|RON LIEBER, Twitter: @ronlieber|
If you're an active participant in social media, it's nearly impossible to avoid a running tally of everyone else's spending. New cars and home renovations are all over
It's tempting to think that your own life doesn't measure up. So what the world needs is more socially driven saving — a counterbalance consisting of reminders and affirmation that people who choose to put money away over spending it are investing in a happy future, even if they are not presently driving a convertible to their beach house.
The biggest goal that these companies share is to get people to set more money aside. Financial services firms win big when people do this, but so do those whose savings have fallen short so far. Putnam does not make its tool available to the general public, but it ran some numbers at my request to see where a variety of its customers stand.
The results begin among its customers who are in the median for savings across a range of four sample ages and two potential incomes for each age. Among the various cases, the best result among the median savers was a group that is on track to reach just 72 percent of having a comfortable retirement income goal. The worst group seemed destined to reach only 25 percent. (Putnam defines comfort as having enough money saved to replace 75 percent of whatever your annual income is projected to be when you retire.) People who are in the 90th percentile of savers, however, appear set to hit somewhere between 86 and 103 percent of the goal.
The company includes
To avoid a shrunken retirement budget, many people will need to save more money. For now, however, people are saving roughly the same percentage as they were a decade ago. The economy hasn't helped, but inertia may be at work too. Putnam had a hunch that by rubbing people's noses in the high savings of their peers, it could get the laggards to make some changes.
The results so far have been impressive. In a sample of 10,000 users, 32 percent used the social comparison tool and adjusted the salary deferral level to see how the results may change. Of those who did play with the lever, there was a 28 percent average increase in the set-aside, to 9.6 percent of the paycheck, from 7.5 percent. To make it easy for people to say yes, the Putnam tool tells people what the pretax effect would be on their paycheck and allows them to make the switch in two clicks.
A couple of other twists may be helping Putnam achieve that kind of lift. On its site, it avoids what it describes as the ''accounting view'' of information, where the balance would be the only thing a customer would see. A few hundred thousand dollars might seem like a decent amount of money, but it may not last more than a few years.
Instead, it shows a customer's progress toward that ideal monthly retirement income goal and displays it front and center. ''We use a monthly amount in order to put things in the context of how people actually live their financial lives today,'' said
Putnam also breaks down estimates for people's health care costs in retirement, including
Putnam's results aren't much of a surprise to
Some employers take the less gentle approach already with a feature known as auto-escalation. Unless employees opt out, the percentage deferral from their paycheck automatically goes up, usually by a percentage point each year, until they reach the legal limit. Many employers choose not to offer the feature because more savings means more employer costs.
Putnam's social comparison tool is not available to noncustomers. Here's hoping it will pull back the curtain as a form of public service.. But Voya's
All of this takes place out of public view, even if the social comparisons do rely on volunteers to share personal data. That means something is missing here — the ability to broadcast your own good behavior.
While I don't think many people will be sharing their Putnam percentile rank on
Until they build this feature, let's have a go at it ourselves. If you've started to save more or spend more carefully or improved some other part of your financial life recently, please tweet about it in the coming days with the hashtag #bettermoney so that we can all pat one another on the back in public.
DRAWING (DRAWING BY
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