How your perception of the passage of time can impact your financial future

A shared human flaw is our inability to accurately sense and anticipate the passage of time. This issue becomes increasingly important as we approach and enter our retirement years. Harvard psychologist Dan Gilbert coined this phrase, “End of History Illusion.” This has been an area of study for Gilbert, author of the bestseller “Stumbling on Happiness,” and co-writer and host of the PBS television series “This Emotional Life.”

How much will you change in the next ten years?

In his research, Gilbert evaluated two subject groups: The first group was asked “How much will you change in the next ten years?” More specific questions about their expectations for change followed. A second group, who happened to be ten years older than the first group was asked, “How much have you changed in the past ten years?” Not surprisingly, their answers didn’t match. 

To help improve the accuracy of answers, the subjects were asked supporting questions that were hard to inaccurately remember, such as “Do you have the same best friend today that you had in the year 2012?” They were not simply asked about their traits. They were asked facts about their lives — things hard to forget.

Bottom Line: People tend to believe that they will change less in the future than they actually do. We tend to think of the person we are today as our “actual selves.” We rationalize that from here on out, while there will be more wrinkles and pounds, we’ll basically remain the same person in the future who we’ve become today. 

When that second group looked back, they said, “Wow, I’ve changed a lot in the last ten years, but I don’t expect to change much in the next 10 years.” We depend on being the same person from now until we’re gone. And we make plans and choices based on the idea that our preferences, abilities, traits, and relationships will remain stable. Many of those choices are made without enough allowance for uncertainty – not enough hedge. This has massive implications for both retirement and estate planning decisions.

Personally, pictures help me to disabuse myself of this flaw. The picture on the left was taken recently; the one on the right was from over a decade ago. It’s difficult for me to argue with the facts. I’m getting older and if I live will continue to age and more changes will result. To expect that I will be mentally and emotionally be the same ten years from now is ludicrous.

Gilbert’s research did uncover one positive aspect regarding the rate of change. He found that change does slow with age. It simply doesn’t slow as much as we anticipate. So, you might be right to think, “I’m probably not going to change as much between 70 and 80 as I did between 60 and 70.” You simply would be wrong to say you’re not going to change much at all. You will not remain the same from now until the “End of Your History.” 

Evaluating the “what ifs”

There’s a powerful technique called Scenario Planning which can help evaluate a diverse set of “what ifs” in the future. I see Scenario Planning as having important potential value to help in this area. It could be the tool that gets you to think beyond your current self.I hope this offers you something to ponder. This information doesn’t offer a solution. It simply raises a critical issue. I’ll be interested to hear your thoughts and observations. Call or email if any of us can be of help.

Rick Adkins, CFP®, ChFC, MBA

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