(Pre) Retirement Personality Types To Know

I know, this is a finance related work thing, but it’s so interesting. I think this applies to more than my job. 

Wade Pfau and Alex Murgia have this Retirement Income Style Awareness (RISA) survey. There are tons of resources focused on our psychology when we’re trying to save money. Their resource focuses exclusively on our psychology when we’re trying/needing to spend down the money we previously saved. 

Look:

There are two key continuums we (and especially pre-retirees) should know where they fall on. 

The first is the “Safety First vs. Probability-Based” continuum. 

The second is the “Optionality Orientation vs. Commitment Orientation” continuum. 

Safety First vs. Probability-Based is all about odds. The Probability side sees an 85% lean hamburger and thinks “delicious” while the Safety side sees the same burger and thinks “15% fat, gross.” 

Risk takers, gamblers, and many entrepreneurs tend to be more “odds-based” thinkers. They have a degree of comfort with risk and failure. Not that they want to fail, but they accept “it’s there.” 

Risk avoiders, never gamblers, and – you know people who are the opposite of the risk-taking type, they tend to be “sure-thing” thinkers. They reject failure as an option to feel safe, first. 

Optionality vs. Commitment is all about flexibility. The Optionality side buys hamburgers, hotdogs, and a veggie plate because “who knows what I’ll be in the mood for later?” The Commitment side buys burgers because they are committed – “We told them we were making burgers, why would we buy anything else?”

Let’s get 2 dimensional.

A safety-first person can lean towards optionality or commitment (on average or most of the time). The same is true for an odds-based person. Here’s what that looks like. 

A safety-first person who likes optionality goes to a casino with a max-loss limit. They put $100 in their pocket and play until they win enough or go bust. They know exactly the risks they’ll accept, but they still like to play. 

A safety-first person who likes commitment doesn’t go to the casino. They collect their social security checks, clip their coupons, and don’t mess with messes. This is a very real (and enviable!) personality type. 

A probability-first person who likes optionality isn’t just at the casino to play one game, they’re there to play whatever they’re feeling in the moment. They still have rules, but like the secret agent who knows where the exits and the next sexiest person in the room are at all times, they stay fluid. 

A probability-first person who likes commitment will play the odds in the casino, but only on one game. And probably with a pre-planned max-loss. They “only play blackjack” or slots or whatever “their” game is and you can’t tell them anything else is better. 

I’m fascinated by these typings, and especially how accurate each type feels to me. I work with people in each quadrant, but I can see why I gravitate towards who I gravitate towards (and why certain types gravitate towards me). 

Personally, I fall into the probability-based, optionality orientation. What about you? What about people you work with, inside or outside of finance? I feel like this applies more broadly. Tell me what this makes YOU think of.