If you are beginning to prepare for retirement, or you recently retired and you are trying to sort out all of the different options you have, you might be feeling a little overwhelmed! After all, making smart financial planning decisions is pretty hard. Not only do you have to determine who the best adviser or firm is to hire, but then you have to begin sorting through all of the different financial vehicles and recommendations you will inevitably get. You may understand some of them, but certainly not all of them. We like to focus on the things we ‘think’ we can control most – such as stock-picking or trying to time the markets.
Common Behavior Mistakes
We have identified three common ‘behavioral mistakes‘ that people often make when it comes to retirement planning. Here they are:
- Loss Aversion: The emotional theory in when people tend to feel losses much more strongly than they do gains. ‘Anchoring’ (basing decisions on events that have no bearing on an actual event) and ‘Sunk Cost Fallacy’ (holding on to something until it is worth absolutely nothing) are examples of Loss Aversion.
- Hindsight Bias: The fact that it is easy to be knowledgeable about something that has already occurred (ex: “hindsight is 20/20…”).
- Herd Mentality: When people are influenced by their peers to follow trends, purchase items and adopt certain behaviors – even in times when it is not in their best interest to do so.
Get Financial Planning Assistance
To learn more about how behaviors can drastically affect your financial planning choices, visit us online at www.IncomeForLife.org and call us toll free at 877-284-8929 today.
Matt Nelson, president and host of Income For Life Radio
877-284-8929 toll free