These 4 Traits Predict Better Retirement Outcomes: Goldman

What You Need to Know

Goldman Sachs examines how workers' attitudes about current and future money issues affect savings efforts.
Optimal behavioral qualities include optimism, future orientation, financial literacy and reward orientation.
Access to advice and support services can help ensure that more Americans achieve their lifestyle goals, research suggests.

The results of a major new survey suggest that people who feel emotionally positive about their future are better able to make sacrifices for it in the present by taking such actions as establishing budgets, living below their means and prioritizing long-term savings.

Those who are primarily focused on their current quality of life, on the other hand, more commonly struggle with allocating to longer-term savings needs, and they report more stress and more difficulty in preparing for retirement.

This is the topline finding of a report published by Goldman Sachs, “Retirement Mindset Matters.”

The in-depth survey runs to some 26 pages and includes a wealth of information about the ways that Americans’ views about work and retirement vary by generation and according to other social, economic and demographic factors.

For this year’s report, Goldman researchers partnered with Syntoniq, a behavioral finance technology company specializing in behavioral analysis, with the goal being to “empower individuals to better understand their financial decision making and bridge the gap between their financial objectives and outcomes.”

Based on Syntoniq’s analysis, those with greater ease in preparing for retirement show four optimal behavioral traits: high “optimism,” high “future orientation,” high “financial literacy” and high “reward orientation” over “risk orientation.”

Importantly, the evidence suggests that these characteristics are moldable for most people, meaning improving access to the right advice and support services can help ensure that more Americans achieve their lifestyle goals in retirement.

Key Survey Findings

According to Goldman’s research, individuals assessed to have high levels of these four traits reported more retirement savings, less stress when managing savings, more comfort managing competing priorities and a higher level of engagement.

For example, this group is likelier to have set up personalized financial plans and less likely to have made damaging changes to investments during volatile markets compared to those assessed to have low levels of these four traits.

Notably, only 10% of working respondents exhibit all four “optimal” traits, while 5% exhibit all four reciprocal or “suboptimal” traits — i.e., low optimism, low future orientation, low financial literacy and an excessive risk-mitigation focus.

The vast majority possess a blend of these traits, the report explains, and as such the vast majority report mixed success in saving for retirement.

Effects of Positivity

In a statement published alongside the new report, Chris Ceder, senior retirement strategist with Goldman Sachs Asset Management, says the results “demonstrate that possessing certain traits can help people navigate the financial vortex of competing priorities that all too often interfere with retirement success.”

Future Orientation Matters

As Ceder highlights, when it comes to levels of retirement savings, high optimism correlated most among survey respondents with reported higher retirement savings. For example, highly optimistic respondents are more likely to report that their retirement savings are on track or ahead of schedule (83%), compared to 41% with low optimism.

While it may be obvious that there would be a link between higher current savings and higher optimism, other results show there is more at work here. That is, those with high “future orientation” answered with similar levels of optimism across savings levels, with 73% reporting that their retirement savings are on track or ahead of schedule versus 50% with low future orientation.

Among those who are low in both the optimism and future orientation traits, 31% report that their retirement savings are on track or ahead of schedule.

According to the survey, having a personalized retirement plan is more common for those with high optimism (78% vs. 42% with low optimism), high reward focus (65% vs. 55% with risk or prevention focus) and high future orientation (70% vs. 48% with low future orientation).

Ceder notes that a personalized retirement plan is particularly prevalent among those with both high optimism and high future orientation (83%) and less common among people with both low optimism and low future orientation (33%).

Financial Literacy Matters

According to the survey, those with higher reported financial literacy seem to prefer approaches to retirement planning that favor “guaranteed, consistent and inflation-protected income” from diversified sources.

Those with less financially literate responses reported favoring retirement income from a single source, reflecting their desire for a straightforward approach to retirement but potentially leaving them exposed to either market or longevity risk.

Overall, the survey shows that guaranteed income generally is most desired by those who report struggling to adequately save, while those with a risk focus prefer guaranteed income and professional financial advice.

“Most Americans do not plan to reach retirement underprepared, yet the gap between their desired and actual retirement income is evident,” Ceder warns. “By integrating behavioral traits into plan design and financial planning services, financial professionals can better personalize education, advice and guidance to what motivates each individual saver, potentially leading to more positive retirement outcomes.”