A question of financial security: Are Indians ready for their retirement?

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how to plan it. This is present bias, a behavioural tendency we all humans have and also known as the inclination to excessively fixate on the ‘here and now,’ and don’t think about what will happen in the long term. Two German researchers, Alejandro Moreno-Okuno and Natividad Aguilera Navarrete described ‘psychological distance’ as a central concept explaining present bias, which means how near or far things feel in our minds.

Plans for the near future, such as an upcoming vacation, are vividly detailed and occupy a significant portion of our thoughts. In contrast, plans for the distant future, like retirement, often lack clarity, existing as mere outlines. We tend to ‘discount’ things that seem psychologically distant and far off in time, thus diminishing their importance in our minds, so we delay taking decisions around them.

Another significant contributor to present bias is ‘instant gratification’, first quoted by Sigmund Freud, the Austrian neurologist and founder of psychoanalysis. He explained it as the pleasure principle,-a desire for and pursuit of immediate rewards or pleasures, often at the expense of long-term goals, even when they offer greater benefits. We all see ourselves gratified instantly, from choosing to eat a tasty but unhealthy snack instead of maintaining a balanced diet to opting for immediate spending on non-essential items rather than saving for our future financial security.

Many might feel their thinking is flawed, but experiencing present bias is a widespread aspect of human cognition. In a 2020 study, I led at Morningstar, we investigated how behavioural biases impact financial decision making. Our findings showed that 97% of over 1,200 US participants exhibited significant signs of present