Analysis Paralysis-Is too much information giving you excuses?

[Gumby]

Something I learned long ago from driving submarines and running nuclear power plants - there will always be situations where a problem arises, the information you have is vague, incomplete and/or ambiguous, and you have to make a choice as to what action to take next. Failing to make any choice is, in itself, a choice to accept the status quo. But given that you have a problem, that won't work. So what do you do?

First, review the information you have and don't have. Think about whether there is an alternative way to get necessary information. Identify your options for potential next steps. Choose one. Figure out how you will know if that action has the desired effect and when you will know it. Make a plan about what you will do next if your first action does not solve the problem. Repeat that thought process a few iterations. Then ACT. Observe the system response carefully and keep going down the list as necessary. Needless to say, in some situations you have a very short time to complete this thought process and start acting, or you and others are likely to die.

Fortunately, choosing whether to retire is not nearly so dire. But the process is similar - choose a path, measure the results, change course as necessary.

 

[OK EE]

I've had my retirement date set for a few years. Due to overperformance of the market in the last 3 years I might have overshot a little bit. I could have probably retired last year but will be retiring in 8 months. I don't have to keep rerunning the numbers because I know they work. I have some buffer which we will use to build a second home, something I wouldn't do if I just hit my exact budget number.

I find that the planning app I use now provides less utility than it used to and will probably stop using it at some point. It's not providing any additional data other than "yep, you're good".

Even a 30% market drop wouldn't really screw up our plan except for some belt tightening, but nothing that would force a return to the labor force. If that doesn't happen, there are always ways to spend more money.

 

[Lorenzo]

A thought occurred to me that overlaps with another popular topic here, financial advisors. I think it's a rhetorical question, but if you consulted with a FA about retirement, would the FA be paralyzed by analysis or would the FA do as good a job as they could within the time/fee allotted? And would their get-it-done approach be a good thing or a bad thing? Many of us here have educated ourselves to at least the level of a FA of average competency. Some here have gone well beyond that and become quite sophisticated investors, but is that level necessary to achieving your goals? And we have the added benefit of being ready to adjust our plan at any time (along the lines of what Gumby said above).

 

[Diogenes]

Something I learned long ago from driving submarines and running nuclear power plants - there will always be situations where a problem arises, the information you have is vague, incomplete and/or ambiguous, and you have to make a choice as to what action to take next. Failing to make any choice is, in itself, a choice to accept the status quo. ...

In such cases, it's often too risky or dire to passively accept the status quo. You have to do something - that something may be thoroughly analyzed or impulsive, but it has to be done.

With many personal or lifestyle decisions, deliberately doing nothing, is perfectly acceptable. Smith doesn't have to retire. He can do OMY again and again, dying on the job at age 85. Nothing dire happens. Nothing devastating. Sure, his quality of life is likely diminished, but maybe that detriment is acceptable. Jones doesn't have to buy a house. He can keep renting, perhaps forever. Sure, being a renter is less prestigious than owning, but maybe that's OK.

This is often why the most trivial decisions paralyze us the most. In contrast, if a family member is in a coma and you need to make a life-altering medical decision, likely you won't waffle. A bit of deliberation, maybe getting a second opinion, and then boom! ... one decides, for better or worse. You have to decide what to do about an alarm in the submarine. Not-deciding, or even delaying too long, might get people killed.

Some trivial decisions are so inconsequential, that we're OK with deciding almost at random. Coke or Pepsi? Who cares? Just pick one! But... should I buy a house, or not? Nobody dies if I make the wrong decision, or no decision at all. But neither can I just toss the can of Pepsi, if it turns out that Coke is tastier.

Where some of us struggle (or struggled) with early retirement, is that we lucked into jobs well beyond our station. We got over-promoted, or found an inimitable plum niche. Give that up, and there's no going back. Maybe a fellow lives in a dying town, but scored a job with the only major employer in town in the 1980s. Retire from that, and there's no possibility of a second job. None. Is our hero absolutely sure that he's done working? OMY is so much easier as the default choice.

Returning to my house-buying dilemma, it's just so much easier to keep paying literal pennies on the dollar as a renter. Sure, it's confining and limiting, in some cases even debilitating. But can one justify the extra expense of ownership? It feels like flying in a private jet - witness that fun thread on that subject. Can you justify flying private? Can you justify buying a house? I can justify just sitting there and chewing the cud. Have been, for years. Probably will, for years to come. Fortunately, I'm not commanding a submarine.

 

[Gumby]

You raise many interesting and valid points. My only response can be that life is a participatory sport. We don't have the luxury of sitting in the bleachers as we watch it pass us by. We are on the field and must play the game as it unfolds.

 

[NW-Bound]

Last week, my wife attended the funeral of a younger acquaintance. She died at 65 of cancer. They were fairly well-off, having three houses in three distant locations. I was told she often talked of living her retirement in Hawaii. Yet, she could not find time off-work to visit the islands just once, because her time off-work was spent visiting her adult children off-state.

We know plenty of relatives and acquaintances who died of diseases before accomplishing some simple wishes because they wanted to work "just one more year". I guess it did not matter in the end, as when they were dying, they might not remember what they planned to do, and were simply sorry that they were dying. Death is sad. Nothing else matters.

 

[tulak]

"If you choose not to decide, you still have made a choice" - Rush

 

[Diogenes]

We know plenty of relatives and acquaintances who died of diseases before accomplishing some simple wishes because they wanted to work "just one more year".

This is incontrovertibly sad, but one has to ask: if a person has clearly conceived desires and dreams, why not actualize them? Is it really necessary to retire first? Maybe one could prioritize these pursuits while still working, perhaps by deliberately reducing how much one attends to one's career. Take leave without pay if necessary, to go on that exotic vacation. Barring that, sounds like a strong signal to go ahead and retire. If hopes-and-dreams are piling up, why are we still working?

The opposite scenario, is when a person really has no particular dreams or desires. Everything is just banal and bland, or sour grapes. Fear of failure, fear of risk. Jadedness. Disbelief that one's dreams are worthwhile and worth pursuing. One keeps working, not from love of work or need for money, but from lack of imagination. I think that this is sadder than the person who wishes to see the Pyramids, or climb Mt. Everest, or go hang-gliding etc., but instead dies at his desk, without having made that trip. It's sad because we have effectively retired from life, whether or not, we've retired from work.

 

[FD1000]

It’s not really that complicated if you understand a few basic principles:

• Your savings should ideally be about 25 times your annual spending (excluding Social Security before retirement) if you want it to last around 30 years.
• Annual withdrawals should generally stay around 4%, and don't increase withdrawals for inflation.

The problem is that most people don’t have that amount of money. The future is uncertain, and retirement can feel intimidating.

The reality is that many people can still retire successfully with only 15–20 times their annual expenses. The issue is that most retirement articles focus on broad rules but spend far less time explaining how to improve risk-adjusted returns and manage SORR (Sequence of Returns Risk). In my view, simply chasing income is not the answer and never has been.

 

[NW-Bound]

Sometimes You Win by Chic

Take a little chance
It don't mean a thing
Sometimes you win, sometimes you lose
Take a little chance
It don't mean a thing
Sometimes you win, sometimes you lose
...
Here you come with that smile upon your face
I assume that even time cannot erase
Confidence is the most important thing you need
To look inside yourself, you can succeed
All the time, you better watch out for the trap
Be careful or first time out, you might roll crap
One mistake and life comes tumblin' down
All around, like galloping dominoes, that's how it goes

 

[Diogenes]

Since we're posting expressive song lyrics now, here's my favorite:

O Fortuna
velut luna
statu variabilis,
semper crescis
aut decrescis;
vita detestabilis
nunc obdurat
et tunc curat
ludo mentis aciem,
egestatem,
potestatem
dissolvit ut glaciem.

... so much for the 4% SWR.

 

[Gumby]

Since we're posting expressive song lyrics now, here's my favorite:

O Fortuna
velut luna
statu variabilis,
semper crescis
aut decrescis;
vita detestabilis
nunc obdurat
et tunc curat
ludo mentis aciem,
egestatem,
potestatem
dissolvit ut glaciem.

... so much for the 4% SWR.

Is that you, Carl?

 

[NW-Bound]

Never heard of this song, so I had to look it up.

 

[TripleLindy]

While I didn’t struggle with the decision to retire, probably because I had a very short period to make a decision, I know I would struggle with portfolio management and it’s why I’m very happy to have Vanguard doing it for me. And no need for the ridicule - I know I could do it myself.

 

[Lorenzo]

While I didn’t struggle with the decision to retire, probably because I had a very short period to make a decision, I know I would struggle with portfolio management and it’s why I’m very happy to have Vanguard doing it for me. And no need for the ridicule - I know I could do it myself.

Was your perception that you would struggle with portfolio management related to analysis paralysis?

 

[Diogenes]

Never heard of this song, so I had to look it up.

Yes, Carl Orff set it to music (in a particularly fraught time!), but the origin, as far as I know, is from Medieval monks... who were the original early retirees.

 

[NW-Bound]

I did find out about the 13th century origin of the poem. I don't think ascetic monks are early retirees. Some work hard to support themselves. They don't have a nest egg like we do to contemplate, examine, and pamper.

 

[hmrambling]

I grew up with parents who believed that good enough really was good enough. If I said I was going to ride my bike 100 miles, they didn’t need to know the training plan, the average pace, or what it involved. They expected me to come back having done it. I could’ve been the slowest person out there, and they still would’ve been proud because I finished what I said I’d do.

Anytime I start dragging my feet, I remind myself: just get it done. Set a goal, stick to it, and don’t move the finish line.

 

[FD1000]

My parents had a somewhat different philosophy. They encouraged us to strive for excellence and to be among the best, at least in some areas of our lives.

I was quite surprised when I came to this country and saw situations where kids were ranked in competition from 1 to 10 out of 30. It was a very different approach from what I had experienced growing up, where the emphasis was often on competing for the top 3 positions. No one was mentioned beyond that.

 

[TheWizard]

My parents had a somewhat different philosophy. They encouraged us to strive for excellence and to be among the best, at least in some areas of our lives.

I was quite surprised when I came to this country and saw situations where kids were ranked in competition from 1 to 10 out of 30. It was a very different approach from what I had experienced growing up, where the emphasis was often on competing for the top 3 positions. No one was mentioned beyond that.

Here, they like to give out Participation Medals to everyone, I'm told...

 

[CindyBlue]

While I didn’t struggle with the decision to retire, probably because I had a very short period to make a decision, I know I would struggle with portfolio management and it’s why I’m very happy to have Vanguard doing it for me. And no need for the ridicule - I know I could do it myself.

Off topic, TripleLindy...but is that a discus thrower in your avatar?

 

[dickoncapecod]

One of the factors driving uncertainty: many folks reach retirement with a portfolio loaded with stocks, supplemented with a few low-yield traditional bond funds that are only there to stop them from being 100% in stocks. So they are forced to be serial sellers of assets to fund retired life. I'd be nervous too about such an uncertain future.
Regards, Dick

 

[TripleLindy]

Off topic, TripleLindy...but is that a discus thrower in your avatar?

Not at all! That’s a world class high diver who is the only person to ever execute the legendary Triple Lindy!

 

[Diogenes]

One of the factors driving uncertainty: many folks reach retirement with a portfolio loaded with stocks, supplemented with a few low-yield traditional bond funds that are only there to stop them from being 100% in stocks. So they are forced to be serial sellers of assets to fund retired life. I'd be nervous too about such an uncertain future.
Regards, Dick

Guilty as charged, except that I'm not making withdrawals. How would your analysis differ with investors with such portfolios, whose annual withdrawal rate is 0% or something negligible like 0.5%?

 

[CindyBlue]

Not at all! That’s a world class high diver who is the only person to ever execute the legendary Triple Lindy!

I'll have to look up a triple lindy!
That position she's in also looks so very much like a discus thrower about to throw!