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Stop Trying To Optimize Your Retirement Plan

In January of this year, I traveled for thirteen days. Outside of traveling, my calendar shows day after day packed with client meetings, planning, and online meetups for our Rock Retirement Club. My calendar runs like a well-oiled machine.

Until it doesn’t.

I pinched a nerve towards the end of the month and found myself unable to look up at a computer monitor without horrible pain. Suddenly my finely-tuned, productive calendar wasn’t an asset; it was a burden as I muddled through meetings and hosted an online meetup with 100s while clutching at my aching neck.

In my quest for optimization, I left no slack in the system—no room for error when something unexpected happened. And I know better—something unexpected always happens!

The Myth of Retirement Optimization

There’s an attraction to optimizing strategies. The American Heritage Dictionary defines Optimize as making as perfect or effective as possible. Why wouldn’t you want your retirement plan to be as perfect or effective as possible?? Focusing on optimizing your retirement provides a respite from the lingering fear about retirement. Fine-tuning your Social Security claiming strategy, even if it’s ten years away, helps you not think about losing that income that has paid for your life. Or creating the mother of all Roth conversion spreadsheets can give you cover from addressing what you’re going to do with the rest of your life without the structure of work to guide you.

There are plenty of articles, videos, blogs, and podcasts teeing up retirement optimization distractions. Tactical planning is cool. Fall down this rabbit hole of tactical planning, and you can build a plan so complicated, so optimized that understanding would take an expert, and managing it over time, is near impossible.

What’s the problem with that?

Like my calendar, a retirement plan can get so optimized that a little unforeseen wrench—a change in the tax code, a jump in inflation, a health event, or simply changing your goals—can send it tumbling down around your ears. So I ask you to stop. Stop running on the hamster wheel of retirement optimization. It doesn’t take a 100-page retirement plan full of intricate investment strategies to create a great life and a great retirement.

Here’s what I encourage you to focus on instead.

Organize Your Thinking.

One of my favorite things to do on my podcast, The Retirement Answer Man, is answer real-life listener questions. And the chances are that you’re likely to hear me start an answer with, “First, you’ll need to organize your thinking on any given week. What are you trying to accomplish?” Make sure that you build your retirement on the vision you want for your life. Start with determining your needs, wants, and wishes for your unique retirement.

Pick Assumptions (and Stick with Them)

Ever weigh yourself at home and then get a surprise when you step on the scale at the doctor’s office? Most scales don’t run exactly the same, just like most retirement calculators will not run the same assumptions for inflation, investment returns, and other planning numbers. Because we can’t predict the future, none of the numbers will be exactly perfect anyway. The important thing is to pick your assumptions and stick with them so that you can observe trends over time.

Stay Agile.

A good retirement plan is not something you create once and leave set in stone forever. Your plan should course-correct as life unfolds. If you’re checking in regularly on your plan and making minor adjustments along the way, optimization will be a natural byproduct of making better decisions over time. Keep your plan simple enough to allow flexibility and adjustment; don’t let it grow so convoluted that you have a hard time turning when the winds change.

Add Slack

I recently finished Antifragile: Things That Gain from Disorder by Nassim Taleb. One of the ideas that really stuck with me was the importance of having slack in a plan because too much optimization can create fragility. We get very caught up in the idea of making the most out of everything in our lives, particularly money. We tell ourselves not to leave cash sitting in the bank, earning 0% interest. Remember that we can get a return from having slack in the system; cash reserves help cushion some of the unexpected blows to retirement, like inflation spikes or down markets. Build some margin into your retirement plan so that you can absorb shocks instead of becoming brittle and having your plan break down.

Enjoy Your Life!

With endless information can come a never-ending quest to get your plan perfected. Kevin Lyles, Head of Education in Rock Retirement Club, emphasizes that we not let the perfect be the enemy of the good. Create your plan, check in on it regularly, and let that be good enough. Don’t get so caught up in optimizing your retirement plan that you lose focus on why you’re making a plan in the first place—so that you can enjoy your life!

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