A recent article in Kiplinger’s retirement report talked about how our minds can destroy our retirement. The topic of behavioral economics in financial planning explains a lot about why we do the things that we do, even though it often makes no sense.
Think back on all that has happened in the past 20 years. Things like 9/11, multiple wars, stock market crashes, crazy elections, and COVID have caused people to be stressed out and have a hard time making the right financial decision. If one false move can destroy your life savings, what biases do we need to understand and then combat?
Financial biases could be fear of missing out like with the GameStop stock situation earlier this year. Another bias is overconfidence, particularly with people who invest in Bitcoin. Loss aversion, action bias, and recency bias can all cause your emotions to get the best of you instead of sticking with your plan.
Why does that matter? Well, there are a million little things you need to be prepared for in retirement. Social Security, long-term care, estate planning, tax planning—all of it will have to be dealt with in retirement. Reach out to a financial advisor to make sure you have everything covered and your biases are kept in check.
Finally, on our Cash Connection, Don answers a question from Jeannie in Toms River who wants to know when to file for Social Security benefits. She wants to wait until full retirement age but still has health insurance from her job that she has no plans to quit anytime soon.
Listen to the entire episode or skip ahead using the timestamps below.
[0:50] – How has the summer been?
[2:11] – Why should we care about how behavioral finance?
[5:41] – What financial biases do we have?
[15:46]– Cash Connection: When should I file for Social Security benefits?
Phone: (732) 784-2867
Donald W. Cash – CPA, CFP® is an independent advisor. Don began his career in 1985 as an accountant after graduating Rutgers University. In 1990 he entered the field of Estate Planning with a concentration in long term care planning. Don has been advising clients in the baby boomer and retirement market for 20 years. He has helped over 1,000 families with their planning needs. He advocates a holistic approach to Estate and Financial Planning as has relationships with other professionals including Attorneys, CPA’s, Mortgage Specialists, Insurance Specialists and Asset Managers. Don is married to Cathy and have 4 children, Carly, DJ, Nick and Tori. They live in Freehold, NJ.