Time Travel: The Key to Financial Security

Last Updated May 4, 2011 4:39 PM EDT

I'm a time-travel nut. I loved Back to the Future, Terminator, Time Bandits, Hot Tub Time Machine and even Bill and Ted's Excellent Adventure. Who hasn't dreamed of going back in time as an adult to steer their younger self?

"Go ahead and ask her out, she likes you."

More importantly:

"Please...puleeeze...young man, buy Microsoft and keep buying for a decade."

It's easy enough to see how time travel could change your life and make you rich without breaking a sweat, if only it were possible. Well, bear with me, because maybe it is.

In Somewhere in Time, a young writer played by Christopher Reeve self-induces a trance-like state and tricks himself into believing he has traveled backward in time to be with the woman of his dreams. Ultimately, of course, he snaps out of it and finds that he never went anywhere. But in the trance-like state his vision of his life in another era was vivid. He had beat Father Time.

The Reeve character, while pure fiction, gives a realistic template for traveling through time, whether you're a pre-retiree or just starting your career. In your time travels, though, you'll want to flash forward, not backward, for a glimpse of what your life will look like years from now based on your current money behavior.

This isn't mumbo-jumbo. A new report, Behavioral Finance in Action by Shlomo Benartzi at the UCLA Anderson School of Management, shows how difficult it is for humans to envision themselves much older; the report also shows that those who can conjure a realistic vision of their future self tend to have a significantly higher savings rate. Benartzi writes:

The notion of a disconnection between present and future selves has fascinated philosophers since the time of Plato. Many young people view their older selves heading into retirement as strangers...This unconscious assumption of a different self in the future is demonstrated graphically by brain scans. Researchers at Northwestern University and elsewhere find that when people think about their future selves, the same brain region lights up as when they think about strangers...the disconnection between present and future selves is well recognized, and it correlates with a reluctance to save... The question is, can the psychological gap between the two selves be closed, and would this affect willingness to save?

Clearly, yes, as Benartzi further writes:

When people are confronted with vivid visual images of themselves that have been digitally aged, they take notice. Hal Ersner-Hershfield and six colleagues performed such an experiment on young volunteers, using age-progression software in a virtual reality environment. These algorithms use a framework of key facial features to build an image of what that person will look like in, say, thirty years' time. Some of the comments on seeing age-rendered future selves included: "Wow, I look just like Grandma," "Oooh, I don't know if I want to see this" and "Whoa, this is freaky." But more pertinently, the volunteers in the experiment who see their future selves more than double the amount of money they say they would allocate to retirement savings.

Perhaps most interesting, the research shows, is that the savings effect is nil when people are shown age-processed images of other people. Only when they see their own future selves do they change their savings behavior.

The upshot is that most of us simply aren't any good at envisioning our future life, which is a big reason too few of us save early and often. Now, are you going to pay an artist to paint a picture of what you'll look like in 30 years? Likely not, even though the studies say that would prompt you to act more aggressively with your savings.

What you might try: Like the Reeve character, enter a quiet room, close your eyes and fall into a trance-like state that transports you to your future -- gray hair, arthritis, meager savings and all. If you're honest you probably won't like what you see. The good news is that you actually haven't gone anywhere yet; there is still plenty time to change the future.

Photo courtesy Allianz Center for Behavioral Finance
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  • Dan Kadlec

    Daniel J. Kadlec is an author and journalist whose work appears regularly in Time and Money magazines. He is the former editor of Time’s Generations section, which was written and edited for boomers. Kadlec came to Time from USA Today, where he was the creator and author of the daily column Street Talk, which anchored the newspaper's business coverage. He has co-written three books, including, most recently, With Purpose: Going from Success to Significance in Work and Life. He has won a New York Press Club award and a National Headliner Award for columns on the economy and investing.