Factoring in human behaviour when building your retirement portfolio

Updated: Jul 15



In last month's blog post we looked at 3 human behavioural insights that can affect our financial planning and decision-making.


This month we continue on with our theme on the impact of human behaviours with 2 more important considerations.


Our instinctive human behaviours change as we get older and can affect our investment decision making process, especially in retirement planning. As we are bombarded with so much information, we tend to use short-cuts to interpret financial facts and figures. This leads to uncertainty and invariably errors in our judgement.

When it comes to your future financial well being, it is worth reflecting on these drivers to help you overcome these common behaviours and plan a successful retirement strategy.

Behavioural Insight – Cognitive Decline

According to research, there is a clear decline in our verbal reasoning, problem solving and financial literacy, (including mathematical) skills. We struggle to understand charts, graphs and tables as easily as we did when we were younger and this causes us to either bury our heads in the sand or go with what we have seen to work in the past.

This is decline in financial literacy is actually concerning when you consider that many people only begin to think about their retirement at from aged 60 plus. Investment portfolios and economic insights can be challenging to understand as it is, so what can you do to ensure you continue to stay one step ahead?

Start thinking about your how to plan for retirement as soon as possible. When you start calculating how much money you will need in retirement, you are more likely to interpret and value factual information and be less concerned with short-term risk.

Behavioural Insight – Fear of Uncertainty

As most of us will be dependent on a regular retirement income stream, the fear of uncertainty and potentially running out of money can lead to irrational choices.

To help you identify your spending needs and develop your investment strategy accordingly, separate your expenditure into lists. Create one list of your regular living expenses, another list for emergencies, one for savings and another for holidays or luxuries. This allows you to see clearly what you are spending your money on and adjust your spending habits accordingly. You can also make more considered investment choices. For example, the funds for the luxury bucket can be invested in a higher risk/higher growth fund.

Book in for a quick chat and see how our Retirement Planning Specialists can help create, grow and manage a diverse, risk-appropriate retirement fund.

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This website contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.

Sage Financial Group, ABN 85 009 388 916, trading as Sage Financial Group is an authorised representative of Charter Financial Planning, Australian Financial Services Licensee and Australian Credit Licensee, Licensee Number 234 665.