4 Traits of a Successful Retirement Savings Mindset

John Sullivan

It’s all about the attitude—especially in retirement saving and investing.

Little surprise that certain financial behaviors help close gaps between retirement savers’ intentions and their reality, but Goldman Sachs Asset Management recently identified which, exactly, matters most.  

The four optimal behavioral traits are high optimism, high future orientation, high financial literacy, and a reward orientation (rather than a risk orientation).   
Individuals with 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, by setting up personalized financial plans and changing investments in volatile markets, compared to those assessed to have low levels of these four traits.   

Yet the firm added that only 10% of working respondents exhibit all four “optimal” traits, while 5% exhibit all four reciprocal or “suboptimal” traits—low optimism, low future orientation, low financial literacy, and risk focus. The vast majority (85%) possess these traits and report mixed success in retirement savings.   

High Optimism 

When it comes to levels of retirement savings, high optimism correlated most among survey respondents with reported higher retirement savings. Highly optimistic respondents are likelier to say that their retirement savings are on track or ahead of schedule (83%), compared to 41% with low optimism.

Future Orientation 

Those with high future orientation answered similarly (73% reported that their retirement savings are on track or ahead of schedule v. 50% with low future orientation). Of those low in both traits, 31% reported that their retirement savings are on track or ahead of schedule.   

Having a personalized retirement plan is more common for those with high optimism (78% v. 42% with low optimism), reward focus (65% v. 55% with risk or prevention focus), and high future orientation (70% v. 48% with low future orientation). A personalized retirement plan is particularly prevalent among those with high optimism and high future orientation (83%) and less common among people with low optimism and low future orientation (33%).   

Impact of Financial Literacy 

Financial literacy reflects a level of understanding of basic financial concepts, such as compound interest, inflation, and diversification. Those with high financial literacy report regularly reviewing their retirement savings, having substantial emergency savings, and keeping spending in check.

Among survey respondents, higher financial literacy was more prevalent in older people, those with partners, higher amounts of household assets, and higher levels of education.  

Implications for Defined Contribution Plan Design 

The survey found that plan sponsors and financial advisors may consider the potential benefits of behavioral mindset as an aspect of personalization. It shows it may be helpful to recognize employees’ behavioral factors and educate employees to avoid their potential behavioral pitfalls.   

Income Generation Preferences 

Behaviors also play a role in retirement income generations: those with high financial literacy reported preferring guaranteed, consistent, inflation-protected income from diversified sources, while less financially literate respondents reported favoring retirement income from a single source.   

Guaranteed income is generally most desired by those who report struggling to save adequately. Those with a risk focus prefer guaranteed income and professional financial advice.