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Retirement Reality Check: How ‘Satisficing’ Can Help You Stress Less
The stakes feel high in retirement planning. But getting the big things right is more important than sweating every little decision
Don’t put every retirement decision under a microscope. Getting the big things right often matters more than obsessing over the tiny details.
Kyle Ellingson
Key takeaways
- Saving consistently and following the basics of sound retirement planning may matter more than fine-tuning every financial decision.
- The concept of “satisficing” encourages choosing an option that is good enough rather than chasing a perfect outcome.
- Applying satisficing to retirement issues, such as how much to save and how to invest those savings, can reduce stress and leave more room to enjoy life.
“Am I doing this right? I want to do everything right. I just don’t want to mess this up.”
I was at my husband’s college homecoming a few years ago, and one of his classmates — I’ll call her Marcia — pulled me aside for a quick chat about her retirement strategy. She was clasping her hands as we chatted, squeezing them together so tightly her fingers were turning white.
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“Take a deep breath,” I said, “and tell me what you’re doing.”
As we talked, it became clear that Marcia was absolutely on the right track. She had been saving consistently for decades, steering more than 12 percent of her income into a retirement plan with an investment mix that was appropriate for her age. She wasn’t “messing up” at all.
But she was putting every decision — what to spend, how much to save, where to invest — under a microscope, both before she’d made it and after. It was causing her massive amounts of stress, and the time and energy she devoted to thinking about her finances seemed to be sapping her ability to enjoy her hobbies and her friends.
One of the things that makes planning for retirement so fraught for so many people is that the stakes feel so high. Do it right, the thinking goes, and you’ll glide through your golden years without a care, like a TV-commercial couple walking on a beach at sunset. Do it wrong and you’ll find yourself living in a one-room efficiency, unable to afford even the smallest luxury.
Let’s not kid ourselves — the stakes are pretty high. You want to set yourself up for a secure and comfortable retirement. But that doesn’t mean every decision is make-or-break. Preparing for retirement isn’t like taking a test in school. You won’t be graded on every choice you make along the way, and you will have many opportunities to course-correct as you continue.
When ‘good enough’ is good enough
Unfortunately, many of us do feel like we’re going to be graded and that every bad grade will come back to haunt us. Clearly Marcia did. Her worries about tomorrow, about doing “everything right,” were making it harder for her to enjoy how she was spending her time and money today. That’s when I taught her a new word for an approach I find enormously helpful when I’m making decisions: satisficing.
Though it was new to Marcia, the word has been around for a while. It was coined in the mid-1950s by the psychologist and social scientist Herbert Simon, who went on to win a Nobel Prize in economics. He combined satisfy and suffice into one word to describe decision-making that produces a result that might not be the best possible outcome but is good enough given limited resources (like time, money or information). Basically, it’s a way to make decisions more quickly and with less effort.
As I explained the concept, Marcia looked taken aback. “You mean I should settle for something that isn’t right?” she asked.
“No, not exactly,” I said. “It’s just that you can’t actually know, for some time, if any of the decisions today are going to be exactly right.”
I recalled that earlier in the conversation, she’d asked exactly how much of her portfolio should be in stocks. A standard rule of thumb is to subtract your age from 100 and allocate about that percentage of your investments to stocks (though that can fluctuate depending on your tolerance and capacity for risk).
“I don’t know if the right answer is 48 percent, 50 percent or 52 percent, and we won’t know for many years which one of those would be better,” I told Marcia. “But I do know that something around 50 percent is a good amount to have for someone your age. So instead of spending a huge amount of time and energy trying to figure out the exact number, we can say that 50 percent is good enough.”
It’s not origami
Marcia looked unconvinced. I tried again.
“Here’s another way to think about it. You’ve heard of the 80/20 rule, right? Basically, you can get 80 percent of something done with 20 percent of the effort, but the last 20 percent of the job takes 80 percent of the effort. In other words, doing something pretty well is easy, and doing something extremely well is hard.”
“Yeah, sure,” she said. “I do that all the time when I’m folding laundry. It doesn’t need to be perfect; it just needs to go in the drawer and not be wrinkled.”
“Exactly!” I said. “Not wrinkled is satisficing — that’s good enough. But you aren’t turning your clothes into perfect squares using origami folds, even though that might be optimal in terms of getting your clothes to fit neatly into your drawers.”
She laughed. “Those videos on Instagram make it look really easy, but I know it would take me twice as long.” She paused. “So you’re telling me that I’m fussing too much and turning every decision about retirement into an origami project?”
“Pretty much,” I said. “Focus on the big picture and make sure you are getting the big things right.” Which she was. Standard financial advice is to save 10 to 15 percent of your income for retirement throughout your working life, and Marcia was on the money there. Given how much was already in her plan, she could probably even afford to save a little less. “But you’re building a cushion,” I added. “You really don’t need to overthink it.”
Marcia grinned. “So if I decide to save a little less next year and go on that trip we were talking about, it wouldn’t be the end of the world?”
“Exactly,” I said. “You’ve also got a good mix of stocks and bonds — anything between 45 and 55 percent in stocks is good for your age. And you’re rebalancing your portfolio every year. It doesn’t have to be more complicated than that.”
We talked a bit more, about our kids and careers, then headed back over to the bar. I thought about ordering the fancy signature drink they were advertising but decided to get a glass of white wine instead. There were still a lot of people I wanted to talk to, and it would take a lot less time for the bartender to pour a glass of wine than to mix a complicated cocktail. The wine was good enough.
The key takeaways were created with the assistance of generative AI. An AARP editor reviewed and refined the content for accuracy and clarity.
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