Most people do better with short-term goals than long-term goals. That is the conclusion reached by a recent study from Rice University on saving entitled “The Effects of Time Frames on Personal Savings Estimates, Savings Behavior and Financial Decision Making.” Excerpt from a press release: “Americans need to save paycheck to paycheck“:
For example, in one study, those saving for next month estimated they would save $287 but actually saved $440. On the other hand, participants who were asked to estimate how much they would save in a specific month in the future indicated a much higher value — $946 — but ended up saving far less — only $123.
Another argument, I guess, for the automatic enrollment proponents since saving from paycheck to paycheck doesn’t always lend itself very well to the qualified plan world.