Understanding the ‘you’ of 2050 or 2060

Economists picked up the idea of multiple selves from psychology. They say selves from high school, middle age, and retirement are different. And we don’t know what will make our future selves happy.

Carnegie Mellon University economist George Lowenstein says it’s called projection bias. That is, we put too much emphasis on our present tastes instead of thinking about what we might want decades later.

Aging changes us so much that it’s like different selves time-sharing our bodies. But the early ones create situations that the later ones have to live with.

The indifferent student you were in high school leaves your next self wishing you had studied a foreign language.

In our earning years, we put something into retirement programs but are essentially unsympathetic to what our older selves might want or need. Some imagine they won’t enjoy it anyway.

Many people invest in stocks and just let them ride, but what if the market tanks near their 65th birthdays? Others say they like their jobs and will work until later in life, but what if health or circumstances prevent it?

When people do retire, they often take lump-sum payouts, but studies show that older retirees are happier with guaranteed lifetime income.

Quoted in Money, Lowenstein says imagining how you will feel when you are older is not the answer. It’s better to look at the facts and consider annuitized income. The risk of outliving your money is real.

If you were in charge of an aging relative’s finances, you would put your tastes aside and make prudent decisions. Why not do the same for yourself?