Mental accounting
‘Tendency to separate money based on its source or the intention’
Put simply, we have a tendency to view money in silos based on its source or what we plan to use it for. This can have a number of implications in retirement planning. For example, people may not consider other assets, such as the family home, as a potential source of income in retirement.
action
To help make sure assets aren’t missed, it may be better to prompt from a list rather than ask a general question.
Other sources of income could include an anticipated inheritance, second property or buy to let, salary or income (if continuing to work in some capacity) and the family home. Unorthodox sources may include rent from children home after Uni (called ‘boomerang kids’)!
And of course state pensions and other savings and investments.