The Financial Price of Forgetting Bad Times

via Wall Street Journal

How well do you remember the last financial crisis? Can you clearly recall what happened to your finances?

Most people are pretty confident in the accuracy of their memories. Unfortunately, decades of research suggest their confidence is likely misplaced. And that overconfidence can cost them, especially as they age.

The human brain isn’t like a computer hard drive; rather, it is full of quirks and blind spots, which can make it difficult for investors to remember exactly how much the S&P 500 lost between 2007 and 2009. (Answer: the S&P lost more than 50% of its value.) These blind spots can have serious consequences, leading people to take far more risk than they can actually afford.

New research suggests that the distortions and gaps in our memory change as we get older. While most people assume that our memory simply gets worse over time, the reality is more subtle and complicated. Older adults have more experience, and perhaps the benefit of perspective, but they also have to deal with specific biases that influence the details of what they remember.

Read the full article here

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About thebenefitblog

Eric is a Producer at Lockton Insurance Brokers, Inc., the world’s largest privately held commercial broker. Eric has over 23 years of experience in the insurance industry and has spent the last 11 years with Lockton. Eric specializes in Health & Welfare Benefits, Retirement Planning, and Executive Benefits. Eric's clients utilize his expertise in the areas of Plan Due Diligence, Transaction Structure, Fiduciary Oversight, Investment Design, Compliance and Vendor negotiation to improve the operational & financial outcome for each client. The Benefit Blog is a place to share that expertise and industry news.
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