Understanding Behavioral Finance Behavioral finance draws on psychology, economics, and finance to u

Understanding Behavioral Finance Behavioral finance draws on psychology, economics, and finance to understand how human beings make financial decisions. Unlike traditional finance that assumes people are rational agents always maximizing utility, this behavioral finance recognizes that many human behaviors are irrational in the sense that they\'re often influenced by emotions and cognitive biases and social forces. In retirement planning, this understanding of psychological influences might help avoid common pitfalls that people fall into, including procrastination, overconfidence, and loss aversion. 2. Most Behavioral Biases for Retirement Planning Such biases in behavior affect retirement planning by providing a suboptimal finance decision. By recognizing the biases, as well as undertaking steps to combat them, individuals can improve their retirement savings and investment strategies. a. Present Bias:-The Preference for Current Gratification Present bias is the tendency of preferring present rewards over later rewards. It is the main problem in retirement planning. People prefer to spend the money now rather than putting it in the retirement fund. The psychological pull for present consumption leads to the delay in saving, an insufficient contribution to the retirem