Our family has two large Bernese Mountain dogs. Our first was Moose, who is five. Moose is about 120 pounds. We trust him enough to let him be free at night and he usually curls up on a couch when he’s ready to settle in for the night. A few months ago, as I headed to bed, he hopped off the couch and followed me back to the bedroom door. We had a mini stare off in the hallway and as I opened the door, he squeezed in front of me and hopped up onto our bed and made himself comfortable. He had decided it was time for him to upgrade.
He doesn’t attempt this often, but every couple of weeks he races me back to claim his spot. Let’s just say that he rarely lays where you would hope. I’ve found myself pinned against the edge of the bed, contorting myself to an odd position to avoid him, or unable to even use the covers as they are under the girth of Moose. I’ve even had to box him out behind me to make sure I got into the bed first so that I could claim my rightful spot as a human in my own bed!
This has me thinking about other things that get crowded out in life. We are pretty good at making plans which get crowded out by seemingly more urgent needs. Personal savings can be an easy thing to get crowded out. There are way more fun uses for our money than just saving it, right? One more trip, ever escalating college bills, or a car that needs a new set of tires.
Many Americans rely on their workplace retirement plan as a primary savings vehicle. The ease of automatic deposits each payroll that are largely out of sight can beautifully compound over time. One of the greatest inventions of the past 20 years is the ability to set your retirement plan savings to automatically increase each year. We call this automatic escalation and I think it’s one of the most powerful tools available to help boost savings in a realistic way.
A 2023 behavioral study from Carnegie Mellon and UCLA found that most participants who were signed up to auto-escalate their annual savings continued to allow the increases to happen. It’s a total flip of the procrastination and inertia problems in a normal system that requires participants to remember how to access their account and consistently maintain discipline to increase savings levels.
It's important to spend some time to plan out our goals and determine the amount of financial fuel that will be required to achieve them. At PYA Waltman Capital, we help clients figure out what is really important and how to quantify and measure progress over time. That won’t keep a Moose out of your bed, but it might help you sleep better at night to know where you stand.
PYA Waltman Capital, LLC (“PYAW”) is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about PYAW’s investment advisory services can be found in its Form ADV Part 2, which is available upon request. PYA-24-18
Study: https://www.voya.com/news/2023/05/new-voya-behavioral-finance-research-finds-employers-can-boost-default-escalators-401k