“If I take my current concerns and values and assume that’s what I’ll want to do when I’m 60 or 70, I’m going to miss by a mile,” added Crook.
Consult the experts
One alternative to making unwarranted assumptions about what you may want decades from now is to talk with those who are already there. “A conversation with people who are in that stage of life can be very beneficial,” suggested Svetlana Gherzi, Behavioral Finance Specialist for UBS CIO Americas, Wealth Management . “Their values and experiences can often be a better predictor of what you might value in retirement than trying to forecast that on your own.”
“We have the ability to imagine the future, but we're not that great at forecasting it correctly,” Gherzi said. “Think about your values 10 or 15 years ago. Now compare them to what you believe today. Your values have probably changed. In fact, research shows that when people think about the past, they acknowledge that their goals have changed significantly over time. But when people think about future goals, they fail to predict changes.”
Having these conversations can also help counter behavioral biases—modes of thought that are human and natural but not very helpful. “When we think about the future, 84% of what we imagine is positive,” said Gherzi. Our relationships will be happy, our children accomplished and our finances secure. But this rose-tinted view can be damaging, she says, if we don’t prepare for some of the things that could mar retirement—cognitive problems or other health issues, for example, or savings that have been diminished by economic turbulence. Recognizing what might happen can help us take preventive action, such as buying long-term care insurance at a younger age when premiums are affordable or diversifying a concentrated stock portfolio to make a financial plan less vulnerable to market volatility.
Your Financial Advisor can also talk with you about how to plan more clearly. For example, Gherzi noted, people tend to be much better at recognition than recollection. “When we try to recall our goals for the future, we usually miss about half of them,” she said. To counter this, your Financial Advisor can share a list of categories and help you consider things more broadly to help spark your own ideas about what will be most important to you.