Imagine winning the lottery and having it pay out over a scheduled period of time. Would you want the largest payments right away? Or would you rather start small and save the biggest windfall for later?

Your choice may depend on how old you are, according to new research from Corinna Loeckenhoff, associate professor of human development in the College of Human Ecology. The finding could have real-life implications.

“Retirement income is shifting from defined monthly pensions to flexible payouts from 401(k)s and other retirement savings plans,” Loeckenhoff said. “This means that retirees now have more control over when they spend their money, and spending too much of one’s nest egg in early retirement could, of course, spell trouble down the line.”

Fortunately, older adults do not appear to pursue immediate gratification at all cost.

Loeckenhoff’s paper, “Age Differences in Intertemporal Choice: The Role of Task Type, Outcome Characteristics, and Covariates,” published Aug. 14 in the Journal of Gerontology: Psychological Sciences. Her co-author was Gregory Samanez-Larkin, assistant professor of psychology and neuroscience at Duke University.

In their study, the researchers asked nearly 300 people of different ages how they would distribute a series of monetary gains and losses over time. Confirming prior findings by the researchers as well as from peers within the field, most participants preferred to get their winnings sooner rather than later and were more likely to postpone their losses. However, preferences for payment schedules differed by age. Older adults were more likely than younger adults to schedule the largest payouts first, the researchers say.

The study included a second task that asked participants to make trade-offs between a smaller payout available immediately and a delayed larger payout. In this setting, where asking for an earlier payout was costly, no differences based on age were found.

According to Loeckenhoff, this suggests that “retirement advisers can help older adults to make responsible choices by clearly spelling out the hidden costs of spending down one’s savings too early.”

More research is needed to understand underlying mechanisms, Loeckenhoff said. Although the present study examined a range of potential contributors – from subjective health to perceived time left in life – none of them could account for the observed age effects. Also, the amount of money at stake ($150 vs. $1,500) and the length of the delay (i.e., months vs. years) did not affect the pattern of findings.

In future work, the authors hope to examine a wider range of potential explanations and extend their findings beyond laboratory studies to real-life retirement savings scenarios.

This research was supported by a grant from the National Institute on Aging.

Stephen D’Angelo is assistant director for communications for the College of Human Ecology.