primer domain was triggered too early. This is usually an indicator for some code in the plugin or theme running too early. Translations should be loaded at the init action or later. Please see Debugging in WordPress for more information. (This message was added in version 6.7.0.) in /home/ikq167bdy5z8/public_html/propertyresourceholdingsgroup.com/wp-includes/functions.php on line 6114The role of psychological considerations in retirement planning is becoming important.
The psychology of money is more important than ever when planning for retirement.
The way financial planning looks at all of a client’s life, not just their finances, is getting more and more holistic. And as this trend keeps going, financial psychology will play an even bigger role in getting clients interested and motivated to reach their goals.
Saving enough money for a comfortable retirement is likely one of the most important goals for a lot of clients. Financial security is a big part of any conversation about retirement, but understanding the effects of this big change is also important. The way clients feel about money is based on years of feelings that can make it hard for them to reach this goal. Advisors who can help their clients get past these obstacles will give them peace of mind, confidence, and the help they need to make the changes that matter.
The world’s population is getting older and people are living longer, which has caught the attention of many financial experts and policymakers. The number of people 65 and older in the US has reached 16.9%, and it is expected to reach 21.6% by 2040. Due to this unprecedented growth, many clients are living longer in retirement, which means they need to plan more.
Even though many clients have ideas about when and how they will retire, they often hire a financial advisor to help them protect their wealth, keep their medical costs in check as they get older, and help them deal with market uncertainty, among many other things. But even if a client has a well-thought-out plan for retirement, some advisors may see signs that the client is having mental or emotional problems as they get ready for or are in retirement.
Retirement and How We Feel About Our Jobs
Our jobs are often more than just how we make a living; they’re often how we see ourselves and how others see us, too. Besides giving us a sense of who we are, our jobs often give us structure and purpose in our lives and give us a chance to meet new people and build relationships with them. Most people will have big changes in their daily lives and social roles when they retire. Even though having enough money and planning are important, that’s not the whole story. Clients may also be grieving the loss of their identity.
So, the changes that come with retirement may make the risk factors for depression in old age worse. Even though depression is common in older adults and people who are retiring, it is not a normal part of the process (Source: Linh Dang, Aparna Ananthasubramaniam, and Briana Mezuk, “Spotlight on the Challenges of Depression after Retirement and Opportunities for Interventions,” Clinical Interventions in Aging. In fact, there is a lot of evidence that retirement may even be good for mental health. Retirees may be less depressed because work-related stress is reduced, they have more freedom, and they spend more time exercising and socialising (Source: van der Heide I, van Rijn RM, Robroek SJ, Burdorf A, and Propek KI).
Research shows that how people react to big changes, like retirement, can depend a lot on the nature of the change (e.g., planned, voluntary, or involuntary) and on the resources they have (e.g., social network, financial resources) that can help them deal with the emotional and practical changes. (Source: Linh Dang, Aparna Ananthasubramaniam, and Brianne Mezuk, “Spotlight on the Challenges of Depression after Retirement and Opportunities for Intervention,”
Advisors can be a source of help.
Since the 1970s, when Daniel Kahneman and Amos Tversky studied how psychological and emotional factors affect investors and the financial markets, researchers and financial professionals have known that psychological and emotional factors have an effect. They said that people and markets are not always rational and looked at how people make financial decisions using subconscious biases and heuristics.
The results of the CFP Board’s 2021 Practice Analysis study show that advisors want to learn about, recognise, and respond to these emotional behaviours and ways of thinking. In response, in April 2022, the Board put out a book called The Psychology of Financial Planning.
Financial psychology goes beyond behavioural finance because it talks about the wide range of feelings and influences that a client may have, such as how their relationship with money has changed over their lifetime. It also tries to figure out how that relationship affects their lives and finances today.
