I know; you’re probably ready to come at me with a million reasons why my assertion in the title is emphatically untrue. But retirement planning is not the complicated problem that you imagine. No, no, retirement planning is complex.

What does that even mean? And why does it matter? We have to be careful about how we define our problems. If we don’t define them accurately, we can waste a lot of time and energy in our journey toward rocking retirement and cause unnecessary stress. Retirement planning can be stressful enough already!

What is a complicated problem?

Planning a successful retirement isn't as straightforward as laying track.

Above all, complicated problems are solvable with the proper rules (that’s not to say they are easily solvable). Let’s take the example of building a railroad from Kansas City to San Francisco. As we prepare for construction, we can identify challenges that will impact our project. We’ll need to overcome mountains, valleys, and soft desert sands; we’ll need to acquire sufficient material to build the line and the heavy equipment to put it in the right spot (not to mention a little TNT for tunneling). Oh, and don’t forget safety issues as we cross hundreds of roads, bore through mountains, and build across swiftly moving rivers. These challenges have been solved before by experts specializing in small facets of our intricate but solvable problem. We need to organize everything, create the master plan, and implement it. Once we’ve discovered solutions, we can repeat our process over and over. Need to add more tracks and extend the line to Los Angeles? No sweat. We know just what we need to do. Okay, we may be ignoring the challenge of regulatory and environmental permits here, but let’s save that for another day.

What is a complex problem?

Retirement planning is more like landing a plane on an aircraft carrier.

On the other hand, let’s look at a complex problem. Complex problems can’t be solved, just managed. Even then, managing the problem does not lead to a repeatable process. Let’s return to our transportation analogy. Complex problems are more like landing a plane on an aircraft carrier. Finding the carrier requires us to deal with unpredictable, dynamically interacting forces, like crosswinds, currents, and the movement of the carrier deck in uncertain seas, all of which make landing a fast-moving jet… well… complex. We can’t build an algorithm to get our plane safely on board in all situations. As pilots, we actively manage the plane, reacting to the unpredictable forces unfolding in real time to maintain safety.

Retirement is complex!

How is your retirement plan like an airplane zooming in on the carrier? Creating a financially secure, emotionally fulfilling retirement is a multidimensional problem with many actively changing variables. You have forces beyond your control that affect your retirement, including interest rates, market performance, inflation, taxes, and government policy. On top of that, add almost limitless internal variables. You have life circumstances, like getting divorced, having grandchildren, or developing an illness. You have cognitive biases that influence your decisions (don’t worry, we all do). Status quo bias keeps us from making changes because change is scary. Even a bad known is better than the unknown. Anchoring bias makes us give more weight to the first piece of information we have about a subject, even if it’s not entirely accurate. I could go on.

Finally—and perhaps most impactfully—your goals and desires will change. The airplane landing on the carrier has a single destination. You and I? We change our targets as our interests and preferences change. Our retirement plane could land on the carrier, a tropical island, or a major airport runway.

Years ago, a client bought a lake house, intending to live there for the rest of their days. We met again recently, and to my surprise, they mentioned they’d like to sell the house and see how that might influence their financial situation. Living on the lake is no longer important to them. Their retirement target is changing in a way we couldn’t have foreseen based on their previous wishes. Now, their plan needs to adjust accordingly.

To create a great life in retirement, we’ll need to accept that uncertainty is part of the equation.

Shift your focus from solutions to processes.

Focus on improving your decision-making process over finding the perfect investment product.

It’s tempting to look for solutions that treat retirement as a complicated versus a complex problem. I agree with Phil Stutz’s assessment that you will never be exonerated from pain, uncertainty, and the need to work. Those three things are part of the human condition. Yet you will find methods and products claiming they will keep you from all those things in your retirement. These claims fail to recognize that retirement is a complex challenge that can only be managed and not solved.

So, if that’s the case, what should you focus on? With so many variables out of your control, look at the factors you can control. Develop a sound process for decision-making and focus on improving the quality of your choices. At first, embracing this kind of uncertainty seems intimidating, but it’s freeing. Solutions that treat retirement as complicated will always come up short. Treat retirement as a complex problem to be managed and not solved, and you can have more confidence in your plan.

Complex problems require a buffer.

Because of the magnitude of uncertainty involved, complex problems require a bit of a buffer. For instance, our plane needs extra fuel in case it takes longer to get to the carrier or the pilot must make multiple attempts to catch one of the four arresting wires with the plane’s tailhook. How does this look in retirement planning?

1. Identify the difference between your base great life needs and discretionary spending. Then, you know where you can make adjustments easily if circumstances change.
2. Give yourself an adequate cash cushion. Cash reserves can help you weather market swings and give you the flexibility to sell or invest on a timeline that benefits you.
3. Value choices that leave you more options down the road. For example, try renting an RV before buying one. Or, if you’re already all in on the idea, buy a slightly used RV over the brand-new, higher-priced model so you can change your mind later without suffering the hit of a new vehicle’s depreciation. A bite-sized commitment helps you trial a goal before locking you into ongoing life or financial obligations.
4. Choose an investment strategy that is flexible and easy to pivot from over one that may tie up your capital long-term or be difficult to sell.

Retirement planning, sometimes perceived as daunting and convoluted, gains clarity when viewed through the lens of complexity. Embracing the complex nature of retirement allows you to focus on developing sound decision-making processes rather than wasting energy seeking perfect solutions. By acknowledging and accepting the dynamic forces at play, you can navigate the journey toward a rocking retirement with confidence in your adaptability. See? Retirement planning really isn’t complicated!