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invest_for_retirement(MCT)—After stocks leaped forward in 2013, the hangover in the early going of 2014, not surprisingly, took a toll on retirement savers’ risk tolerance.

The Retirement Advisor Confidence Index, a monthly poll of wealth managers, fell 4.2 points, to 52.5, in February, one of the steepest drops since Financial Planning magazine began tracking the measure.

Clients on the whole pulled money from stocks and bonds to put into cash accounts, and they cut back on retirement planning services and retirement-oriented investment products, according to the magazine. Still, readings in excess of 50 are considered expansionary.

Investors notoriously buy and sell at precisely the wrong time. But when they get near or into retirement, something even more alarming seems to occur, according to research in behavioral finance.

The aging process can derail clients’ original investment intentions, making their portfolios vulnerable to a counterintuitive mix of overconfidence and loss aversion, according to a new paper in the Retirement Management Journal.

“People change as they get older, and I wanted to investigate how aging changes the way people manage money and work with an adviser,” says Helen Simon, a financial adviser who also teaches classes on investments and risk management at Florida International University.

Simon will receive an award from the Retirement Income Industry Association, a trade group of financial service and annuity providers, for a paper she wrote for the journal on how better to cater to the specific needs of clients in or near retirement.

On that front, she says, there is ample room for improvement.

Advisers and clients alike often fail to bring up key issues that will affect the clients’ financial futures or focus too heavily on the wrong issues, she said.

Many retirees take lump-sum pension buyouts because they think they can manage the money to better returns than could be had with an annuity and out of fear of giving up control over the money to an insurance company, she said.

“Marketers play havoc with this behavioral flaw, encouraging retirees to take their lump sums and do it themselves; similar to the scenario of lottery winners, who overwhelmingly take the lump sum only to end up broke and often in debt,” Simon writes in her paper.

In an interview, she said she understands how paralyzing all the retirement investing choices can be.

“I’m 57 myself now, and all of my friends are going through this stage of life. I kept feeling that if I’m perplexed about all this, how do they feel?” she said.

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