4 Ways to Help Folks Grapple with Retirement (While It Still Makes a Difference)
Many Americans are woefully unprepared for their retirement years, and traditional financial literacy hasn't solved this. Can behavioral science provide answers that drive improvement?
By Travis Tatman, Shaye Hopkins, Jess Dorrance and Kahini Shah
The digital era has transformed access to financial information. AI-driven platforms, social media, finance podcasts and a continuous news cycle provide an endless stream of investment information, advice and savings strategies. Meanwhile, America’s shift from traditional pensions to 401(k)s has placed greater responsibility on workers to plan for their own retirement.
Yet despite these shifts, America faces a continuing retirement crisis. Two thirds of respondents to a Federal Reserve study reported that they are not on track for retirement. Many have no retirement savings at all.
How Behavioral Biases Influence Retirement Planning
Behavioral science helps explain why so many struggle to save for retirement, highlighting how complex sign-up processes and product friction become barriers. Behavior science calls these barriers "biases."
"Availability bias" plays a significant role. It causes people to rely on familiar, easily recalled choices and attitudes rather than deliberate strategies, often assuming these options are the most important.
Here’s how that works: Research shows that the human mind is wired to focus on immediate concerns, especially when someone’s attention is fragmented by stress, distraction and decision fatigue. This leads people to reach for ineffective but available ideas that come to mind.
This cognitive strain is particularly acute for lower-income individuals prioritizing short-term survival. Overwhelming information or too many choices exacerbate this, leading to defaults based on recent, repeated or emotionally charged messages.
However, these biases offer insights for financial providers to design products that naturally encourage better savings habits by simplifying decision-making, reducing cognitive burden, and making optimal choices the default. Research from Duke University’s Common Cents Lab highlights four key evidence-based strategies to achieve this.
4 Strategies for Improving People’s Judgments on Retirement Planning
Consumers need help, but much has been tried before. Today, banks and credit unions must move beyond traditional financial education and develop retirement savings approaches that align with the ways people really think and behave. By leveraging strategies we’ll lay out, providers can empower individuals to make smarter long-term financial decisions.
These four strategies deal with the ways institutions can better communicate with consumers. They include Wage Framing, Active Choice, Curiosity Gaps and Fresh Starts.
1. Wage Framing: Shifting the Perspective on Income: Framing reveals how decisions are influenced by the way information is presented. The effect occurs whenever two or more similar pieces of information bring about divergent responses depending on how they are presented.
Example: How earnings are presented influences consumers’ willingness to save. Research shows that framing wages impacts people’s perceptions of income, their productivity and their willingness to work. In one study, Common Cents Lab found that participants whose wages were framed as yearly income intended to contribute almost twice as much to long-term savings compared to those framed as an hourly wage, despite equivalent salaries.
Why? Relativity — or framing income from a larger amount — shifts the focus from immediate cash flow concerns to longer-term financial planning by talking about the whole instead of the pieces.
Financial providers can use this insight by presenting consumers’ projected lifetime earnings in retirement account dashboards or payroll communications. This can reinforce messages about the benefits of consistent contributions and drive higher savings totals.
Read more: Behavioral Economics for Banks: Small CX Moments Can Create Big Results
2. Enhanced Active Choice: Encouraging Commitment Through Guided Decisions: Active Choice is a decision-making strategy where people consciously and deliberately choose an item from among available options that they’ve been provided.
For example, retirement savings program providers have long known that automatic enrollment, with the option to withdraw, increases participation rates. However, incorporating active choice within a default framework can boost engagement even further. Offering a choice of options can increase a person’s sense of ownership of the move, encourage thoughtful decisions, and potentially lead to more beneficial outcomes.
Common Cents Lab conducted an experiment with Self-Help Credit Union. We tested a new retirement savings account, offering participants, at random, one of two possibilities. One group were simply presented with a simple 3% default contribution. The other group had a choice of three defaults: 3%, 6% or 10%.
Credit union members given the choice of default enrollment options were more likely to enroll and save at the higher rates than those presented with the simple 3% default. Presenting safe, not cognitively demanding choices, resulted in increased retirement savings.
Banks and credit unions can integrate similar structures to encourage active participation without overwhelming individuals.
3. Curiosity Gaps: Driving Engagement Through a Sense of Urgency:
People can find the answer to an enunciated question irresistible. The gap that emerges between what’s known and what’s unknown, and which motivates individuals to seek information and resolve uncertainty, behaviorial science calls the "curiosity gap."
Like a muscle, the mind gets fatigued when overloaded, making decisions feel harder. The volume and frequency of financial information can overwhelm, leading to "choice overload" followed by inaction.
Therefore, financial institutions should use behavioral tools to inspire urgency and encourage action, such as building curiosity gaps.
We tested the hypothesis that curiosity drives tool usage by redesigning an advertising banner for a retirement calculator that appeared on a popular retirement account homepage. The revised version removed projected savings numbers and sparked curiosity. In turn that led to double the number of people interacting with the tool and led to greater overall savings compared to the standard banner. Providers can increase curiosity and suggest norms like frequent check-ins to nudge disengaged savers toward action.
Read more: Dementia’s Hidden Cost: How Cognitive Decline Compounds Banking Errors and Enables Fraud
4. Age Milestones: Capitalizing on ‘Fresh Starts Learnings’: People link renewed efforts of all kinds to milestone dates: holidays, birthdays, New Year’s.
Moments that feel like new beginnings can motivate action towards goals — a phenomenon known as the fresh start effect. A study by Beshears et al. (2021) found that framing opportunities to increase retirement contributions around fresh start moments led to higher contributions compared to neutrally-framed messages.
The Common Cents Lab’s work has also shown that messages framed around fresh start moments improve progress towards financial security.
A Facebook ad campaign targeting seniors was created to encourage them to enroll in a home sharing program as a part of retirement readiness showed.
The experiment randomized the 64- year-olds and presented two messages.
- Among the control group, the ad read "You’re getting older. Are you ready for retirement? House sharing can help."
- For the experimental group, the ad read "You’re 64 turning 65. Are you ready for retirement? House sharing can help."
As it turned out, mentioning specific ages more than doubled engagement compared to the generic aging message.
Financial providers can apply this by tailoring retirement planning outreach to milestone birthdays — e.g., 29, 39, 49 — when individuals are naturally more reflective about their financial future.
The future of retirement savings will depend not just on access to plans, but on effectively reducing friction, engaging users, and guiding them toward financial security.
