Overcoming Emotional

Biases

LIFETIME INCOME CASE STUDY

Andy & Sarah Neebly
Registered Investment Advisor

Presented by Financial Sense Advisors, Inc.

 Important Notice:
This is a hypothetical illustration based on real life
examples. Names and circumstances have been
changed. The opinions voiced in this material are
for general information only and are not intended
to provide specific advice or recommendations for
any individual. To determine which investments or
strategies may be appropriate for you, consult
with a financial advisor prior to investing.

Financial Sense Advisors, Inc.

Registered Investment Advisor
WHO ARE ANDY & SARAH?
Ages: 59 & 58

Jobs: Data Analyst & Education

- Andy dreads the idea of retiring and is

unsure if they even have the assets to
sustain a comfortable retirement

- Sarah wants to retire ASAP and with

complete peace of mind

- Seeking a professional to help determine

how they can meet their needs and goals
 WHAT IS IMPORTANT TO ANDY?

Growing their assets

to make up for losses Being prepared for
retirement

Andy

Living a comfortable
lifestyle
 WHAT IS IMPORTANT TO SARAH?

Determining their needs

Protecting their for retirement
investments from loss

Sarah

Being able to retire with

peace of mind
 ANDY & SARAH’S CURRENT RISK TOLERANCE?

Most Conservative 1 - 20 - 30 - 40 - 50 - 60 - 70 - 80 - 90 - 100 Most Aggressive

Current Risk Score Portfolio Risk Score

63 81
ANDY & SARAH’S CURRENT BUDGET

Income $190,000
Expenses ($100,000) Discretionary
21%

Surplus $90,000
Living Expenses
79%
ANDY & SARAH’S RETIREMENT BUDGET

Income $80,000
Expenses ($98,000) Discretionary
32%

Shortfall ($18,000) Living Expenses

68%
 ANDY & SARAH’S BALANCE SHEET

Real
Estate + Portfolio - Liabilities = Net Worth

$1,300,000 $960,000 ($450,000) $1,810,000

ANDY & SARAH’S ASSET ALLOCATION

1% Asset Allocation
Stocks
40%
49% Bonds
Cash
Mutual Funds
5%5% Hard Assets
ANDY & SARAH’S FINANCIAL PLAN CHALLENGES

1. Educating them about emotional

biases.

2. Minimizing potential sequence

risk.

3. Managing their expectations for

retirement.

4. Updating allocation to better meet

their goals and needs.
ANDY & SARAH’S RETIREMENT INCOME STRATEGY

Rental
Income

$35,000
+ Social
Security

$45,000
+ Portfolio

$27,680
= $
Total
Income
$107,680

Investment Portfolio Expenses ($98,000)

Andy’s Retire. $550K Stocks & Bonds @ 3.2%1 $17,600
Surplus $9,680
Sarah’s Retire. $208K Stocks & Bonds @ 3.2%2 $6,656
Joint/ROS Acct $107K Stocks & Bonds @ 3.2%3 $3,424
PMs and Cash $95K

1,2 & 3: Yields are for current portfolio yields as of 4/30/18. Please see disclosures at the end of this presentation for security risks.
 GOAL BASED RECOMMENDATIONS
FOR ANDY & SARAH

Personal Biases Sequence Risk

• Loss aversion: refusing to sell certain
• Big concern given their high exposure
investments based on fear of loss
to riskier asset classes and the potential
impact of personal bias
• Confirmation bias: following people of
influence that only affirm personal views

Being Mentally Prepared

for Retirement
• Feeling “unprepared” is completely
normal
• Begin thinking of retirement as a
“transition to a new chapter.”
Reallocating Investments
• Getting them to understand how
personal bias can influences
counterproductive decision making
• Rebalance portfolio to reduce
concentration and overall risk
 Disclosures:
1. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values
will decline as interest rates rise and bonds are subject to availability and change in price.

2. The payment of dividend is not guaranteed. Companies may reduce or eliminate the
payment of dividends at any given time.

3. The information in this material is not intended as tax or legal advice. Please consult legal
or tax professionals for specific information regarding your individual situation.

Financial Sense Advisors, Inc.

Registered Investment Advisor
Financial Sense® Advisors, Inc.
Registered Investment Advisor

If you have any specific questions or comments, please give us a call at

(858) 487-3939
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