For many of us, saving enough for retirement remains a murky, unrealized goal. Behavioral science has already proven useful in some ways, but there are still many opportunities to apply a behavioral lens to better preparing for the future.

In Mexico, not putting aside enough for retirement is a persistent problem for many people. As a result, 27% of the nation’s elderly live in poverty. While recent reforms to the retirement system have provided more Mexicans with individual retirement accounts than ever before, mandatory contribution rates remain too low to provide for post-retirement living expenses. To cover the rest, the system currently allows people to make voluntary contributions to their individual accounts. The problem is that they don’t: currently, less than 1% of the 50 million account holders make at least one contribution each year.

In an attempt to increase contributions, the Mexican government has recently changed the system so that people can make deposits at 7-Eleven® stores and Telecomm® branches. The ubiquity of these two outlets across the country has reduced hassles and simplified the deposit process – and yet voluntary contributions still remain low.

So what’s going on? To try and answer this question, and find ways to overcome the problem, ideas42 is partnering with The MetLife Foundation to design behavioral solutions aimed at increasing voluntary retirement contributions made through 7-Eleven and Telecomm locations.

A crucial part of this work is building a deeper understanding of the context and key behavioral factors involved in Mexican retirement contributions, which is why we’re collaborating with a number of organizations with a vast expertise in this area, including CONSAR (Mexico’s commission of the retirement system), the 12 Afores (nationally approved retirement fund administrators) and Amafore (their national association).

After conducting in-depth interviews with over 50 account holders and surveying over 100 7-Eleven and Telecomm customers across three cities in Mexico, we’ve identified several initial behavioral insights. These include:

• People often choose savings methods that allow instant access, rather than the delayed gratification of long-term investments. As a result, many favor keeping their savings in the form of physical goods, such as inventory for their small businesses, or cash. When they do formally save, they opt for more liquid savings accounts.
• Similarly, short-term savings goals (and their more immediate rewards) trump long-term ones. This is partly because most people have trouble imagining what their lives will look like once they’ve stopped working. With only abstract notions and ideas, we might become apprehensive about our futures, which can lead to feelings of hopelessness. Alternatively, we might be over-optimistic, leading us to think that things will simply work themselves out when the time comes instead of spurring us to take real action.
• Individual concerns regarding retirement are kept private, while friends’ and family’s short-term spending and consumption habits are highly visible. This creates a false perception that others are not worried about or planning for their futures.
• Finally, people are rarely prompted to think about or actively engage with their retirement accounts. They don’t know how the retirement system works, or what it does specifically with their money. Therefore, if they do think about long-term savings, many don’t think of these accounts as viable options.

Inspired by these insights and others, in the coming months we’ll be focusing on generating design recommendations for the Mexican retirement system. Through this partnership, ideas42 will pilot multiple behavioral interventions that we hope will ultimately lead to improving the long-term financial health of millions of people in Mexico.