Is a ‘Herd Mentality’ Damaging Feds’ Retirement Dreams?

If you “follow the herd” when investing, it can potentially lead you astray from reaching your retirement goals. The author explains how this can happen.

Many federal employees may be damaging their retirement plans by indiscriminately adopting the behavior of their colleagues. By adhering to the pack mentality, they could be neglecting their individual investment objectives.

We don’t all drive the same type of vehicles, live in identical neighborhoods or marry the same type of people. Why then, is it accepted, “everyone is doing it” is an appropriate mindset for retirement savings/allocating or planning? Would you believe good old-fashioned “peer pressure” (like in high school) may be at play here?

“Going along”, “running with the pack” and “group think” are all other ways to describe “Herd Mentality.”

According to Noam Shpancer Ph.D, (professor of psychology), in order to feel like we belong and to stay comfortable in our conformity, human beings rely on two types of social cues. In a group environment, we first look for informational cues (what’s going on), then normative cues (looking to the group to learn how to react). Dr. Schpancer also says, “We are often not even aware when we are conforming. It is our home base, our default mode.”

I imagine it is also part of our psyche to accept failing…provided we don’t fail more than our peers. Therefore, couldn’t it be argued, good old fashioned “group think” may be harming feds’ chances to pursue their retirement goals? Rather than taking a chance of underperforming the group, are federal employees blindly following the herd?

Most of us probably took our first alcoholic drink, smoked our first cigarette, had our first kiss or tipped our first cow because we wanted to look “cool” in front of our friends. We had a desire to be accepted by our peers and especially the “ring leader.”

Who is the retirement “Ring Leader” in your herd?

We tend to accept, and even depend on, advice from someone we know over the advice of a qualified authority. I know of people that seek financial advice from their mechanic and medical advice from their hair dresser! Why? Because they trust their mechanic and hair dresser. These people care about them and wouldn’t (intentionally) give them bad advice.

In virtually every federal office I know, there is always that one person that has “read up on” or “researched” the “right way” to invest. They then share the findings with their co-workers. The herd believes that this person has all of the answers, and “peer pressure” tenets states the herd follows the Shepherd.

Think about it for a moment. Who is this person in your office? Can you picture them? They are probably goodhearted and only want to help everyone make sound financial choices. Heck, they did all the legwork; all you have to do is follow their lead. Perhaps you would even feel a little guilty (or ignorant) if you didn’t take their advice.

Now do you know who I am talking about? It’s ok to grin. You just identified your herd’s unequivocal financial authority.

Avoiding the “Herd Mentality”

So, what could possibly be wrong with following the guidance and advice from someone you know and trust?

The thing missing from group-think mentality is that retirement is more of an individual undertaking than most issues. When it comes to developing an intelligent investment/retirement plan, “Herd Mentality” could fail most (if not all) of the herd.

Not everyone needs to reach the proverbial trough at the same intervals. Some of the herd may get fattened up while others become malnourished.

Good intentions, psychological motives, peer pressure and group think cannot change the fact that your needs now and during retirement are (and will be) different than that of the herd. Therefore, does it seem reasonable to manage individual TSP allocations on a consensus or peer pressure basis?

Pam (not her real name) is a 30+ year federal employee and is within 2 years of planned retirement.

Pam has been “going along” with the TSP advice of a co-worker for nearly 15 years. She and many of her co-workers have all allocated their TSP accounts virtually identically with the help of their TSP Sage.

Since Pam is nearing retirement she scheduled a Federal Retirement Readiness Review to see if all her bases are being covered. Pam was surprised to learn that she had been availing herself to less growth potential than would have been desired for her.

What Pam and “Pam’s Office Financial Guru” didn’t understand was that timing the markets can be very risky. Accurately and consistently predicting what is going to happen in the future and to the index funds inside the TSP would be the stuff of legends.

What is more likely to happen is 13th hour (after the fact) movements. This could allow for missing the upward market ticks and seizing much of the downward market losses, not a terribly desirable outcome.

In Pam’s case, there appeared to be a lot of panic induced moves over the years. Pam didn’t realize it, but her office ring leader was apparently a much more conservative investor than she was.

To me, understanding and adhering to an individual’s “Risk Tolerance” is a more reliable approach to investment allocating than following the herd.

Risk tolerance is a measure of an individual’s boundary for investment losses held in balance with their realistic growth needs. This measurement is unique for everyone. When a good balance is achieved, a fed may find themselves in an investment comfort zone, one that allows for the pursuit of desired gains while taking a strategic stance to mitigate exposure to traumatic losses.

Pam’s 15-year risk tolerance levels were basically monitored and directed by a co-worker that had a much lower tolerance for investment losses. For Pam, this meant an approach with a lower risk/lower return potential, but for many I can see this going the other direction as well.

Since her review, Pam has re-directed her TSP to better align with her risk tolerance. Based on the total scope of the review, it looks like Pam will be able to achieve her desired retirement date. She is also taking steps to pursue greater growth for both today and post retirement.   She has increased her retirement contributions and is taking a deliberately higher risk/return approach with a small portion of her retirement savings.

Desiring to be part of a group, feeling included and doing things together are understandable and part to the human condition. But, some things should be done without the groups assistance or participation.

Here are a few suggestions of things you may want to put on your “Non-Herd” list:

  • Honeymoons
  • Proctologist exams
  • Allocating your TSP (or other retirement savings accounts).

Some things should just be done for you, not for the herd!

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  Investing involves risks, including the loss of principal.  No strategy assures success or protects against loss. Silverlight Financial, Infinity Financial Services and its affiliates do not provide tax, legal or accounting advice. This material is not intended to provide, and should not be relied on for tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction. For a list of states in which I am registered to do business, please visit

About the Author

Randy Silvey is the published author of You FIRST, Federal Employees Retirement Guide, one of the bestselling books of its kind on Amazon and Kindle. For over 18 years, he’s been educating and guiding Feds in pursuing wealthier retirement lifestyles. Randy can be reached at 816-524-1515 or visit his website at Securities offered through Infinity Financial Services. Member FINRA/SIPC.