Episode 16: No Do-overs For Retirement Savings - It's All About The Start

Bryan Foltice Behavioral Finance Podcast

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In this episode, we begin our discussion on the importance of retirement savings and why most individuals don't save enough. The biggest issue with this is that there are no do-overs for retirement savings, leaving most people ill-equipped for retirement.
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Defined Contribution (DC) Plan:
Individual Accounts: In a DC plan, each employee has their own individual retirement account. Examples include 401(k)s and 403(b)s in the United States, as well as Individual Retirement Accounts (IRAs).
Contributions: Contributions to a DC plan are made by both the employee and often the employer. These contributions are typically a percentage of the employee's salary. Some employers also provide matching contributions.
Investment Responsibility: In a DC plan, employees are typically responsible for making investment decisions for their account. They can choose from a menu of investment options offered by the plan, such as mutual funds or exchange-traded funds (ETFs).
Defined Benefit (DB) Plan:
Pooled Fund: In a DB plan, the employer contributes to a pooled fund, which is managed by the employer or a professional investment manager. The contributions are determined by a formula based on factors like the employee's salary, years of service, and age.
Guaranteed Benefit: The key characteristic of a DB plan is that it provides a guaranteed retirement benefit. This benefit is typically based on a formula and is predetermined. Employees know in advance what they can expect to receive upon retirement.
Investment Responsibility: Investment decisions in a DB plan are typically the responsibility of the employer or the plan trustee. The employee does not make investment choices.
1. Procrastination in Finance
Procrastination refers to the tendency to delay or put off tasks, even when they are important or have long-term consequences. In the context of personal finance, procrastination can have several negative effects.
2. Self-Control in Finance:
Self-control, also known as discipline or willpower, plays a vital role in managing personal finances effectively. It involves making decisions that prioritize long-term financial well-being over short-term gratification.
Clicking the timestamps below for a quick view of every action.
00:00 Introduction and Short Life Update
01:21 Cost of Having a Wedding Compared to Alternative Wedding Options
07:15 The rational stance on retirement savings (perfect savings vs. consumption)
10:00 Defined Benefit vs. Defined Contribution Plans Defined
12:22 In retirement savings, there are no do-over's
14:30 The overall "sorry picture" to retirement savings
17:15 Reasons We Don't Save - Procrastination and Lack of Self Control
21:40 Reasons We Don't Save - Status Quo Bias and Information Overload
23:40 How Often Should You Change Your Retirement Portfolio (What Do Most People Do?)
28:05 Reasons We Don't Save - The Task Is Too Overwhelming and Difficult
I hope you enjoy the content and learn all about the topic of Behavioral Finance. I've set up the first few podcasts as mini-lectures of my Behavioral Finance course that I teach at Butler University each semester. The goal of this podcast is to provide a comprehensive look into the topic of Behavioral Finance - for free!
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