| The present study develops and tests a framework to understand the psychological determinants of employee savings for retirement. The framework, based on prior research and thinking in economics and psychology, explores how people at different stages of their life and financial situation differ in the choices they make to save. The fundamental psychological principle of the framework is called delay discounting, defined as inflation of the psychological value of a smaller, sooner outcome (e.g., spend now and do not save) relative to a larger, later outcome (e.g., save now for larger rewards later). In addition, psychologists have noted that participants discount future rewards hyperbolically, such that the perceived devaluation of a delayed outcome is not constant over time, but declines less steeply in the long-run. In this dissertation, my main hypothesis was that at any point in time, the decision of how much to save for retirement is inversely related to the rate that employees discount future rewards. In other words, those who discount future rewards less save more.;The major hypothesis was supported on a sample of 665 working professionals from a wide range of occupational backgrounds, years from retirement, and current economic circumstances. To test the hypothesis, I adapted a binary choice scenario that psychologists have used (e.g., Green, Fry, & Myerson, 1994; Rachlin, Raineri, & Cross, 1991) to study other forms of delay discounting behavior. The results suggest support for previous research showing wide individual differences in the way people discount future rewards and also validates in a new situation (the decision to save for retirement) the binary choice task adapted here. In addition, post-hoc analyses suggested a significant interaction between the amounts of disposable income people perceive to be available and their delay discounting parameter such that those with more disposable income chose to save more for retirement.;A number of practical implications of these findings were proposed, stressing the psychological nature of saving for retirement compared to the financial/economic foundations assumed to determine such decisions. Most importantly, I proposed that HR departments in companies provide counseling to their employees about tendencies to discount the future. |
