‘Marshmallow Test’ For Early Retirement


Look at these two questions used in a new study (of 3,000 people) of people approaching retirement and think about how you might answer them …

1. You just learned that you are due a tax refund. If you’d like, you can get the $1,000 refund right away. Alternatively, you can get a $1,100 refund in 10 months. Which do you prefer?

2. You just learned that you are due a tax refund. If you’d like, you can get a $1,000 refund in 18 months. Alternatively, you can get a $1,100 refund in 28 months. Which do you prefer?

How did you answer?  As you can see, both questions give people the option of delaying a reward.  In the second question, both the initial and enhanced reward are delayed.

The questions are from a 2016 study by Philipp Schreiber and Martin Weber at the University of Mannheim in Germany that looks at the temptation that people approaching early retirement have to quit their jobs early.  It attempts to explain the behavior of people retiring too early – that is, before they have saved an adequate amount of money to last them through their golden years. According to the study’s authors, people who want the money quickly, or answer the questions inconsistently find early retirement difficult to resist.

Answering the early retirement “Marshmallow Test” questions was relatively easy for me.  It wasn’t difficult to understand that one would be getting a 10% return in less than a year by waiting the extra 10 months for the bigger reward in each question.  That’s a heck of a return – especially in today’s low interest rate environment.

That said, it is an interesting study because the questions strike me as so similar to the famous ‘Marshmallow Test” done with children in the 1960s and 1970s.   It’s the simple experiment of delayed gratification by Stanford Psychologist Walter Mischel who gave kids a choice between a simple reward now (a marshmallow or cookie) or waiting about fifteen minutes for two rewards.

The study might seem meaningless, but the author purports that it shows that children who are able to wait for longer periods for their rewards have better SAT scores, educational attainment, body mass indexes, and other life measures. That is, the simple ability to be patient for rewards in life makes for a better life overall.  If you haven’t seen the study, here is a link to a remarkable video which overviews the experiment, recreated with kids today.  The results are listed in this Wikipedia article.

How did you do on the early retirement “Marshmallow Test”?

Image Credit: Pixabay





8 thoughts on “‘Marshmallow Test’ For Early Retirement

  1. The Marshmallow Test videos are great. So interesting to see how the kid react and know how they did years after, I think for those in the right frame of mind with their money/retirement they would always pick the latter with the 10% bump. For those not having a plan I can see them taking the $1k up front for the quick win.

    Liked by 1 person

    1. I agree, Brian – I don’t imagine many people coming to either of our blog sites would take the easy, upfront money.


  2. As one who is patiently waiting for my “FIRE” date in ~18 months, I can relate to this article! I, like you, immediately recognized the 10% return in both scenarios. I’m also doing my best to be patient and wait for “The Numbers” to line up before I pull the plug on work! Interesting to see the correlations, and can confirm that the correlation works in my situation!

    Liked by 1 person

    1. That’s good to hear! It would have been fun to give my son the marshmallow test when he was a little kid. That was before I had never heard of it…


  3. I picked the delayed reward, but I found early retirement difficult to resist. Maybe you meant early retirement before having enough?

    Liked by 1 person

    1. Yes – that is the challenge. That people don’t always know how much is enough and are tempted to go into early retirement earlier than they should. The questions aren’t 100% correlated for every individual that answers them, but overall they point to peoples’ behavioral vulnerabilities.


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