The Hardest Part of Retirement Planning Isn't Always the Math

It may arrive on a Tuesday morning after a rough day in the market. It may show up in a headline about a recession, an election, a war or a company layoff. Sometimes it comes quietly, after checking an account balance one too many times.

For a minute, the future that once felt organized starts to feel uncertain.

That’s when people start asking questions like, “Should we just get out until things calm down?”

It’s an understandable question. When retirement is no longer far off, a market decline can feel less like a number on a statement and more like a threat to the life you have been working toward.

The hard part is that “until things calm down” has no calendar date. Markets rarely send an invitation when it is safe to come back.

Why can good plans feel hard to follow?

Consider Denise and Omar, a composite couple a few years from retirement.

They had done many things right. Saved consistently. Paid down most of their debt. Talked through the kind of retirement they wanted. More time with grandchildren, a few road trips each year and the comfort of knowing they would not need to call their children for financial help.

Their plan was built around those goals.

Then the market dropped.

Omar wanted to wait it out. Denise wanted to move everything to cash. Neither reaction was foolish. Both were trying to protect the same future. They were simply responding to stress in different ways.

The most important part of that conversation was not a chart or a market forecast. It was returning to the reason they had built the plan in the first place.

What did they want their money to do for them? Which dollars were needed soon and which had years to work? What would moving everything to cash actually solve, and what new risk might it create?

Those questions can slow down a decision long enough for a family to reconnect with its own priorities. That kind of pause is often more valuable than any single portfolio move.

What does behavioral finance mean in real life?

Behavioral finance studies the human side of money decisions. It recognizes that investors don’t make choices in a vacuum. We bring our memories, fears, hopes, habits and opinions into every financial conversation.

Most people recognize the feeling even if they don’t know the academic term for it.

After a market decline starts, it’s easy to believe the decline will continue forever. That’s recency bias. When an account value falls, the discomfort can feel larger than the happiness of a similar gain. That’s loss aversion. When someone can’t stop thinking about the account balance at the prior market high, that is anchoring.

None of this means a person is irrational or incapable of making good decisions. It means they are human.

A good planning process makes room for that reality. It does not shame people for being worried. It gives them a way to talk through the worry before it turns into a permanent decision.

That’s also where a well-built retirement income plan starts to earn its keep. When someone can see which dollars fund near-term life and which have decades to work, the temptation to react to short-term news gets a lot smaller.

Why would an advisor study this?

A financial plan has to work during ordinary months, but it also has to hold up during the months that do not feel ordinary.

That’s one reason some advisors pursue behavioral-finance training. The Behavioral Financial Advisor designation is issued by think2perform. According to FINRA’s professional designations database, the program includes two behavioral-finance courses, a proctored final examination and 20 hours of continuing education every two years. FINRA does not approve or endorse professional designations.

Doug Lennick, who founded think2perform, has said that “irrational decision making trumps high IQ every time.” He describes one role of a financial advisor as helping people make rational decisions when they are dealing with difficult emotions.

That doesn’t mean an advisor has all the answers. It means the work should include more than selecting investments. It should include helping clients make decisions they can live with when the news is loud and confidence is low.

Can coaching matter as much as investing?

Vanguard’s Advisor’s Alpha research has identified behavioral coaching as one of the largest potential contributors to advisor value. Its 2022 framework estimates a value range of 0 to more than 200 basis points depending on the situation, with the greatest potential during periods of market stress. It’s not a guaranteed return or a prediction. It is a reminder that the decisions surrounding a portfolio can matter as much as the holdings inside it.

Think about the difference between a plan that looks good in a spreadsheet and a plan someone can actually follow.

The first may be technically sound. The second has considered the human being who has to live through it.

That might mean keeping enough accessible cash for near-term needs. It could mean agreeing in advance on what would justify changing an investment strategy or simply scheduling a conversation before reacting to a market headline.

Warren Buffett wrote in his 1986 Berkshire Hathaway shareholder letter that his goal was to “be fearful when others are greedy and to be greedy only when others are fearful.” It’s useful advice, though it is much easier to read during calm markets than to practice when fear is the dominant emotion.

What can a planning conversation sound like?

A few years ago, a client we’ll call Rina described her retirement concern in a way that had nothing to do with a benchmark or an investment ticker.

“I don’t want to spend the next 20 years wondering whether I can afford to say yes to my family.”

That was the real planning question.

Rina and her spouse wanted to help with future education costs for grandchildren, travel while they were healthy and avoid becoming a financial burden to their children later. They initially felt every spare dollar had to go toward one goal. The more we talked, the clearer it became that the pressure was coming from trying to make every dollar do every job.

The planning answer was not a magic product. It was to organize their cash flow and investments around different time horizons and goals, build flexibility into the plan and revisit tradeoffs before they became emergencies.

That approach does not remove uncertainty. Nothing does. It can make uncertainty more manageable because the plan has room for real life.

What should you look for?

The BFA designation can be one useful signal, but it shouldn’t be the only one.

Look for an advisor who starts with your goals before discussing products. Ask what happens when markets become volatile. Ask whether the advisor has a process for helping families make decisions when they are anxious, not just when they are confident.

Most importantly, look for a relationship where it is safe to say “I am worried” without feeling talked down to or pushed into a quick answer.

Finding a behavioral financial advisor starts with finding someone who sees the plan as more than investments. The plan should reflect your personal values and the life you are trying to protect.

If you want to talk through how this shows up in a real planning conversation, our advisors are happy to offer a complimentary second opinion with no obligation.

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Scott E. Jones, BFA™, CPFA®, CRPC®, RFC®, is the founder of Genesis Wealth Advisor Group, LLC, a fiduciary financial planning firm in Marlton, New Jersey, specializing in retirement income planning, behavioral finance and Social Security strategy. He also founded Genesis Advisor Alliance, a professional community for advisors seeking independent support and resources to grow on their own terms. This article is for educational purposes only and does not constitute personalized financial, tax or legal advice. Composite examples are fictionalized illustrations and do not represent actual clients or outcomes.

Securities and investment advisory services offered through Osaic Wealth, Inc., member FINRA/SIPC. Osaic Wealth is separately owned, and other entities and/or marketing names, products or services referenced are independent of Osaic Wealth.