Picture yourself at 65. Now 75. Now 90.
Picture what you need to do now for the older you. Developing some empathy for your retired self can help to get past one of the barriers to starting retirement saving: It seems so long away and so unreal.
Visitors to Merrill Edge's Face Retirement website and mobile app, first launched in 2012, were able to plug in a current photo and age their image to what they will look like in retirement.
Although the app from the U.S. investment firm has been discontinued, Merrill Edge had success with Face Retirement, saying in a 2014 press release that 60 per cent of those who visited the website sought information on saving for retirement.
Stanford University in California also found in a series of virtual reality studies that subjects exposed to an aged avatar of themselves chose to make higher contributions to savings accounts.
Although the realism of these images may be up for debate, they are only one tool to make the idea of aging more real for clients.
Howard Kabot, vice-president of financial planning, RBC Wealth Management, says young clients come in with many competing priorities. "There are just more pressing needs, especially if they're young and they've got a family. … Saving for retirement is so far away."
He says financial advisors need to start the saving-for-the-future dialogue by asking clients, "How much do you think it's going to take? How much do you think you're going to need?
"We used to model to age 90. Now we're modelling to 95 or 100. …There are a lot of people living a lot longer, but you have to finance that lifestyle. You potentially will be financing 35 years of retirement and that takes a lot of money, so where is that coming from?" Mr. Kabot says.
"If you haven't really considered it, that can really shock you into thinking, holy smokes, I've got to start saving."
Mr. Kabot says once has has the clients' attention, the discussion can begin about what kind of retirement they want and how to plan toward that goal.
"You actually have lots of flexibility. Maybe you don't need $70,000 after tax which, by the way, is a very healthy retirement. Maybe you only need $60,000 or $50,000. Maybe you don't need to retire at 60. Maybe 65 or 70. Five years can make a huge difference."
The trend now among financial advisors is to urge clients to be realistic about the actual expenses they will encounter in retirement. If the client hasn't been living an extravagant lifestyle, they probably won't change that pattern in retirement.
So after the jolt of recognition that money needs to be saved for the future, the next task is to get the client past being overwhelmed by all the demands on their disposable income.
In surveys, the issue of competing priorities – home mortgage, consumer debt, children's education – tops the list of excuses for not socking away money for the future.
"Some people tend to want a bigger house and a fancy car and sometimes they prioritize those things over retirement, but I would argue that's not the best way to go about it," says Mr. Kabot.
Advisors can make a compelling argument about the value of a long time horizon and the power of compound interest to push the "earlier is better" agenda for reluctant retirement savers.
Kevin Press, assistant vice-president of market insights at Sun Life Financial, applies a balanced portfolio argument when discussing competing priorities.
"If you think of the mortgage as a forced saving plan, you are all in on one asset. You lack the kind of diversification you would get from a long-term commitment to capital markets and a portfolio that's properly diversified. The power of retirement savings, even if you're carrying mortgage debt, is it does get you a more diversified portfolio of assets."
Advisors agree the best way to start good saving habits is with monthly contributions, preferably deducted from a paycheque or automatically withdrawn from a bank account.
Mr. Press says the time most Canadians start thinking about retirement is when they get their first good job, and often that job provides an opportunity to enrol in a savings plan that takes deductions from their cheque.
"It's set and you don't have to make a conscious decision on a biweekly or monthly basis to save for retirement. It's a simple idea but a profoundly impactful thing," he says.
Jason Gibbs, portfolio manager for Scotiabank Wealth Management, says how much the client puts away is dependent on their circumstances, but consistency and a rule should help avoid the drift away from resolution.
"Set yourself a rule. If you don't set rules for ourselves, you just forget or move on to something else. …Something that makes sense – even if it's 5 or 10 per cent. Force yourself to do it."
Even after the initial barriers to starting saving have been overcome, Mr. Gibbs says, there is the issue of sticking to the plan, particularly in a time of volatile markets if you have your retirement investments in the market. For that he suggests a carrot that counters the long delay in gratification for retirement savings.
"With millennials – I say look at those phones you're staring at every day. Wouldn't it be great to be an investor in that company? You become an investor in Bell, Telus, Rogers and you're investing in the profits that they make from you using the phone and the internet all the time. And then you get a dividend cheque every three months."
"Even though it's best if you invest the dividend, sometimes I say it helps if you don't for some. Watch that cash come into your bank account…That's something the market can never take away from you. Markets go up and down but the dividend check will always be there."
Mr. Kabot admits that sometimes the discussions with clients are difficult. But the emphasis at most institutions now is less on rates of return and the numbers but on what the client is actually investing the money for. What does the retirement goal actually look like in terms of lifestyle.
"The only thing we can do is tell our story and try to help people understand that something is looming there in terms of retirement. We try our best to explain the challenges if they don't start directing some sort of resources toward it."