CIO shares actions you can take to help you retire comfortably. (UBS)

1. Start saving early. We all have a tendency to procrastinate. And since most individuals have difficulty imagining the negative effects that their actions today have on their future selves (Hershfield et al., 2011), this can make us particularly susceptible to procrastination when it comes to saving for retirement. Why start saving today when you still have decades left in your working years?


Starting early doesn't just mean you'll have a bigger nest egg when you retire—it also provides you with more financial freedom to retire comfortably if unexpected shocks prevent you from working and saving longer.


2. Control spending by maintaining your lifestyle. Pre-retirees have a never-ending battle between competing spending objectives. With every dollar that comes in, they must prioritize that dollar’s purpose between the need for consumption today and the need to save for consumption in the future. Most of us, however, have a strong desire or preference for immediate gratification—the temptation, and resulting tendency, to forgo a future benefit in order to obtain a less rewarding but more immediate benefit. This makes it difficult to stay off the hedonic treadmill and to control spending.


Rather than relying on sheer force of will, we can use systems and tools that help us make hard decisions and good behavior easier. Direct deposits and automatic investing strategies can be highly useful here.


3. Consider a change in your location to boost your savings potential. Deciding where you live and work can have a meaningful impact on your take-home pay and on your cost of living. In a world where remote work solutions are increasingly viable for many careers, this is an excellent opportunity to consider whether moving could enhance your ability to save.


If you can't work remotely, consider whether it makes sense to relocate for better career opportunities. If you can work remotely, take this opportunity to shop around for places where housing is more affordable, taxes are lower, and the environment is tailored to your living, rather than working, needs. Many families consider this type of relocation in the years leading up to retirement, but if you're able to do it sooner you can potentially supercharge your savings strategy, and it may improve your quality of life as well.


4. Grow and protect your human capital. While saving and investing strategies are an important part of a successful retirement plan, they should not be the sole focus. Human capital is another critical component of wealth that strongly factors into present and future financial well-being. Young investors, in particular, should prioritize building and protecting their human capital because of the significance it has on their balance sheets.


Human capital can broadly be defined as the attributes—knowledge, skills, training, creativity—that enable someone to produce economic value through their labor. Boost your income potential (and therefore, savings potential) by taking the time to invest in yourself. Refining these attributes can help you to become more marketable, which means you'll have more bargaining power when negotiating your pay and it means you may potentially spend less time out of the workforce (i.e. shorter durations of unemployment).


Main contributors: Ainsley Carbone and Justin Waring


Read the full report Modern retirement monthly: How to save for financial freedom 24 March 2021.


This content is a product of the UBS Chief Investment Office.