New Blog from LPAG’s Stewart Fields Advocates Behavioral Finance Strategies for Retirees

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A new blog from Lake Point Advisory Group Wealth Management and Retirement Advisor Stewart Fields offers a critical and compelling look at the field of behavioral finance as it applies to retirement planning. Behavioral finance strategies help advisors to help their clients avoid making bad financial decisions under stress in order to achieve their retirement goals.

behavioral finance, retirement planning, wealth management, avoid volatility

Lake Point Advisory Group

A qualified fiduciary retirement advisor who knows how to utilize the concepts of a behavioral finance approach can be extremely valuable in helping retirees achieve their long term goals.

The concepts of behavioral finance are fast becoming fundamental in a variety of professional and corporate environments, including retirement planning. The psychology of decision-making—what motivates people to make decisions, both good and bad—is the subject of a new blog from Lake Point Advisory Group’s Stewart Fields, a retirement and wealth management advisor who focuses on the long-term financial needs of retirees.

Titled, “Behavioral Finance—a Powerful Tool for Providing Retirees with Financial Peace of Mind,” the newly published blog draws on Fields’ experience and expertise in the application. Fields considers behavioral finance strategies essential for helping retirees establish a complete financial plan to help them achieve their retirement goals.

One of the greatest challenges retirement planners face is relieving the anxiety their retired clients experience during market drops and other events that may affect their portfolios and potentially their income stream for the next 20 - 30 years. Helping clients avoid making compulsive and usually risky financial decisions when market and sector performance gets dicey is a top priority for retirement advisors. Market volatility is the primary catalyst behind many bad financial behaviors retired investors engage in under stress, such as buying high and selling low, or divesting a portion of their equities to invest in stocks.

Combining behavioral and cognitive psychological theory with conventional economics, behavioral finance strategies help advisors identify triggers that cause individuals to make certain—usually bad—financial decisions, and recognize past financial mistakes in order to avoid repeating them and putting their retirement income at risk.

“Jumping back into risky market investments at a time in life when less risk is generally the rule of thumb can be destructive in the long term,” Fields says. “But volatility isn’t the only culprit when it comes to making poor financial decisions on impulse.”

Uneasiness sets in when investments earn low or no gains in a flat economy, which can activate emotional triggers that may also lead to bad financial behaviors. According to Fields, investors can most likely minimize losses by merely staying the course and resisting the compulsion to take on risk. Fields says a behavioral finance approach can be extremely valuable to advisors in helping retired clients establish a low-risk, diversified portfolio that makes them less likely to respond to emotional triggers.

According to Fields, most retirees experience heightened anxiety over their financial security at one time or another. A recent American College survey of retirement income certified professionals showed that more than 60 percent of their clients are concerned with market volatility significantly impacting their retirement income stream.

“At Lake Point Advisory Group, we apply principles of behavioral finance to our broader retirement planning services, Fields says. “A qualified fiduciary retirement advisor who knows how to utilize the concepts of a behavioral finance approach can be extremely valuable in helping retirees achieve their long term goals.

“He or she can empower clients to resist that little voice inside their head when it starts nudging them toward bad financial behaviors.”

Minimizing risk and establishing a financial plan that meets one’s retirement goals without draining their savings prematurely requires planning and flexibility, as this is not always an easy transition for retirees. Many retirees often over-estimate how far into retirement their savings will last, and don’t plan for unexpected expenses such as taxes and medical care that accompany retirement.

When applied to retirement planning, behavioral finance principles can help advisors make recommendations to investors to help minimize the impact of volatility on retirement savings, and adopt new strategies to protect their nest egg’s longevity.

There are many strategies for creating a plan that addresses risk to one’s retirement security from the start. Fields says an adept advisor can find ways to minimize the impact of volatile and flat markets in a retirement income plan, and a behavioral finance perspective can be extremely helpful here.

Selling investments and taking portfolio distributions in order to generate income to meet retirement expenses—like taking portfolio distributions during a volatile market—makes retirees susceptible to sequence of returns risk, and vulnerable to collecting lower or negative returns early in a period when withdrawals are made from their underlying investments.

Until the investor begins withdrawing money from their savings, there is no impact on their portfolio. However, selling stocks right after a significant market downturn can lock in lower returns, which can negatively impact the longevity of one’s retirement portfolio.

If flexibility with retirement income is not possible, you can consider securing enough guaranteed income sources to cover your basic retirement needs—a strategy often referred to as flooring, which is usually accomplished through a combination of investments and insurance products such as bonds and annuities that can help provide a predictable amount of income each month in retirement to meet expenses.

Coordinating annuity or bond purchases with other consistent income sources, such as pensions, Social Security, or rental income can help provide reassurance during volatile markets, and allow retirees to focus on enjoying their golden years instead of worrying about meeting expenses. Other innovative flooring strategies are available as well, determined by each individual’s situation.

To learn more about behavioral finance and other strategies to achieve one’s retirement goals, visit the Lake Point Advisory Group website, email info(at)lakepointadvisorygroup(dot)com, or call 214.771.3363.

About Lake Point Advisory Group:

Established in 2000 by President Reid Johnson, Lake Point Advisory Group is committed to helping clients meet their financial needs. By evaluating and assessing their clients’ financial situations, the firm’s wealth management team provides suitable recommendations to improve each client’s portfolio, and they do so with integrity and transparency. Lake Point Advisory Group’s experienced professionals are not only knowledgeable about finances, they also understand the importance of priorities, family and confidence in the client’s financial future.

Lake Point Advisory’s wealth management team employs members of the Financial Planning Association (FPA®), the largest membership organization for personal financial planning professionals in the United States. FPA members are those who commit to the highest standards of professional competence, ethical conduct and clear, complete disclosure to those they serve. They deliver advice using an objective, client-centered, ethical process.


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