One of the wonderful things about living in modern times is that we all have more choices available to us than our recent ancestors could even dream of. From the orange juice aisle to your company’s 401(k) plan, it’s possible to choose the exact product that will fit our needs.
Except that’s not what happens. According to Barry Schwartz, author of The Paradox of Choice, having a huge array of options available is overwhelming and leads to decision paralysis. Instead of finding the exact right option, most individuals will retreat into a state of inaction and either do nothing or do whatever is easiest. In the case of orange juice, no harm, no foul. But if you experience choice paralysis when it comes to your retirement savings, it can really hurt you. So what can you do when the number of choices is greater than the amount of patience you have?
To know what to do, it’s important to understand why having hundreds of plan choices is so overwhelming. Apparently, having so many options available taxes the decision making processes of our brains, and we shut down. This even happens with educated and sophisticated investors. The problem is the belief that there is a perfect choice available somewhere, and that it is up to us to find that perfect choice. But that belief gets in the way of making a “good enough” decision—which is much better than waiting.
Why would you make a good enough choice rather than the perfect one? Well, first of all, it’s important to remember that there is no such thing as a perfect option. No matter how much research you do and time you invest (which to be honest, most won’t bother), your investment choice can never guarantee the exact results you want. So rather than become paralyzed trying to decide exactly what you want, recognize that any choice you make is better than no choice at all.
The next step necessary for fighting the paralysis is limiting your options yourself. Once the field of choices is reduced, you won’t feel nearly as overwhelmed by the thought of the research necessary to decide among a handful of options, for example. And by a handful, it’s really important to limit the options you choose from to six or fewer. Any more than that, and the choice paralysis sets in again.
Ultimately, the problem of choice paralysis is overcome by making a choice—and sticking to it! While it is certainly possible (and often beneficial) to revisit your retirement choices on occasion, it’s also important to let go of the decision once you’ve made it. Those individuals who continually second-guess their decisions are more likely to feel the choice paralysis prior to a decision. Let go of the sense that you have to make the best possible choice, and recognize that settling for something that will work for your needs will be better than waiting for perfection. A good choice is better than the paralysis that comes from trying to find the best choice.
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