Planning is a powerful tool to help investors succeed and achieve better outcomes. A detailed US study on retirement planning amongst Americans over age 50 showed that having and sticking to a plan results in three times the net worth compared to those who don’t have a plan.
The study analyzed the following four categories of planning and their impact on net worth:
Source: Lusardi, Annamaria, and Mitchell, Olivia S., “Financial Literacy and Planning: Implications for Retirement Wellbeing,” May 2011
Not surprising, having and sticking to a plan generates the best outcome. What may be surprising is the magnitude of the impact of planning and that any amount of planning results in two to three times the wealth. Even just calculating the amount of money needed for retirement improves results dramatically. Naturally for more affluent clients the results in $value terms will be even more pronounced.
From a behavioural viewpoint, what is going on?
What can we do?
Conclusion
Having a plan simplifies investing and allows investors to focus on things they can control. Contributions, withdrawals and the amount of time invested are all drivers of long-term wealth. These actions are enhanced by planning which creates awareness and encourages long-term thinking along with consistent action over time. These practices in turn can help investors avoid the many common and costly behavioral biases and mistakes. So, make a plan and stick to it!
Got any questions/thoughts? Please click here to send us a brief email.
This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial and tax/or legal advice prior to acting on this information. Before acquiring a financial product a person should obtain a Product Disclosure Statement (PDS) relating to that product and consider the contents of the PDS before making a decision about whether to acquire the product. The material contained in this document is based on information received in good faith from sources within the market, and on our understanding of legislation and Government press releases at the date of publication, which are believed to be reliable and accurate. Opinions constitute our judgment at the time of issue and are subject to change. Neither, the Licensee or any of the Oreana Group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Gordon Thoms and David Conte of Calibre Private Wealth Advisers are Authorised Representatives of Oreana Financial Services Limited ABN 91 607 515 122, an Australian Financial Services Licensee, Registered office at Level 7, 484 St Kilda Road, Melbourne, VIC 3004. This site is designed for Australian residents only. Nothing on this website is an offer or a solicitation of an offer to acquire any products or services, by any person or entity outside of Australia.