Overconfidence Bias:- Overestimation of One\’s Knowledge or Abilities

Overconfidence Bias:- Overestimation of One\'s Knowledge or Abilities Overconfidence bias refers to the psychological effect where one overestimates his or her ability to predict outcomes or even his or her level of expertise in a given area. In retirement planning, overconfidence can cause excessive risk-taking or even poor investment choices, given that individuals may believe that they can \"time\" the market or pick winning stocks. This can then lead to underperforming portfolios that fail to meet retirement objectives. How to Combat Overconfidence:- • Seek Professional Advice: It can be countered by consulting with a financial advisor. A financial advisor can provide objective recommendations based on data and help set expectations for risk and return. • Use a systematic investment strategy. Instead of trying to pick individual stocks or time the market, focus on a disciplined investment strategy based on your long-term goals and risk tolerance. A good example is dollar-cost averaging; you invest a fixed amount regularly, irrespective of the market conditions, which goes a long way in reducing impulsive decisions. d. Mental Accounting:- Separate Treatment of Retirement Funds Mental accounting is the practice of treating different sources of money or investment accounts as being different even though they are fungible. This