If it would surprise you to learn that the choice between eating a banana or chocolate in a lab experiment has helped to redefine the way Americans save, then you're behind on the latest thinking in "behavioral finance"—the study of how human psychology impacts investing and markets—and that could cost you on the road to a comfortable retirement.
To pioneers in the 401(k) test lab, like Shlomo Benartzi, UCLA professor and chief behavioral economist at Allianz Global Investors, the effort to outsmart our shortsighted, animal side—the one that tends to make irrational financial decisions, especially when it comes to retirement investing—has gotten off to a good start, but it remains a largely unfinished project.
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