow the “spend less, save more,” playbook, take advantage of lower priced items such as low costs mutual funds, less expensive cars (used?), and more practical vacations. And in general, spend on experiences, not things.

Keep in mind the youngsters in Mischel’s experiment did receive their marshmallow, plus one, after patiently waiting. If a five year old can do it, so can you.