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Beyond Greed and FearUnderstanding Behavioral Finance and the Psychology of Investing$
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Hersh Shefrin

Print publication date: 2002

Print ISBN-13: 9780195161212

Published to Oxford Scholarship Online: November 2003

DOI: 10.1093/0195161211.001.0001

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Retirement Saving: Myopia and Self‐Control

Retirement Saving: Myopia and Self‐Control

Chapter:
(p.139) Chapter 11 Retirement Saving: Myopia and Self‐Control
Source:
Beyond Greed and Fear
Author(s):

Hersh Shefrin (Contributor Webpage)

Publisher:
Oxford University Press
DOI:10.1093/0195161211.003.0011

A great many people find that they lack the foresight and self‐control necessary to save adequately for retirement. But the spectrum is wide. Some people learn the keys to successful retirement planning. They learn that they need to deal with framing effects and behavioral biases. Notably, there are some aspects of mental accounting that are detrimental to accumulating retirement wealth, and other aspects that are helpful. Mental accounting can lead people to invest too conservatively, because it leads them to suffer from myopic loss aversion. At the same time, mental accounting can be constructively used to distinguish different categories of wealth, thereby helping people both to save money and thereafter to safeguard that money from being injudiciously spent. Dollar cost averaging is intriguing from a behavioral perspective. It combines the cultivation of good savings habits to deal with temptation, framing effects that reduce the pain of loss, and conventionality that mitigates feelings of regret.

Keywords:   dividends, dollar cost averaging, mental accounting, myopic loss aversion, regret, saving, self‐control

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