03/11/2013 04:00 pm ET Updated May 11, 2013

What March Madness Can Teach You About Retirement Saving

This month, millions of Americans will spend hours filling out and monitoring their NCAA Men's Basketball Tournament brackets. If they paid the same attention to their retirement planning, perhaps the country's savings programs would be in better shape.

No matter though, because while you are deciding which 12-seed could pull a first-round upset, and which mid-major school will be this year's darling, March Madness could also teach you a thing or two about retirement saving.

Specifically, here are five things March Madness can teach you about retirement saving:

  1. Upsets happen when you least expect them. Last year two 15-seeds knocked off number two seeds in the first round. Who saw that coming? Similarly, at the end of the 1990s, who foresaw that the stock market would essentially go sideways for the next dozen years? Or five years ago, who foresaw that savings account interest rates would be down to a fraction of 1 percent? Any retirement plan has to be built around the realization that no historical pattern or conventional wisdom is a sure thing.
  2. Longshots make bad bets. As noted above, upsets do happen, but they happen infrequently and unexpectedly. Betting a long-shot to make up for lost ground is a low-percentage play that will most likely just get you deeper in a hole.
  3. Winning teams generally have multiple go-to options. There have been numerous teams that have made impressive tournament runs on the back of a single, transcendent star, a la BYU with Jimmer Fredette a couple years ago. However, while those one-man bands often shine on the tournament's first weekend, they don't often make it out of the second weekend. Like a well-balanced team, a diversified investment portfolio will give you the most consistent performance over the long haul.
  4. The best coaches adapt to changing situations. It's good to approach retirement saving with a long-term plan, but you also have to be flexible enough to adapt to circumstances as they change. Think of Mike Krzyzewski. He got to be the winningest coach in NCAA Men's Division I basketball history by fitting his system to the different talent available from year to year, and by adjusting to different opponents and game situations within the season. Over the course of your retirement savings program, you'll also encounter a variety of situations: bull markets, bear markets, windfalls and unexpected emergencies. Like a good coach, you need to figure out how to get into a winning position under each new set of circumstances.
  5. You often don't know where you stand till you get to the end. Sometimes, you fill out your bracket and everything goes great on the first weekend of the tournament -- and then three of your semi-finalists get knocked out in the Sweet Sixteen. Other times, you start out shaky but then start racking up points in the later rounds. As with the NCAA Tournament, there are several stages to retirement saving, and it doesn't pay to get too complacent -- or too frustrated -- in the early going.
Retirement saving isn't a game, but game theory does come into it. Americans probably gain more practical experience with game theory from NCAA Tournament brackets than from anything else, so during the next TV timeout, perhaps think about how to apply what you've learned to your retirement planning.