Avoiding retirement regrets

cook_headshotPaul Cook, AIF®, Vice President and Regional Director, Retirement Plan Services

Owning up to mistakes and admitting to missed opportunities may be cathartic, but it sure isn’t pleasant. Unfortunately, most older Americans have financial regrets. Per a recent survey, not saving for retirement early enough was the biggest regret of retirees. Not saving enough for emergency expenses (13%), taking on too much debt (student loan and credit card debt each at 9%), and buying a bigger house than was affordable (3%) were among the other regrets expressed in the survey.[1] While not uncommon, investment regrets pose unique challenges because the ability to recover can be limited by both time and opportunity.

Investor regret typically takes two forms:

Regret of action is the sinking feeling you get when you did something you shouldn’t have like investing in a stock tip you overheard while waiting in line at Starbucks.

Regret of inaction refers to something you wish you had done, like buying long-term care insurance for your mother a decade ago.

In a landmark study[2], Thomas Gilovich and Victoria Husted Medvec discovered that misguided actions generate more regret in the short term; but failure to act produces more remorse in the long run. You can, however, make bold financial moves today to avoid both short and long-term regrets in the future.

No matter where you fall on the financial spectrum, consider these regret-management moves:

  • Invest for the future today, again tomorrow, and again the next day. While two-thirds of U.S. employees are saving for retirement, according to the 2015 Retirement Confidence Survey conducted by the Employee Benefit Research Institute, their efforts fall short. You’ll never get this time back, so if you haven’t started saving for the future, then delay no more. The longer you invest money, the more time it has to grow.
  • Don’t confuse risk and volatility. Risk is the likelihood that you will not have the money you need when you need it to live the life you want. Paper losses are not “risk,” and neither are the fluctuations of a volatile market.
  • Measure progress against your goals, not industry benchmarks. As Chuck Widger and Dr. Daniel Crosby point out in The New York Times best-selling book, Personal Benchmark: Integrating Behavior Finance and Investment Management, by measuring performance relative to the specifics of our lives and the goals we have set, rather than vague generalities, we can become an expert in the “Economy of One.”
  • Infuse discipline into your investment strategy. There are several steps you can take to help make saving more of a habit, such as establishing automatic transfers from your bank account to your brokerage account.
  • Become a savvy investor. Even if you have a skilled advisor or your partner handles the family’s investments, you should have a baseline understanding of how investments work and the different characteristics and performance expectations for each asset class in your portfolio.
  • Get in touch with your emotional side. Most investors think that the strongest links to performance are timing and returns, but an investor’s behavior also plays a significant role. Over the last 20 years, the market has returned roughly 8.25% a year, but poor investment behavior has caused the average retail investor to gain only 4%.[3]
  • Control the controllable, not the markets. Do not try to predict or master the markets. Instead, focus on controlling the behaviors that negatively impact results, like impatient or impulsive investment decisions and overspending.
  • Work with an advisor. A trusted advisor will help you articulate your goals and design a portfolio to help you reach those goals while managing market volatility. But, your advisor’s value doesn’t end there … in fact, one of the most valuable things your advisor can do for you is to provide behavioral coaching along the way. Research has found that when an advisor applies behavioral coaching, performance increases from 2-3% per year.[4]

For over 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] Bankrate.com, December, 2016

[2] The Experience of Regret: What, When, and Why.

[3] Dalbar, Inc., Quantitative Analysis of Investor Behavior. Boston: Dalbar, 2015.

[4] 10 Surefire Ways to Ruin Your Financial Future, Dr. Daniel Crosby.

Does Balance Truly Exist in the Lives of Professional Women? It’s Up to You

Noreen D. BeamanNoreen D. Beaman, Chief Executive Officer, Brinker Capital

Last week I had the pleasure of attending Financial Advisor magazine’s inaugural Invest in Women conference in Las Vegas. It was well attended by prominent and respected women of the financial services industry and it was a two-day agenda full of valuable discussions and presentations about all aspects of women in the financial industry.

Throughout the day-one discussions, the debate emerged about whether balance can truly exist in the lives of professional women. A few contended that a meaningful balance can be achieved but the majority concluded that, for most women, balance between career and family is an ever-shifting goal. At best, it’s a moving target that we may occasionally hit; most of the arrows we fire blindly sail past the target, leaving us struggling to find a way to “do it all.”

The story isn’t a new one—professional women have been trying to balance the needs of family and career (and self? – often that’s not even on the list) for many years with varying degrees of success. Most of the women at the conference agreed that it was a perpetual juggling act, often lasting for years, sometimes decades. Many have spent some time forsaking career for family and raising children. Others have spent time away from home, focused on growing a career and meeting the demands of their professional lives. And now as individuals are living longer, many are struggling with the task of supporting both aging parents and children while maintaining a successful and demanding career. Many have done all of it at one time or another.

shutterstock_99376793As we moved into day two, the discussions evolved as it became clearer that the answer to find what works best at any given time lies within each of us. There’s no consolation for those looking for the magic plan or formula, but the truth is that it’s upon each of us – male or female – to drive our own life choices and embrace the decisions we make. Balance is an elusive target, and the journey is personal and unique to each of us.

In my 20+ years of being part of the financial services industry, no employer has ever offered to take a back seat so that I could be more present for my children. My family has never declared, “We can handle everything from here, why don’t you spend more time focused on your career?” It’s on each of us to determine when and where to make sacrifices and to decide when to step back and when to dive in.

It’s not up to our family or our employer to make our choices for us. Every individual must assess their life situation with every change, evaluate their priorities, weigh the sacrifices and be willing to carry out the ones we choose. It’s sometimes easier to put the onus on others—whether work or family—to determine our level of engagement and then complain if we are being pulled too far in one direction. But if we truly own our decisions and acknowledge that we will make mistakes now and then, we empower ourselves to be more successful in both our careers and our lives.

The views expressed are those of Brinker Capital and are for informational purposes only. Brinker Capital, Inc., a Registered Investment Advisor.