Try to Be Satisfied

ONE OF MY FAVORITE books is The Paradox of Choice by Barry Schwartz. Its subtitle is Why More Is Less: How the Culture of Abundance Robs Us of Satisfaction. The principles that the book discusses have important implications for how we manage our money.

Schwartz distinguishes between “maximizers” and “satisficers.” A maximizer is someone who needs to be assured that he or she is making the best decision possible. By contrast, a satisficer can feel settled with a decision that’s good enough, and doesn’t spend time worrying whether a better alternative might have been missed.

I imagine everyone lives on a spectrum somewhere between pure maximizer and pure satisficer. By temperament, I tend to be a maximizer. Still, I’ve been working on becoming more of a satisficer.

What are the downsides of being a maximizer? Maximizers enjoy positive events less than satisficers and don’t handle it as well when negative things occur. When something bad—like a financial setback—happens to maximizers, their sense of well-being takes longer to recover. Maximizers ruminate more than satisficers. They experience more feelings of regret. In general, maximizers tend to be less happy than satisficers.

I think those of us who take in a lot of financial information can find ourselves nudged toward the maximizer end of the spectrum. How often have you read a financial article and afterwards had an uneasy feeling that maybe you don’t have the optimal mix of stocks and bonds, or that you lack the appropriate exposure to international markets, or that you have too much cash in your portfolio?

There are many areas of my financial life where it isn’t clear that I’ve made the best decision—if maximizing wealth is the ultimate goal. Indeed, some choices I’ve made have clearly reduced my net worth. To be a good satisficer, I need to feel comfortable with these decisions. Here are some examples of financial decisions I’ve made that have resulted in wealth not being maximized:

Pension choices. In the middle of my career, I had to decide whether to stay with my traditional pension or move to a cash balance plan. Using the best information available to me at the time, I selected the cash balance option. Years after I locked in my decision, changes were made to the cash balance formula that made it less lucrative. I had no way of knowing that would happen when I made my initial choice.

When I retired last year, I had the option of taking a cash lump sum or receiving a monthly payment for life. Again, I made what appeared to be the best choice at the time: I took the monthly payments with a 100% survivor option. The amount of the monthly payment is clearly less than what I would have received had I stayed with the traditional pension formula initially.

Whether the monthly payment option was the right choice for my cash balance pension remains to be seen. If my wife and I both die younger than expected, it would have been better—in hindsight—to have taken the lump sum. Being dead, we wouldn’t care, but our heirs might.

Retirement savings. I’ve discussed before that I didn’t contribute much to my 401(k) early in my career and that I didn’t invest aggressively. I certainly didn’t maximize my 401(k) account’s growth potential. Still, the percentage of my financial wealth in tax-deferred savings is uncomfortably high. The tax implications of managing that account are thorny enough already. Had I maximized my 401(k) over my entire career, Uncle Sam might have ended up being a major beneficiary of my frugality.

Charitable giving. I’ve shared previously how charitable giving is a priority for my wife and me. In fact, we’ve given away more money over the years than I contributed to my 401(k). Had maximizing wealth been our objective, this would’ve been quite counterproductive.

But here’s the thing: For us, our ultimate goal is to be good stewards of the wealth entrusted to us, not necessarily to maximize it. Money has deep spiritual implications for our lives. We follow someone who said you cannot serve both God and money. Giving money away is the best way we’ve found to avoid serving it.

Social Security. The decision of when to start receiving Social Security benefits still lies ahead for my wife and me. There are varying philosophies regarding when you should begin. The conventional advice is for the family’s main breadwinner to defer taking Social Security until age 70 if possible.

Still, when I input our specific information into an online calculator, the recommended commencement age for me was computed to be just under age 63. I’m sure we won’t make the optimal decision, whatever that might be for us. Still, I don’t plan on agonizing over it or feeling regret. Without foreknowledge of one’s date of death, it’s impossible to know whether you’re making the “best” choice.

I’m satisfied with our retirement savings. I don’t want to feel compelled to maximize the balance. Given that my wife and I appear to be on track for a financially successful retirement, gratitude seems more appropriate than rumination and regret.

Ken Cutler lives in Lancaster, Pennsylvania, and has worked as an electrical engineer in the nuclear power industry for more than 38 years. There, he has become an informal financial advisor for many of his coworkers. Ken is involved in his church, enjoys traveling and hiking with his wife Lisa, is a shortwave radio hobbyist, and has a soft spot for cats and dogs. Follow Ken on X @Nuke_Ken and check out his earlier articles.

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