Americans' savings needs have never been more urgent - we're an estimated $6.6 trillion short of the funds we require for a secure retirement. To catch up, most of us want to be saving much more, but struggle to translate this desire into action.
Luckily, researchers and retirement plan managers are identifying practical strategies we can use to increase our savings rates, and they don't involve self-sacrifice or complex budgeting.
Findings from behavioral economics research have been revolutionizing public policy and retirement plan design over the last decade - now you can put these insights to work for achieving your financial goals.
Investing More Trumps Investing Better
To first see why savings rates matter so much, consider the experience of two hypothetical women just recently reaching retirement, using actual market return data from the Putnam Institute.
Anna and Elizabeth both turned 28 at the end of 1982, and started the same job, with the same annual pay - $25,000. They saved in 401k accounts for three decades, and saw annual income gains of 3 percent a year.
Anna was able to consistently predict and choose top-performing mutual funds, while saving 3 percent of each paycheck in her 401k.
Elizabeth was stuck with investments in low-performing mutual funds, but consistently put away 8 percent of her salary each month for retirement.
By retirement in 2013, Anna - the prescient investor - had an investment portfolio of $226,720, while Elizabeth - the big saver - was sitting on $503,501, more than twice as much as Anna.
The moral of the story: while your portfolio allocation matters, your investment rate matters even more. Below we outline a few simple steps you can use to grow your nest egg like Elizabeth.
1. Save More, Tomorrow
Procrastination is one of the most persistent enemies of good saving habits. It's easy to put off decisions to save now, and never get started.
You can beat procrastination by committing to save more - sometime in the future. As anyone who has ever volunteered for a future Saturday morning community service project knows, it is almost painless to take on obligations that are months away.
Commit to automatically raising your savings rate with future salary increases. Even if it's only 1 or 2 percent a year, it will make a major difference in the long run. You won't see decreases in your current spending level, and you'll be much better off for it.
For the last few years, retirement plan participants across the US have had the opportunity to make these kinds of commitments, in "auto-escalating" 401k programs, and as a result are putting away an extra $7.4 billion in estimated savings each year.
In one widely noted example, the economists Shlomo Benartzi and Richard Thaler used auto-escalation to help retirement plan participants grow their average savings rates from 3.5 percent to an impressive 13.6 percent.
If you can't access these features in your retirement plan at work, set an annual reminder to increase your savings rate.
2. Imagine Your Future (and older) Self
Another reason most of us don't save enough is that we discount the importance of helping our future selves. Recent studies show that we feel the same way about ourselves in a decade as we do about relative strangers.
When we have a chance to think about the person we will become, we are more inclined to fund our future, just as seeing a child's picture on a charity's advertisement makes us more likely to offer a donation.
Recent experiments have found that when young participants are shown a computer-rendered image of their retirement-age selves, they substantially raise the amount they plan to save for retirement.
Keep your future self in mind by visualizing how you plan to live in retirement, especially when you set investment goals. This reflection can help nudge you toward smarter savings decisions.
3. Write Down a Savings Plan
Most of us lead hectic lives, and we simply forget to save, or forget the importance of savings decisions.
To fight this forgetfulness, you can help yourself with simple notes.
So scribble yourself a savings plan (even if just on a post-it note), then revisit every few months to make faster progress toward your goals.
4. Get a Savings Coach
Coaches, teachers and mentors motivate us to achieve goals throughout our lives. Similarly, a personal advisor can be tremendously helpful as you try to keep up your investment commitments.
Experiments at financial institutions in the US and around the world have shown that motivational reminders and regular contact with a supportive financial professional can help us achieve higher savings rates.
Think about working with a financial advisor who is ready to support your goals - ideally focused on holistic planning advice, not just investment management.
Saving more is critical to your wealth. Use these four proven strategies to raise your investment rate and secure your retirement.
Post was co-authored by Esther Stearns - former CEO of Nestwise LLC, and a financial services executive with over three decades of experience at some of the largest and most innovative advisory firms in the US.