Easy Access to Financial Advice Requires Analytical Thinking

It’s up to each investor and retirement saver to separate fact from fiction and to overcome their own personal biases.

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Even in the best of times, Americans face a daunting range of financial decisions as they approach retirement. And, let’s face it, these are not the best of times. So, I understand when people turn to the internet for answers, or listen to financial gurus who dole out free advice on TV.

It’s easier, faster — and probably more entertaining — than calling a financial adviser every time you have a question or need help. You can do a deep dive into just about any issue of interest (Do I have enough money to retire? Do I still need life insurance? Should I pay off my house?) and find plenty of suggestions out there.

Pros and Cons of Overabundant Advice

The upside to limitless access to answers is that retirees and soon-to-be retirees have the potential to become much more knowledgeable about investing and financial planning.

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The downside is that it can be a challenge to differentiate between good and bad information or facts and opinion. It also may be difficult to understand how a specific strategy or financial forecast pertains specifically to your situation. You may not even realize how your personal biases are playing in your decisions.

Trying to Google your way through a retirement plan is a lot like trying to diagnose an illness by typing symptoms into a search engine or watching a health segment on the news. You might receive some worthwhile guidance, but you’ll also find plenty of confusing contradictions. And, depending on your personality or experiences, you might decide you’re fine when you aren’t, or that you’re in dire trouble when there’s an easy fix.

We All Have Our Biases

The tendency to look for information that supports your views and ignore data that proposes something different is called confirmation bias, and it can be dangerous for your finances. It can lead investors to make poor decisions when it comes to saving and investing, especially when there’s a barrage of anxiety-inducing news out there.

We all fall victim to our biases; it isn’t a fault or a failure. It’s just something you should know about yourself to ensure you’re careful about how you filter the information you receive, whether it’s coming from social media or the news or, for that matter, from your co-worker, neighbor or brother-in-law. If your mindset tends toward the negative, you’re likely going to latch onto the things you see and hear to confirm that view. And if you’re an optimist, you’ll have little trouble finding signs to suit a strong bias.

If you believe inflation is going to explode in the next few years, you can find evidence that you’re correct. The same goes for worries about taxes rising or Social Security disappearing. And, if you think the economy will rebound in six months and everyone who wants a job will find one, I’m sure you can find support for that, too.

The Keys to Overcoming Them

So how can you battle your biases?

The first step to overcoming confirmation bias is to acknowledge that it exists — not just for you, but for everyone out there offering an opinion on how much risk you should take with your portfolio, when you should claim Social Security, or how much money you should have saved to retire comfortably. (Yes, that includes professional financial advisers.)

Then, knowing that these biases exist, stay open-minded about alternative points of view. Make a list of pros and cons, and don’t just nod when you hear what you want to hear and tune out everything else. Whether you agree or disagree with the person giving the advice, ask challenging questions.

Finally, in my opinion (and, of course, I may be biased), it’s important to have a retirement plan that assigns a purpose to each asset and account you own or in which you might invest. This means knowing the meaning of every product and strategy and when it’s meant to come to fruition – now, in a few years or many years down the road.

Separate your income-producing assets from your growth assets so you have money for now and in the future. Have a reserve account meant only for emergencies — for the grocery store or when a tree lands on your roof, not when you want to go to Key West. Have a plan for inflation, taxes, your home and your health care. Be prepared for things to change in the world, and in your personal world, as you age.

Knowledge is power when it comes to investing — but it starts with knowing yourself, your goals and how to attain those goals. Make a plan built with purpose — not based on fear or folly. And then, work the plan.

Kim Franke-Folstad contributed to this article.


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The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.


This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Founder, Sterling Wealth Management LLC

Kyle A. Kay is a licensed insurance agent and an Investment Adviser Representative and founder of Sterling Wealth Management LLC (www.swmfl.com). He has three decades of experience in banking and financial services and has helped guide clients to success through four economic cycles.