Research has uncovered new ways to explain why investors act the way they do — why they panic, why they jump into and out of markets, and why they ignore risk. The newest behavioral application: flashing forward to the future. It turns out, people will boost regular retirement contributions if they get a good look at their futures.

“If you feel close to yourself in the future, you will save more,” explains Daniel Goldstein, a research scientist at New York–based Yahoo! Research and assistant professor of marketing at the London Business School. “So we need to make it easier to imagine the future.”

Goldstein and colleagues have been conducting studies that place participants in a virtual reality in which one half see mirror images of themselves and the other half see themselves much older, retired. When asked to fill out a questionnaire on savings, those who stared back at their retirement­-age images socked away twice as much cash.

The research was part of Allianz Group’s response to a request by the Department of Treasury and the Department of Labor for information regarding lifetime income options for aging baby boomers amid a looming pension crisis in the U.S.
Goldstein and Hal Ersner-­Hershfield, a postdoctoral fellow and visiting assistant professor at Northwestern University’s Kellogg School of Management in Evanston, Illinois, have also been testing Web-­based tools in which investors’ facial expressions, as well as their ages, change based on savings decisions. When people save more now, they look happier in the future. Says Goldstein: “There are clearly trade-offs between present spending and future comfort.” Nothing like a glimpse through the looking glass.