Advisors not only help clients make good decisions, but they help them avoid making bad ones, too.
This is the 24th article in "Behavioral Finance and Retirement." This series is intended to provide insight to advisors to the unique needs and financial behaviors of clients who are entering that period of transition called "retirement."
I put retirement in quotation marks because people are not retiring the way they used to; the days of the retirement party, the gold watch, and sitting out one's years on the couch doing crossword puzzles and watching "Wheel of Fortune" are over for most people.
And we've all heard the analogy that the baby boomers are like a baseball going through a garden hose. Well, the baseball is getting to the end of the hose and it's not leaving without a bang! And before it leaves, it will be a financial force to be reckoned with.
To serve retiree clients properly, there are some key themes that advisors need to be aware of:
1. People are living longer than ever thanks in part to medical technology and better habits such as diet and exercise. This is extending the time people are in a nonworking phase of life.
2. People's definition of retirement is changing, which is having a major impact on how individuals manage their finances.
3. In some cases, a certain segment of the population will have no choice but to produce some type of income after they leave the traditional workforce.
4. The responsibility of planning and investing for retirement has shifted in large part to the employee/retiree away from corporations … and behavioral biases significantly affect people entering/in this phase of life.