A dozen steps to a smooth transition to retirement

CookPaul-150-x-150Paul Cook, AIF®, Vice President and Regional Director, Retirement Plan Services

If there were one thing that sudden retirees wish they had, it would be time to think things through while still gainfully employed. They wish they had time to plan. The term “sudden retiree” refers to an ever-growing population of workers who found themselves retired due to unexpected events, such as the sale of a business, caregiving for a family member, downsizing, or sickness. Sudden retirees are typically forced to make decisions before they feel ready to do so.

If you are fortunate enough to exercise some control over when you will retire, you have an advantage over sudden retirees. You have the gift of time. You can prepare. You can think through all the angles and possibilities. You can ensure the smoothest possible transition by taking the twelve steps listed below.

  1. Visualize your exit. While retirement is a process, not a one-time event, it helps, to think about the event of exiting the workforce. How will your final days, weeks and months of work look? How will you spend your time? How can you pass the baton in a way you are most comfortable? Is it important to you to leave a legacy or footprint on your employer? If so, what actions will need to occur to ensure the legacy you desire?
  2. Visualize your entrance. Give thought to how you want to spend your days in retirement. What will your daily routine entail? Are there habits you want to form … or break? No longer confined to career-related personas, retirement provides an opportunity to reshape your identity and decide how you will present yourself to the world.
  3. Freeze frame. Take a snapshot of your current financial status by listing your assets, debts, interest rates on debts, and income.
  4. Retire high-interest debt. If possible, try to pay off any high-interest credit card debt, personal loans or auto loans before retirement. Typically, it is not wise to tap into your 401(k) or IRA to repay debt. If you are under the age of 59 ½, you could be subject to penalties and income tax liabilities, which could nullify any benefits you gain from the debt repayment.
  5. Revisit your retirement plan. Certain assumptions went into your retirement plan. When you know you are within 12 months of retirement, meet with your financial advisor to revisit those assumptions and strategies, and rebalance your portfolio with your newly established time horizon in mind.
  6. Make maximum contributions to your retirement accounts. If you have fallen short of maximum contributions, now is the time to step up your savings.
  7. Decide where and how you will live. Where you decide to live, including the location and the type of home, impacts nearly every dimension of your retirement experience. No longer anchored by the geographic constraints of your employment, retirement offers you the opportunity to re-think or re-commit to your residence. A study conducted by Bank of America Merrill Lynch shows 64 percent will move at least once during retirement, with 37 percent having already moved, and 27 percent anticipating doing so.[1] Factors to consider when making your decision include the cost of living in the area you’ve selected, weather, your home’s capacity to evolve into a more senior-friendly design, public transportation and services, accessibility to medical care, and proximity to family and friends.
  8. Lock down your retirement expenses. Some people believe they will see a significant decrease in post-retirement expenses; however, that may not be the case. In many instance, there is a trade-off in expenses. For example, you may not have the daily expenses of your commute to work, but taking long trips more often may nullify any savings. Most retirees’ expenses follow a U-shaped pattern. For the first couple of years, the expenses mimic pre-retirement expenses, then as the retiree settles in, expenses dip, only to rise as health care costs kick in.
  9. Formulate your income plan, by
    1. Deciding your election age for social security
    2. Considering other sources of income including fixed, immediate, and indexed annuity strategies, pensions, and even your house
    3. Creating a spend-down strategy so you know when and how to withdraw income from all potential sources
  10. Take preventative health measures. When it comes to determining retirement well-being, health is typically more important than wealth. Retirees in better health have the added peace of mind that comes from financial security. They tend to enjoy retirement more, feel fulfilled and are not as prone to negative emotions as their less healthy counterparts. [1] For most, health care costs top the retirement expenses charts. It makes good financial and medical sense to establish and adhere to healthy habits as a cost-containment measure and lifestyle booster.
  11. Strengthen your networks. Retirees who have strong social ties report higher levels of overall happiness in retirement. While still working, makes sure to build your social networks, so you have ways to connect with people who share your interests.
  12. Get serious about your emergency fund. It’s important to plan for how you will address emergencies, big and small, in retirement. According to a recent survey, 90 percent of Americans have endured at least one setback that harmed their retirement savings. Setbacks vary from caring for adult children, to college expenses stretching over six years instead of four. Others include loss of a job, assisted living expenses, and disappointing stock performance. On average, unexpected life events can cost retirees nearly $117,000.[2] An emergency fund can serve to prevent you from having to resort to retirement savings during hard financial times.

For more than 10 years, Brinker Capital Retirement Plan Services has worked with advisors to offer plan sponsors the solutions to help participants reach their retirement goals. When plan sponsors appoint Brinker Capital as the ERISA 3(38) investment manager, this allows them to transfer fiduciary responsibility for the selection and management of their investments so they can focus on the best interests of their employees.  This fiduciary responsibility is something that Brinker Capital has acknowledged, in writing, since our founding in 1987.

The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Brinker Capital, Inc., a Registered Investment Advisor.

[1]  https://mlaem.fs.ml.com/content/dam/ML/Articles/pdf/ml_Home-Retirement.pdf

[2] http://money.cnn.com/2013/05/15/retirement/retirement-savings/index.html

Why every retirement plan needs a managed account

Marino_R 150 x 150Roddy Marino, CIMA, Executive Vice President
National Accounts & Distribution

Meeting the unique and specialized needs of retirement plan participants requires looking beyond a “one-size fits all” solution.

Managed accounts offer personalized, tailored asset allocation for individual participants and fiduciary oversight. Using investment goals as a guide, financial advisors can help determine the appropriate asset allocation based on risk tolerance and investment time horizon. This approach provides a more holistic view for participants instead of focusing on the age of retirement as target-date funds do. Additionally, unlike target date funds, managed accounts allow for asset allocation depending on the market environment.

Managed Accounts 2

Don’t let bad behavior get in the way

Investing can be an emotional rollercoaster and many investors find themselves reacting to the market highs and lows. For this reason, its beneficial to be invested in a managed account that has a team of investment professionals monitoring the market and making asset allocation adjustments as necessary.

Choose a comprehensive retirement partner

Because no two investors are alike, it’s important to work with a firm that offers retirement options that are personalized to individual participant goals rather than focusing on one component, the age of retirement.

Helping participants today

The retirement landscape is rapidly evolving and its important to evaluate the available options to find a partner that will offer the most appropriate solutions for participant’s needs. Offering a sophisticated managed account solution that addresses needs, risk tolerance, and investment time horizon can help participants reach their retirement goals.

For more than 10 years, Brinker Capital Retirement Plan Services has worked with advisors to offer plan sponsors the solutions to help participants reach their retirement goals. When plan sponsors appoint Brinker Capital as the ERISA 3(38) investment manager, this allows them to transfer fiduciary responsibility for the selection and management of their investments so they can focus on the best interests of their employees.  This fiduciary responsibility is something that Brinker Capital has acknowledged, in writing, since our founding in 1987.

The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Brinker Capital, Inc., a Registered Investment Advisor.

Investment Insights Podcast: Harvey & Irma upend the jobs market

Holland_Podcast_150x126Tim Holland, CFA, Senior Vice President, Global Investment Strategist

On this week’s podcast (recorded October 13, 2017), Tim discusses why the jobs market turned south after seven years of net job growth, and if the disappointing September report is a harbinger of a weakening economy or possibly even a recession.

Quick hits:

  • According to the Department of Labor, the U.S. lost 33,000 jobs in September, marking the first month in seven years that the labor market failed to expand.
  • One can assume Harvey and Irma had a significant – and temporary – impact on the jobs market.
  • While Hurricanes Harvey and Irma were tragic events, we don’t see them having a lasting, negative impact on the economy, which remains on very firm footing.

For Tim’s full insights, click here to listen to the audio recording.

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The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Holdings are subject to change. Brinker Capital, Inc., a Registered Investment Advisor.

A tale of two billboards

O'Hara 150x150Jim O’Hara, CISM, CISSP, CEH, Information Security Officer

Imagine a plush community of beautiful, sprawling estates where each property is protected by a high-end security system.  Now imagine two enormous billboards along the nearby interstate.  Once per month, the first billboard displays a list of newly discovered flaws in the community’s security systems.  The second describes methods to repair the same flaws.  Which billboard would be more closely watched?  Who would be watching it?

By now it’s common knowledge that the Equifax breach was a direct result of the company’s failure to properly maintain a webserver.  What’s less talked about is the fact that the exploited Apache Struts flaw had been published and rated “Critical” by security authorities well in advance of the breach.  Even less discussed is Equifax’s admission to knowing of the vulnerability at the time of breach, but not applying the associated patch, which had been available for months.

Software patching is essentially the 2-billboard scenario described above:

Billboard #1:  The Common Vulnerabilities and Exposures (CVEs) database.  Maintained by the Cyber Security FFRDC, and funded by the Department of Homeland Security, the CVEs database is an ever-updated list of all known software vulnerabilities.

Billboard #2:  A collection of patches and other mitigating controls issued by software providers and security authorities, designed to mitigate the vulnerabilities listed on Billboard #1.

The primary shortcoming of this system is the vulnerability information on Billboard #1 is almost always newer than the remediation information on Billboard #2.  While most software providers strive to release patches concurrently with the publication of the corresponding CVE, this is not always possible.  This occasionally creates a period of time when hackers can use the CVE data to attack vulnerable systems.  In fact, Verizon’s 2015 Data Breach Investigation Report found that half of published CVEs are used to successfully compromise some systems within two weeks.  Hackers are keeping a close eye on the CVE database, and working quickly to weaponize new information it provides.  So, for users and IT departments, it’s an unwinnable race, right?  Not so fast.

The tale of two billboards

The same Verizon study also found that 99.9% of system compromises occurred more than a year after the associated CVEs and corresponding patches were made public.  So, while the hackers may be fast, there is plenty of blame left for the victims –  99.9%, in fact.  Going back to our community of beautiful, sprawling estates, this suggests that even if home owners are bothering to read Billboard #2, many are not acting on the information it contains.  Equifax.

The key to keeping systems protected is a strong patch management program.  Responsible organizations put in place policies, procedures and systems necessary to ensure vulnerabilities are quickly identified and thoroughly mitigated.  Despite a strong patch management process, however, it remains possible that an attacker may find and exploit a vulnerability not yet listed in the CVEs database.  This is known as a “Zero Day” attack.  In order to mitigate Zero Day attacks, organizations must utilize a layered defense-in-depth strategy, which would include implementation of controls such as malware detection software, next generation firewalls, intrusion detection/prevention systems (IDPS), and data loss protection (DLP) technologies.

What can individual advisors and clients do?

 1. Ensure your operating system and software are configured to update automatically.  Waiting for an update to install can be frustrating, but it’s nothing compared to the sinking feeling you’ll experience if your system is compromised.  As a bonus, you’ll no longer see those annoying reminders in the task bar.

2. Consider installing malware detection software on your computer.  This would be in addition to any anti-virus solutions already installed.  There are many free and low-cost malware detection and eradication options available.  Research the tool before installing to ensure it is legitimate and properly supported.

3. Encrypt critical and sensitive data.  Password protecting spreadsheets, Word documents, and PDFs containing sensitive data will greatly reduce the impact of a Zero Day attack on your computer.  The attack may compromise your system, but it won’t be able to decrypt your protected files.  This could spare you many uncomfortable phone calls.

The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Brinker Capital, Inc., a Registered Investment Advisor.

Investment Insights Podcast: A review of September markets

Lowman_150x150px

Leigh Lowman, CFA, Investment Manager

On this week’s podcast (recorded October 9, 2017), Leigh provides a quick review of September markets.

 

Quick hits:

  • In September, more clarity surrounding anticipated tax reform policies helped boost consumer and business sentiment and there is now a higher probability that corporate tax cuts and/or move to a territorial tax system will be enacted in the beginning of 2018.
  • Overall macroeconomic data leans positive and we expect the positive market momentum we have seen so far in 2017 will carry through to the end of the year.
  • We remain positive on risk assets over the intermediate-term but recognize we are in the later innings of the bull market.

Listen_Icon  Listen to the audio recording.

Read_Icon  Read the full October Market and Economic Outlook.

 

 

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The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Holdings are subject to change. Brinker Capital, Inc., a Registered Investment Advisor.

 

No apologies needed – The Diversification Apology Index

Rosenberger 150 x 150Andrew Rosenberger, CFA, Senior Investment Manager

Being truly diversified means always having to apologize for something.  Diversification, like investing in general, is oftentimes easier said than done.  We can theorize about 30 year time horizons; but emotions, herd mentality, individual circumstances, and a largely unpredictable future make practice far more difficult than theory.  For example, prior to the Financial Crisis when international stocks were ripping higher, investors questioned why more of their equity exposure wasn’t allocated toward international and emerging market stocks.  Last year, clients questioned why any of their equity exposure was allocated toward international companies.  As diversified asset allocators, we are constantly facing something in our portfolios which is lagging the broader markets.

With that said, 2017 certainly “feels” like it is shaping up to be a good year for diversified investors.  Most asset classes are up on the year with select ones, like international equities, handily outperforming the S&P 500.  But why does this year “feel” different than those in the past?  To answer that, let me introduce the “Diversification Apology Index.”

Diversification Apology Index 2

Source: Brinker Capital, FactSet, Lipper: 1/1/05 to 8/31/17

To explain further, let me first mention that not everything is performing well this year.  Commodities are slightly negative year-to-date, while REITs cling to only fractionally positive returns.  Yet, when you look at most investors’ portfolios, commodities and REITs make up only a minor portion of their overall asset allocation.  International equities, on the other hand, tend to represent a much larger investable universe and thus tend to make up a more significant portion of a diversified asset allocation.  To demonstrate this idea, we complied all U.S. open-end mutual funds and grouped them into broad asset classes based on their Lipper classifications.  With the entire mutual fund universe in hand, we then asset weighted each fund according to its corresponding asset class.  In short, we created a proxy for the ‘market portfolio.’  While we don’t believe this represents the average investors’ asset allocation per-se, it does give us some indication on relative positioning.  For example, we can see that the assets under management (AUM) for the international and global equity mutual funds is nearly twice as large as that of commodities, natural resources and MLPs.  Similarly, REITs make up only 3 percent of the total mutual fund AUM.  Although investors will differ based on their risk tolerance, objectives, biases, and investment philosophy, the aggregate mutual fund AUM provides some insight as to where the investors tend to allocate their investable capital.

US Mutual Fund Universe by Asset Class 2

Source: Brinker Capital, FactSet, Lipper: as of 6/30/17

With an idea relative asset class weightings, we can then compare recent performance of each of these asset classes to how a very traditional 60 percent S&P 500, 40 percent Barclays Aggregate portfolio would perform.  When asset classes with relatively small weights underperform, investors tend not to take all that much notice.  Hence, there is little to ‘apologize’ for.  However, when more meaningfully weighted asset classes underperform, the results stand out like a sore thumb.

Therein lies the basic methodology for the “Diversification Apology Index”.  After staying in an elevated range since 2011, we now see the benefits of diversification more similar to that of before the Financial Crisis.  Although we shouldn’t interpret this gauge as having any predictive power, it does bring hope that conversations with investors will be more focused on goals and how to meet objectives rather than why one may not be keeping up with the S&P 500.  Ultimately though, we should take comfort in knowing that it’s a good thing when select asset classes underperform, as it means that we are truly benefiting from a diversified portfolio.

The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Brinker Capital, Inc., a Registered Investment Advisor.

 

 

Investment Insights Podcast: Headed for home

Holland_Podcast_150x126Tim Holland, CFA, Senior Vice President, Global Investment Strategist

On this week’s podcast (recorded September 29, 2017), Tim discusses how we at Brinker Capital do not currently see a reason to change our thinking on market history and fundamentals as we head into October.

Quick hits:

  • We have been overweight risk assets and overweight U.S. equities.
  • So far, as we move into the end of Q3, the expected pattern of equity market strength is holding, with the S&P 500 up more than 3% in the quarter.
  • We see many more positives than negatives when we consider the underlying fundamentals for the market and the economy.

For Tim’s full insights, click here to listen to the audio recording.

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The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Holdings are subject to change. Brinker Capital, Inc., a Registered Investment Advisor.

What we can learn from Hurricanes Harvey, Irma

Dressel 150 x 150Ryan Dressel, Investment Analyst

Over the past few weeks, Hurricanes Harvey & Irma grabbed our collective attention as we watched the fury of mother nature unfold in Texas and Florida. While images of the damage can be jaw dropping, what’s more amazing is the strength of communities coming together to assist those affected. In today’s digital age, acts of heroism, generosity, and courage were on display via social media for the world to see. Examples included neighbors forming a human chain through floodwaters to help a woman in labor make it to a fire department truck; drones that located stranded families on roof-tops; a Delta Airlines pilot who flew into the violent, outer bands of Irma to pick up one last group of passengers desperate to flee the island of Puerto Rico; and Houston Texans star J.J. Watt, who single-handedly generated $30 million in aid (and counting).

The financial impacts of the two storms will no doubt be meaningful. Fortune estimates the loss could be as high as $180 billion for Harvey[1], while estimates for Irma range from $30 to $60 billion. This includes damages to property, infrastructure, crops, natural resources, small businesses, transportation, and unemployment. Political hurdles stand in the way, but the United States has the resources to rebuild.

As an investor, these events remind us that storms can be unpredictable, no different than financial markets. Government officials have many tools at their disposal to handle the unexpected, such as communications, shelters, curfews, utility companies on standby, rescue vehicles, and storm monitoring to name a few. Money managers and fiduciaries also have tools, such as asset allocation, diversification, performance analysis, or monitoring financial conditions including interest rates, liquidity, political risks, valuations, and corporate growth rates among many more.

The emotional mindset of an investor is no different than that of anyone awaiting a hurricane. Prepare for the worst, hope for the best, and expect to be surprised. Or, as Benjamin Franklin said, “by failing to prepare, you are preparing to fail.”

The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Brinker Capital, Inc., a Registered Investment Advisor.

[1] http://fortune.com/2017/09/03/hurricane-harvey-damages-cost/

Investment Insights Podcast: Shaping up to be a pretty good year for diversified asset allocators with an active management bias

Rosenberger_Podcast

Andrew Rosenberger, CFA, Senior Investment Manager

On this week’s podcast (recorded September 22, 2017), Andy discusses the performance of asset allocators with an active management bias thus far in 2017.

 

Quick hits:

  • 58% of primary shareclass mutual funds in the Lipper Large Growth & Value and Small Growth & Value style boxes have outperformed their passive benchmarks.
  • Upwards of 63% of fixed income managers are outperforming the Barclays Aggregate while 55% of international managers are outperforming the MSCI EAFE.
  • The majority of active managers are outperforming and in emerging markets, where most are not, the asset class is up 31% on the year.

For Andy’s full insights, click here to listen to the audio recording.

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The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Holdings are subject to change. Brinker Capital, Inc., a Registered Investment Advisor.

Can money buy happiness?

Crosby_2015-150x150 Dr. Daniel Crosby Executive Director, The Center for Outcomes & Founder, Nocturne Capital

“Wealth is the ability to fully experience life.” – Henry David Thoreau

In your Psych 100 class, you were likely introduced to the concept of “operationalization,” where one concrete variable serves as proxy for a fuzzier, harder to measure construct. It is no secret that for many, the amount of wealth they have amassed serves as shorthand for happiness, but such is hardly the case. While wealth is positively correlated with well-being to a point, disconnecting money from purpose is a formula for emotional bankruptcy. One such self-delusional variant of chasing money for happiness is the “I’ll stop ignoring my happiness when I reach XYZ number.” Your magic number may be a salary or it may be a wished-for dollar amount to have in the bank. Whatever it is, I can promise you that when you get there, it won’t seem like enough. You see, we are not conditioned to think of money in terms of “enough.” As one of my clients once said to me, “Doc, you can never be too rich or too skinny.”

The scientific name for this phenomenon is the “hedonic treadmill” or “hedonic adaptation,” referring to the fact that we must make more and more money to keep our level of happiness in the same place. What tends to happen is that our expectations rise and fall with our earnings (as well as other circumstances in our life), keeping our happiness at a relatively stable place. To demonstrate this effect, I’d like for you to consider two groups that seemingly have little in common – paraplegics and lottery winners.

Can money buy happiness

 
Suppose I asked you, “Which would make you happier, winning the lottery or being in a crippling accident?” Not too tough, right? So, we would hypothesize that one-year after the life-changing event, lottery winners would be much happier and paraplegics would be much sadder. But this is simply not the case. One year after their respective events, it makes little difference whether you are riding in a Bentley or a wheelchair – happiness levels remain relatively static.

Why? We tend to overpredict the impact of external events on our happiness. One year later, paraplegics have discovered their accidents were not as catastrophic as they may have feared and have coped accordingly. Similarly, lottery winners have found out that having money brings with it a variety of complications. No amount of spending can take away some of the tough things life throws at each and every one of us. As the saying goes, “wherever you go, there you are.” In much the same way, we tend to project forward to a hypothesized happier time, when we have more money in the bank or are making a bigger salary. The fact of the matter is, when that day arrives, we are unlikely to recognize it and will simply project forward once again, hoping in vain that something outside of ourselves will come and make it all better.

A recent Princeton study set out to answer the age-old question, “Can money buy happiness?” Their answer? Sort of. Researchers found that making little money did not cause sadness in and of itself but it did tend to heighten and exacerbate existing worries. For instance, among people who were divorced, 51 percent of those who made less than $1,000 a month reported having felt sad or stressed the previous day, whereas that number fell to 24 percent among those earning more than $3,000 a month. Having more money seems to provide those undergoing adversities with greater security and resources for dealing with their troubles. However, the researchers found that this effect (mitigating the impact of difficulty) largely disappears at $75,000.

For those making more than $75,000 a year, individual differences have much more to do with happiness than money. While the study does not make any specific inferences as to why $75,000 is the magic number, I’d like to take a stab at it. Most families making $75,000 a year have enough to live in a safe home, attend quality schools, and have appropriate leisure time. Once these basic needs are met, quality of life has less to do with buying happiness and more to do with individual attitudes. After all, someone who makes $750,000 can buy a faster car than someone who makes $75,000, but his or her ability to get from point A to point B is not substantially improved. Once our basic financial needs are met, the rest is up to us. Hard work provides the means, but we must find our meaning.

If happiness does not come from hitting the lottery and sadness is not borne of personal tragedy, what does make us happy? Well, fortunately or unfortunately (depending on how well-adjusted your parents are), a great deal of happiness comes from our “hedonic set point,” which is genetically determined. A ten-year, longitudinal study of 1,093 identical twins found that between 44 percent and 52 percent of subjective wellbeing is accounted for by genetic factors. So, roughly half of what makes you happy is out of your control I’m sorry to say.

Of the remaining 50 percent, roughly 10 percent is due to external circumstances and a whopping 40 percent is due to intentional activities, or the choices we make and the purpose we create. We discussed before how we tend to overrate the importance of the things that happen to us, and sure enough, only 10 percent of what makes us happy is accounted for by lucky and unlucky breaks. Eighty percent of the non-genetic components of happiness can be controlled by our attitude and by making choices that are consistent with finding true joy. The first step in this pursuit is ensuring that the goals we are setting for ourselves are consistent with finding true happiness.

If 80 percent of the happiness that is in our control comes from setting and working toward positive goals, what sort of goals should we be setting? Headey has found that goals focused on enriching relationships and social resources are likely to increase wellbeing. We connect with a number of close friends and find joy within those relationships. On the other hand, he found that goals based around monetary achievement have a negative effect on overall wellbeing. Unlike friendship, which we “consume” in limited but satisfying quantities, we feel as though we can never really reach a financial goal. Having a core group of close friends sates us; it is sufficient to meet our social needs and we do not pine for ever-greater numbers of friends. Not so with financial goals; just as we reach our former goal, the hedonic treadmill kicks in and our excitement over having “arrived” is gone in an instant. Dr. Daniel Gilbert, a happiness expert at Harvard University, says that pursuing wealth at the expense of more satisfying goals has a high opportunity cost. “When people spend their effort pursuing material goods in the belief that they will bring happiness, they’re ignoring other, more effective routes to happiness.” The simple fact is this: chasing money and material goods is an itch that our flawed psychology will never let us scratch, unless we can define our financial goals in terms of the personal ends they will meet.

In a money-obsessed world that has socialized us to chase the almighty dollar, it can be weirdly unsettling to learn that money isn’t everything. As much as we whine about money, having something that is the physical embodiment of happiness is nice. We can hold it, save it, get more of it, all while mistakenly thinking that getting paid is how we “arrive.” Realizing that money does not directly equate to meaning can leave us with a sense of groundlessness, but once we’ve stripped away that faulty foundation, we can replace it with things that lead to less evanescent feelings of happiness. Breaking your overreliance on money as a substitute for real joy is a great first step, a second step is learning to spend your wealth in ways that matter.

Lest we swing from the extreme of “money is the only good” to the opposite extreme of “money is no good,” it is worth noting that there are ways in which money can be spent to improve happiness. A lot of our troubles with money stem from the way we spend it, thinking that buying “things” will make us happy. We engage in retail therapy, which is quickly followed by feelings of regret at being overextended. Before we know it, we’re surrounded by the relics of our discontent; the things we bought to be happy become constant reminders that we’re not. Instead of amassing a museum of junk, spend your money on things of real value. Spend a little more on quality, healthy food and take the time to savor your new purchases. Use your money to invest in a dream – pay yourself to take a little time off and write that novel about which you’ve always dreamt. Give charitably and experience the joy of watching those less fortunate benefit from your wealth. A growing body of research suggests that the most important way in which money makes us happy is when we give it away. Finally, spend money on having special experiences with your loved ones. It’s true that money doesn’t directly buy happiness, but it can do a great deal to facilitate it if you approach it correctly.

The Center for Outcomes, powered by Brinker Capital, has prepared a system to help advisors employ the value of behavioral alpha across all aspects of their work – from business development to client service and retention. To learn more about The Center for Outcomes and Brinker Capital, call us at 800-333-4573.

The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Brinker Capital, Inc., a Registered Investment Advisor.