Watch the kids in this video. They are re-creating psychologist Walter Mischel’s famous 1972 marshmallow experiment, which was designed to study children’s ability to defer gratification. In the actual experiment, the researchers analyzed how long each child resisted the temptation to eat a marshmallow placed in front of them in order to obtain a second marshmallow later and whether or not doing so was correlated with future success.
The kids’ struggles to hold out for the extra marshmallow is poignant and hits home with all of us.
Over 600 children who took part in the original experiment. A small minority ate the marshmallow immediately. Of those who attempted to wait, less than one-third deferred gratification long enough to get the second marshmallow. The others struggled to resist temptation and held out for an average of less than three minutes. Any of us struggling to diet or just to eat right will surely relate. For most of us, a bird in the hand is better than two in the bush, no matter how likely we are to acquire the two later.
As it turned out, those children who waited and got the second marshmallow did better later in life. A follow-up study in 1988 showed that “preschool children who delayed gratification longer in the self-imposed delay paradigm, were described more than 10 years later by their parents as adolescents who were significantly more competent.” A second follow-up study, in 1990, showed that the ability to delay gratification also correlated with higher SAT scores (over two hundred points higher, on average).
Obviously, the ability to delay gratification is an adult concern too. Retirement planning may be our supreme test in this regard. Adults are asked to put money aside for decades instead of spending it for (seemingly?) important or fun stuff now in order to fund an unknown, uncertain and often far-off future. Not surprisingly, we aren’t very good at this hyperbolic discounting.
We who focus on retirement planning spend a lot of time and energy considering such things as asset allocation plans, decumulation strategies and needs analysis. But we spend far too little time and energy on the most important factor of all — how much money is saved and how to save it. As my friend Wade Pfau succinctly points out in his seminal JFP paper, Safe Savings Rates: A New Approach to Retirement Planning over the Life Cycle, “[t]he focus of retirement planning should be on the savings rate rather than the withdrawal rate.” Put another way, “someone saving at her ‘safe savings rate’ will likely be able to finance her intended [retirement] expenditures regardless of her actual wealth accumulation and withdrawal rate.” Using Wade’s analysis, these “safe savings rates” generally range from 9.3 percent to 16.6 percent over 30 years under various sets of market conditions. Simply put, we should all be maxing-out out our defined contribution plans (usually a 401(k)) every year of our working lives and leaving the money untouched until retirement.
Unfortunately, few of us are able to delay gratification sufficiently to save at anything like those rates. The 2012 Retirement Confidence Survey from EBRI once again shows just how poorly we are doing.
- One-third of workers haven’t saved at all for retirement (up from one-fourth in 2009).
- Only 58 percent of workers are currently saving for retirement (down from 65 percent in 2009).
- 60 percent of workers have less than $25,000 in savings and investments (30 percent have less than $1,000).
- More than half of workers (56 percent) report they have not done a retirement needs calculation.
- Workers dramatically underestimate how much money they will need for a comfortable retirement.
- Only 17 percent of workers ae “very confident” of their ability to accumulate the savings needed for retirement.
Mischel and his colleagues later taught children a simple set of mental tricks to deal with the problem, such as pretending that the candy is only a picture, surrounded by an imaginary frame. These techniques dramatically improved their self-control. The kids who hadn’t been able to wait sixty seconds could now wait fifteen minutes. “All I’ve done is given them some tips from their mental user manual,” Mischel said. “Once you realize that will power is just a matter of learning how to control your attention and thoughts, you can really begin to increase it.”
Penn psychologist Angela Lee Duckworth looked at the relationship between self-control and grade-point average among eighth graders who were given a choice between a dollar right away or two dollars the following week. She discovered that the ability to delay gratification was a far better predictor of academic performance than IQ. She said that her study shows that “intelligence is really important, but it’s still not as important as self-control.”