Regret Risk – How much do you have?

We often hear about investment risk, longevity risk, sequencing risk and inflation risk. All of these are important. But I believe there is another risk that also deserves some attention: regret risk.

My definition of regret risk is this: Waking up at 85, perhaps after a significant health event, and realising you have more money than you could ever spend but regretting that you didn’t enjoy more of it when you had the health and ability to do the things that mattered to you.

One of the most important roles we have as advisers is not simply managing investment risk. It’s helping people understand how much they have, how much they can comfortably spend, and what their money can enable them to do.

I often see retirees feel guilty about spending once the regular employment income stops coming in. But think about what got you there. You worked hard. You got up early. You turned up to work, day after day. You made sacrifices and saved for the future.

At some point, the goal needs to shift from accumulating wealth to enjoying the wealth you’ve accumulated.

Of course, it’s important to make sure your money lasts. But financial planning shouldn’t just be about avoiding running out of money. It should also be about avoiding running out of time and good health before you’ve had the chance to enjoy it.

So perhaps one of the most important questions to ask in retirement planning is: “What do I want to do while I’m healthy enough to do it  and can my financial position support it?”

Don’t let the fear of spending become the reason you miss the experiences you worked so hard to afford.

By Nick Wall, Senior Financial Adviser at Smart Financial