I went to make a cup of tea the other night and experienced a problem: I had choice paralysis. I could not make up my mind because I had too much damn choices. Since I’ve bought a few loose tea sampler packs I currently have over 35 types of tea in my house. Eventually just to get over the problem I picked out a category of tea and worked down from there.
Apparently my tea problem is bigger than I realized after watching this TED Talks video featuring Barry Schwartz discussing the paradox of choice. The video is about 19 minutes long, but well worth it is you have the time.
Barry points out this issue of choice paralysis is fairly damn common right now. Western society prides itself on freedom and generally assumes more choice means more freedom and the happier we all should be. Since after all if you have 175 salad dressings to choose from you should be able to find one that is perfect for you. Yet all this choice is having a few problems develop from it.
As I’ve already mentioned having too many choices can induce choice paralysis, it just gets hard to make up your mind without applying some kind of invented subsystem to reduce your choices. No wonder people develop brand loyalty…its just easier than choosing from the full range of options. A second side effect of too much choice, according to Barry it is easier to regret our choice. For example, if you pick the wrong tea or salad dressing it becomes easy to imagine you could have made a better choice. Why? With 175 options for salad dressing we develop an unreal expectation that we can find a perfect salad dressing, so anything less than perfect becomes disappointing (of course perfect doesn’t often exist).
Overall, I realized that this is the exact problem many people have with their retirements. We have too many damn options out there. We can semi-retire with paid part time employment, start our own company or work until we get full pension. Then we can retire where we currently live, change to the coast, or perhaps change countries during the winters. Then you pick your hobbies for retirement: hiking, camping, reading, photography (film or digital), make wine, make beer, fix up a house, sell a house, get a cabin…the options just go on and on. In fact if you add up all the 1000’s of choices people can make related to their retirement, the number of different retirements out there are in the billions. Oh my gods, no wonder it becomes hard for people to make any decisions related to retirement so they make odd statements like “I’m going to worry about this later” or “I’m going to work until I die.” Decision paralysis is damn easy when facing a huge set of options.
So what to do? Well Barry has a suggestion “The key to happiness is low expectations.” So by keeping your expectations lower you tend to avoid disappointment and end up being happier with your choices. With that in mind I’m going to suggest a few default assumptions to kick start your retirement planning, you can change them later on, but to avoid paralysis this gives you a default set of assumptions.
In your retirement you will:
- Take your employers matching money at work for retirement savings. Sign up now and take the most conservative investment option to get started on the free money. You can change your mind later.
- You will live in your current home, so pay off your mortgage before you retire. That way if you do sell and downsize you can do so with cash.
- You will think of what you love to do with your free time and write down the first five things that pop into your head. Those are your hobbies.
- You will assume your current spending level is the same in retirement. Just cut out the mortgage and job related costs.
- You will times that spending level times 25 and that is your retirement savings goal. Divide that by the number by the years until your retirement date (which by the way will be 60) and then by 12 months a year. This is what you should be saving a month. If you can’t afford it, reduce your spending now to free up the cash to start saving.
There you go, a default retirement plan in a box. Will it work, perhaps, but at least it gives you a starting point. After that you can visit each assumption by itself and make only one choice at a time. It gets easier that way. So do you suffer from retirement choice overload? How did you deal with it?