Behavioral Mistakes Retirees Make When Planning For Retirement

Retirement Planning is straight forward in theory, but more complex in reality. Of all the big changes in life, retirement is right up there with going to college, graduating from college, getting married and having kids.

Traveling the globe with your spouse… Spending weekdays on the links with the buddies… More time watching the grandkids… Everyone retires for a reason. To move towards something or away from something.

The reality for most though is that for 30+ years you’ve woken up with a plan, an agenda, more responsibilities to attend to than you have time for… and now what? This kind of change, while assumed to be relaxing and restorative, can be full of stress and identity crisis.

Retirement can be also be time of great change financially as you go from filling the coffers to beginning to deplete them. While many retirees have thought through and planned for this change, they underestimate the emotional change that takes place as a result of retiring and the way it impacts their financial decisions.

In this article, we will discuss three of the most common behavioral mistake retirees make and how to avoid them.

A Common Behavioral Retirement Mistake Can Be Watching Too Much News

Now with much more time on their hands, retirees tend so spend way more time in front of the TV watching the news. The problem with this, is that the news is literally built to focus on fear because fear sells. When we feed our brain a stream of fear, we naturally become more fearful. As we become more fearful, our brain goes into fight or flight mode and we become more jumpy with our investment portfolio. We get prone to making quick and irrational decisions to reduce the fear. We call up our advisor and tell him we want to sell, go to cash, reallocate to more bonds, etc. because the political party we despise in power is going to wreck the economy. To avoid this, limit your news time to a short amount of time in the morning and in the evening at max. Don’t let yourself sit in front of the TV all day. Get outside and be active.

Taking on Too Much Risk or Not Enough Risk Can Be a Behavioral Mistake

Many retirees apply one investment framework to their entire portfolio. If they have a risk appetite they may be heavily invested in stocks, if prone to avoid risk they will be heavily invested in bonds, CDs, money markets and other fixed income investments. The problem with either approach is it doesn’t actually align with the retiree’s investment time horizon, meaning when he or she will actually spend the money. In reality, the portfolio should be broken up into different buckets based on short, intermediate and long-term needs. Shorter-term buckets should be invested with a focus on capital preservation while longer-term buckets should be invested for growth.

Refusing to Seek Help When Planning For Retirement

Many retirees are proud and self-reliant, but this can lead to them not seeking help when they need it. They may not understand the financial products and services available to them, or they may be uncomfortable asking for help. However, if a friend of yours needed surgery would you tell him to search online for instructionals and articles on how to perform surgery himself? Or would you tell him to go talk to a surgeon? The value of having a professional can and should go far beyond the annual cost to hire them. They can not only ensure your portfolio is properly allocated, help you plan for the future and minimize taxes, but can also act as a confidant for you as you inevitably become more emotionally tethered to the swings of the market. To avoid this mistake, retirees should seek out a financial advisor who can help them understand their options and create a plan that works for them.

Retirement can be a time of great change, both financially and emotionally. By avoiding these common behavioral mistakes, retirees can ensure that their financial stability and quality of life are not impacted. They should seek out a financial advisor, develop the right asset allocation, and turn off the news! With proper planning and a balanced investment portfolio, retirees can ensure a secure and comfortable retirement.