Nudging my way to retirement

Trish Oakley 
January 2024 

Nudges.  I am the youngest of three children so that meant I always had to sit in the middle of the back seat on car rides.  If you are like me, you will be all too familiar with nudges filling road trips or Sunday drives.  And if it wasn’t a car trip, I would find myself nudged along on walks - my legs were invariably shorter and slower than the rest.  Unsurprisingly, nudges has a certain connotation in my head.

Like many of you, the summer holidays presented a time to indulge in a little reading.  A variety of books spilled over my table as I dipped in and out depending on the day.  Deep within one particular book, I came across a chapter on “nudging” and the way this can be used to positively influence behaviour.

No back seat squished riding for me these days, (although I suspect the family dog might sympathise with my childhood memories) but New Year’s did loom.  Like many, the idea of resolutions popped up while those made and perhaps not quite achieved in 2023 were pushed aside.  Fortunately, what my reading affirmed was that resolutions seeking big changes (largely focused on the what), rather than step by step plans (focused on the how), may not be the best way to go.  In fact gently nudging in the required direction is a more efficient way to change people’s behaviour than your standard resolution set.

So how does this work when it comes to saving I wondered?

KiwiSaver certainly seems to do part of the job for us.  We are nudged along every pay packet with a deduction made and credited to our KiwiSaver account.  That feels like the ‘how’ is taken care of for us and the annual member statement we receive mid-year telling us what we are on track to receive at age 65 feels like the ‘what’ might be sorted too.  Job done, put a tick in that KiwiSaver box or is there more to it? I thought about this a bit and while the mechanical nudges of pay packet deductions get us a long way there, without some clear meaning for the lump sum at retirement, the reward for effort isn’t all that clear. 

It got me reflecting on a piece of advice from my fellow author, Martin Hawes.  “Trish” he said to me, “Money has no value until you give it a value.”  Until then of course it is just a number.  A number with potential, but potential for what? 

Savings and the associated number is easier to imagine when it is for goals like a house deposit, a new car or perhaps an overseas holiday.  But what about retirement?  It’s a concept, an idea, it doesn’t come with a roof, four wheels or plane tickets.  Indeed no detailed plan is attached to retirement until you build it yourself.  So how do you give your KiwiSaver account value, turning it from a possibility (its potential value), into an actual value of how you are going to use it?

Back to nudging.  The book I read observed that a neuroimaging study showed when people imagine themselves in the future, their brain activity looked more like when they are thinking about an entirely different person than how brain activity presents when thinking about themselves right now in the present.  Curious indeed! So it appears we find it hard to identify with ourselves in retirement years.  I can relate to that, it seems a long way off and then suddenly it is just around the corner.

So how do we get to relate to our future selves better?  I am not sure I will take the full advice the book offered and use an app to age me, print that photo and store it next to my credit card prompting me to think harder before buying on a whim. But I do think this is where Martin’s teachings come into play.  Give your KiwiSaver account a value by working out what it is you hope to do when you retire.  Do you want to travel? If so when, where and how often?  Do you want to move closer to family and what does that house change mean?  Are there new hobbies to take up? Do you want to support your grandchildren’s education or house ambitions?  Do you plan to still work for a period of time?  Do you intend spending the whole sum or is your aim to leave a little nest egg behind for others?  Will it be set aside for medical treatments or aged care facilities? 

So many questions, but taking your projected KiwiSaver lump sum and turning it into tangible plans is a really important part of saving for the future.  It enables you to have a clear view of what resources are required to deliver on that lifestyle and understand if there is a gap between the reality and the dream.  Crucially it gives your KiwiSaver savings real meaning, not just potential value which is especially important when locked away for so long. It also opens up choices for you between spending now and saving more for your future self.

This seems like the positive type of nudging that the book was seeking of me and certainly better than the nudging I understood from childhood.  With KiwiSaver mechanics sorted for us, perhaps now in those early days of the New Year before life takes over once more, time can be found to sit down and imagine your future you.

Grab a pen and paper and write it down, share it with your partner, fine tune it as new ideas come to mind, perhaps via a travel show that captures your imagination or the birth of a new family member.  (I encourage you to read Martin’s Investor Education article too about SMARTI goal setting as you do so).

So happy New Year to you all, the best resolution we may set this year is using pay checks as a positive nudge to validate a vision of retirement.  Take charge of the value of your KiwiSaver account and how you want to spend it.

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