Could You Pass The Marshmallow Test?

We’re starting to pack for a spring break trip to El Salvador next week, where both the air and water are in the 80s.

Meanwhile, a few of the families we’re friends with are packing for a snowboard trip to Aspen.

My daughter would certainly like to be there drinking hot chocolate and toasting marshmallows with the rest of her crew, but she’ll happily forgo a couple sweets for something she likes even more – big, warm waves in a bathing suit.

As it turns out, that’s a very good trait to have.

In an experiment conducted by Stanford back in the late 1960s and early 1970s, researchers took a group of kids (ages 4-6) and offered them each a single marshmallow to eat.

However, they also gave them another option — wait 15 minutes without eating the marshmallow and have a second one.

All told, 653 children participated. Some kids ate the marshmallows as soon as the researchers left the room. And even out of the group who tried to wait a little longer, only one third made it long enough to get the second marshmallow.

Even more interestingly, follow-up studies with the same group of children have showed high correlations between the ability to wait for the second marshmallow and overall success in life — based on everything from parental evaluations of general competence and well-being to other measures into adulthood.

Heck, the kids who were able to wait the full fifteen minutes scored an average of 215 points higher on their SATs than the children who couldn’t wait 30 seconds!

Of course, even if some people have a higher innate propensity for retirement saving — which is perhaps THE biggest real-world example of delayed gratification — I still believe reasonable adults can at least change their ways a bit, assuming they’re given reasons to do so.

So if you know someone who just wants to eat all the darn marshmallows right now, here are a couple things you can tell them…

Fact #1:
Social Security is not going to bail you out.

I have gone into great detail on the current state of our nation’s Social Security program many times before, but the upshot is that it faces ongoing shortfalls and will struggle to pay out all the benefits that have been promised.

Yet astoundingly enough, plenty of people I talk to still seem to think that they’ll be doing just fine by retiring on Uncle Sam’s dime.

What they fail to realize is that — even if Washington finally gets around to shoring up the Social Security program’s finances — those monthly checks won’t come close to covering even a modest lifestyle in retirement.

In fact, the average monthly benefit that’s going out to a retired worker right now is about $1,400.

And quite frankly, I now suspect many people will see their promised amounts get CUT – whether it’s through even more aggressive taxation of benefits or some other method.

Fact #2:
You’ll probably need an extra quarter of a million just to cover your medical expenses!

Medicare is in even worse shape than Social Security right now.

But again, even if you assume that Medicare is okay for the long haul, the typical 65-year-old couple that retired in 2017 will spend at least $275,000 in out-of-pocket medical expenses.

That number comes from a Fidelity Investments study and doesn’t include long-term care costs, non-prescription drugs, or even most dental work. It also assumes an average life expectancy of 82 for the husband and 85 for the wife. Oh, and it’s up 6% from just one year earlier and a shocking 70% since 2002.

Which brings me to…

Fact #3:
If you like eating marshmallows that much now, you are REALLY going to hate the last 20, 30, or 40 years of your life!

Two last ironic twists of retirement fate to consider:

FIRST, the people who love living large right now will actually be the same people who want to spend the most money in retirement!

By learning to save a bit more in the present, they can simultaneously reduce their needs, desires and expectations for the future.

And these changes can be pretty simple to implement. For example, just go take a nature walk instead of spending an hour trolling the mall!

SECOND, the longer they live the worse their lack of planning becomes!

This is both because of the basic math involved (i.e. more years = more money needed) and also because of the compounding nature of inflation, which will further erode what little buying power they have as time elapses.

Look, I can’t tell you how many people say they’re simply enjoying their lives now because there are no guarantees that they’ll live all that long … because they never had a chance when they were younger … or some other similar rationale.

And just to be clear — I am all for enjoying every day of your life, having some regular indulgences, even splurging from time to time. That is precisely why I just took my family on a surf trip this week!

However, “dying” is not an adequate retirement plan unless you are truly ready to pull the trigger when the money runs out.

So go ahead and have a marshmallow or two from time to time. But also make sure you’re saving at least as many for later in life … because 20 or 30 years is a heck of a lot longer than 15 minutes.

To a richer life,

Nilus Mattive

Nilus Mattive
Editor, The Rich Life Roadmap

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