Understanding better how people relate to time, and the perspective they have on the past, the present and the future, can enable financial planners to help clients plan more effectively, particularly during times of maximum uncertainty.

The idea that people have “time perspectives” was developed by the US psychologist Philip Zimbardo; and Dr Joanna Earl, an organisational psychologist and a senior lecturer and program leader at the University of NSW, says research has found that people generally exhibit one of five major perspectives:

  • Past positive
  • Past negative
  • Present hedonistic
  • Present fatalistic
  • Future

“Retirement is all about [making decisions]: pre-retirement, during retirement – there are constantly decisions that need to be made,” Earl says.

“Do I take a lump sum? Do I take an annuity? Do I stay in my own home? Do I move out? When do I retire – what’s the best time for me to retire?

“There are a minefield of decisions to be made. Some people do get stuck in the process and we think one of the reasons people get stuck is because of time perspectives.”

Earl says the case for planning for retirement isn’t in doubt, and understanding time perspectives might make planning more effective.

“Planning is important pre- and post-[retirement],” she says.

“It helps to determine retirement adjustment – that is, how people feel during retirement.

“And also the conditions of exit – how people decide to exit the workforce –will have some influence over how well they adjust during retirement.”

Adjusting to retirement

Earl spoke at the PortfolioConstruction Forum Conference in Sydney this week, and she says that overall, about 30 per cent of people adjust poorly to retirement, for one reason or another.

“We also know that financial resources are one of the key predictors of retirement adjustment,” she says.

“Without proper finances it is difficult to access good healthcare and social activities that people enjoy.

“We know that a lot of people think that they are going to retire on their super, but in fact they don’t. They end up, at some point, going onto a pension. And that’s partly because they underestimate how much money they need, and how long they are going to live.

“A lot of people have to leave the workforce early. About 25 per cent of people at the moment leave work unexpectedly due to ill health, physical and psychological. So when we talk about people working through to 70, for a lot of people that won’t be the reality because just because if ill health.

“We also know that retrenchments and dismissal are another key contributor.”

Earl says the growing emphasis on self-reliance in retirement means it is “really important that we encourage people to plan”.

“We’re bombarded in the media about how everyone should be planning for retirement, but I bet we all know people from our own social circles who don’t plan. They don’t plan their housing; they don’t plan their careers; they don’t plan their families. So why is it, when people get to retirement age, we suddenly want them to be and expect them to be expert planners?

“Well, some people aren’t. And one of the reasons we think some people plan and others don’t is their time perspective.”

Time perspectives can be explored by financial planners and their clients by taking a simple online test, the Zimbardo Time Perspective Inventory (ZTPI).

Defining the perspectives

Earl says people with a past positive time perspective tend to view the past through rose-coloured glasses and recall favourable experiences more readily and more vividly than unfavourable ones. Those with a past negative perspective tend to dwell on the past and “ruminate about what went wrong”.

People with a present hedonistic perspective live for the moment, Earl says, and focus on enjoying the here-and-now rather than on the consequences.

People with a present fatalistic perspective believe they have little influence over what happens to them, and that nothing they do will make a meaningful difference to what is going to happen anyway – it’s predetermined.

And finally, people with a future perspective are society’s inveterate planners and list-makers, and are inclined to forgo pleasures today for benefits in the future.

Earl says no particular time perspective need necessarily be an impediment to effective and successful retirement planning, but understanding how a person thinks and what is important to them can help financial planners to have a conversation and a relationship that resonates with the client and makes them more likely to follow a recommended course of action.

Different time perspectives are distributed through the general population, with past negative perspectives most common, and present fatalistic and past positive being relatively uncommon. In the table, below, the incidences of these perspective combine to equal 9 per cent of the population. A recommended “balanced time perspective” is set out in the table.

    Dominant TP Balanced TP
TP Type Focused on Stability % in pop. Recommended
Future Setting goals and long- term rewards 93% 33% Mod-high
Past Negative Negative reminiscence of the past 82% 40% Low
Present Hedonistic Here and now. Living for the moment. 79% 18% Mod-high
Present Fatalistic Leaving future to fate 82% 9%** Low
Past Positive Positive reminiscence of the past 90% 9%** High
Source: Dr Joanne Earl, University of NSW – [email protected]

Significance of perspective

Earl says there have been two schools of thought about the significance of time perspectives.

“One school of thought says, let’s try and get everyone balanced out – let’s try and give everyone a little bit of everything, to make sure they’re well-rounded,” she says.

“And the other school of thought says, what if time perspective behaves a bit like personality: it is stable over time and it’s hard to change? That kind of makes [school of thought] number one impossible; and up until recently we didn’t know the answer to this question so we did some research to better understand it.”

Earl says her research followed more than 300 people, measured them at three points in time over 18 months and found that time perspective is “very stable”.

“It doesn’t vary very much,” she says.

“Over that 18 months, it’s very stable. And we also find there are dominant time perspectives for each person. Every person has a time perspective that is more relevant for them than others, and will dominate their thinking and behaviour more than the other four.”

So at least financial planners can get a handle on the sort of time perspective they are dealing with for a particular client. But is also poses some problems.

“It’s hard to change; so how do you use that?” Earl says.

“What do you do if you’ve got people who are present hedonistic – will they plan?

“That brings up the next part of our research which was to have a look at the relationship between time perspective and planning. We thought it was pretty sure that those people who were future-focused would be planning; but that we also found was that people with other time perspectives were planning as well. There are differences, though.”

Future planners “plan for everything”, Earl says, and often have been planning for retirement from the day they started working.

“But you also have past negative people who plan, and they plan because they are trying to avoid previous mistakes, or the mistakes of other people they know: ‘I don’t want to end up like Mum and Dad; I’m going to plan’,” Earl says.

“We also find that present hedonistic people plan, and they plan to maintain a lifestyle. They’re thinking, how much money do I need, and for what? So we do see evidence of present hedonistic people planning.

“The two groups of people who are most at risk are the past positive people, because it doesn’t matter what happens to time, they are going to make the best of it. If they end up with less money in retirement than they thought, they will cope. We find in terms of retirement adjustment their wellbeing still tends to be very well rounded.

“We also know that people who are present fatalistic don’t plan. They don’t plan because they don’t think it matters.”

A useful tool for planners

Earl says an appreciation of time perspectives can be a useful tool for financial planners.

“If you can just listen to the stories that people tell you, you’ll be able to dissect some of the information you need in order to be able to use this in their planning behaviour in a different way,” Earl says.

“That’s the challenge, in terms of the crossroads of your own practice: do you want to continue doing what you’re doing; or, when you encounter someone that seems to have a roadblock or seems to be caught at the crossroads and you’re not sure where to go next, can you use information like this about their behaviour more deeply to be better able to understand what motivates them, beyond what they just tell you in terms of their on planning?

“The opportunity is to enhance your practices by thinking about behaviour and what is underlying it – what are the motives underlying the behaviour, in terms of being ale to help people to plan for the future?

“Listen carefully about where people anchor their timeframes. Are they always going back to the past? Keeping in the present? Going to the future? And think about using this as another way of encouraging more planning for people.”

A typical perspective on time
Past-negative: 2.70
Past-positive: 3.44
Present-fatalistic: 2.44
Present-hedonistic: 3.33
Future: 2.46
(Ratings out of 5)
Real results of a Zimbardo Time Perspective Inventory


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