Are Our Caveman Roots Preventing Us From Effective Retirement Planning?

NEW YORK (MainStreet) — Alicia Phillips, a 28-year-old in San Jose, Calif., who does marketing for a start-up, is forgoing all retirement planning. She has $125,000 in student loans from Rowan University in New Jersey and Duquesne University Law School, which she left last year. A 401(k), she says, would be futile.

“I figure with that debt, plus the mortgage I'll eventually have and children I'll potentially have — I'll spend my entire life barely paying my bills and have to work well beyond retirement age,” she says.

Yet even if she had the extra money, she wouldn’t make investments she could reap the benefits of only down the line.

“More likely I'd make some risky investments hoping for big returns and travel more,” she says. “Not the smarter decision, but I'd rather experience more of life, then worry about supplementing Social Security insurance payments 50 years from now — if I even get those.”

Phillips is not alone in her focus on “the now.”

There are clear reasons behind why 20- and 30-something guys and gals are not contributing as much to 401(k)s: it's simply not in the caveman wiring to think 40 years ahead, according to behavioral economists such as Teresa Ghilarducci, director of the Schwartz Center for Economic Policy Analysis in the Department of Economics at The New School. “Young people, because of their age, do not have the DNA to worry about their old age, because as a species we’ve been very concerned about survival,” Ghilarducci says. “Saving for your old age is not what geneticists call a selective factor, and those who worry about their old age may not have children.”

It’s a major feat to overcome this predisposition and biological imperative. The numbers prove it.

In the U.S., companies have $1.5 trillion in unfunded or underfunded pension obligations. Almost half of Americans have less than $10,000 in retirement savings, with almost a third with less than $1,000. In total, American workers are $6.6 trillion short of what they'll need to retire. And the idea of a true Florida golf course/no-job retirement seems old hat: Almost three-quarters of people will maintain some job after retirement, and close to half will work until death.