September 2016: The Pre-Retirement Bucket List

Too Much Positivity can Equal a Negative 

The mind is a powerful tool. It can protect, justify, trick and even make good things happen by its sheer will. A good example is the placebo effect, a biology-based phenomenon with proven positive results.1

But there are limits to what a positive mindset can truly accomplish. For example, a 2016 survey by asset manager Schroders found that American investors may be expecting unrealistically high returns. The average stock market yield globally is 3.8 percent, but investors over the age of 35 think they can achieve 8.4 percent. Millennials are even further off the average mark, anticipating returns of 10.2 percent.2

Simply believing your investments will pay off won’t make it happen. As financial advisors, we’re here to help you analyze your personal financial situation and create strategies utilizing a variety of investment and insurance products that can help you work toward your financial goals.

The positive outlook consumers have developed after the recession could be a good sign for our nation’s spending and continued economic rise. However, this optimism can actually be a negative factor if it leads to an irrational confidence in investment choices.3

According to the Wells Fargo/Gallup Investor and Retirement Optimism Index, even after the volatile swings of this year’s first quarter, investor optimism regarding the stock market was pretty high. Most investors (81 percent) said they “rode out” the volatility and did not make changes to investments, while only 4 percent reported selling stocks in response to market changes.4

That’s a good sign, because doing nothing can be one of the most difficult actions when an investment starts losing money. Human nature is hard-wired to fight or flee; people may want to liquidate for cash, trade for something better or just blame somebody. Part of that is fueled by the enormous amount of information available to investors, which makes it seem like there’s always somewhere else we can go for higher returns. But studies show that investors who overtrade tend to earn mediocre returns once all of those transaction costs are factored in.5

Every year, the Employee Benefit Research Institute conducts a Retirement Confidence Survey to gauge how confident Americans feel about their retirement income prospects. In 2016, the survey found that only 28 percent lack confidence in their financial preparations for retirement, with 28 percent feeling very confident and 43 percent somewhat confident. Among retirees, the survey found that 39 percent are very confident (up from 18 percent in 2013) that they have enough money for a comfortable retirement.6

The Pre-Retirement Bucket List

Crossing items off a bucket list is one of the things pre-retirees look forward to most. However, there are some things to check off during your working years that could make retirement even more enjoyable.

If you have dreams of climbing Mount Kilimanjaro or touring Napa’s wine valley, you might consider giving something on your bucket list a try before you retire. One way to avoid a letdown in retirement is to use the years preceding it to find out if your perceived dreams are all they’re cracked up to be.

For example, if you’re thinking of relocating when you retire, use some of your vacation time to visit your retirement destination in different seasons. Will you still want to live in your dream beach community in the winter, when it’s a bit too windy and cold for those long beach walks? Some people find they miss experiencing all four seasons — the beauty of autumn leaves changing color; snow on the lawn. Maybe year-round warm weather is as nice as it sounds, but it’s worth spending time contemplating every detail before you pack up and move.

By the same token, consider whether you can relocate before you retire. For instance, perhaps ask for a transfer if your company has an office near your retirement dream spot. Or, pitch the idea of working remotely from home. Retiring and moving at the same time can be quite disorienting; try it out before you quit.

Also, develop a strong social network outside of work. Many times colleagues are our closest friends, but we don’t all retire at the same time. Whatever hobbies you want to pursue in retirement, start them now and develop a network of friends who share those same interests. Consider it “trying out” new friends to find a good fit.

From a financial perspective, you may want to consider paying for any pending large-ticket expenses before you retire, such as replacing windows or the roof, buying a new car or a new water heater. Also, try living on your projected retirement income before you retire. This is easier if the kids have moved out of the house and you’re all paid up with college and the mortgage. See what life would be like on the amount you have allotted for yourself.


Content prepared by Kara Stefan Communications.

1 NPR. Jan. 26, 2016. “How Meditation, Placebos and Virtual Reality Help Power ‘Mind Over Body’.” Accessed July 8, 2016.
2 Suzanne Woolley. Bloomberg. June 16, 2016. “Wanted: Big Returns, Low Risk. (And Millennials? They Want 10.2%).” Accessed July 8, 2016.
3 Shreenivas Kunte. CFA Institute. April 21, 2016. “The Behavioral Continuum: What’s the Best Behavioral Bias?” Accessed July 8, 2016.
4 Wells Fargo. March 10, 2016. “Wells Fargo/Gallup: Stock Market Jitters Drive Investor Confidence Down; Majority Ride out the Volatility.” Accessed July 8, 2016.
5 Fidelity International. December 2014. “Behavioural finance: Overconfidence.” Accessed July 8, 2016.
6 EBRI. March 2016. “The 2016 Retirement Confidence Survey: Worker Confidence Stable, Retiree Confidence Continues to Increase.” Accessed July 8, 2016.

This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the complete loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions.  If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference. 

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