FDA Warns Food Manufacturers

The Food and Drug Administration said Tuesday that nutritional logos from food manufacturers may be misleading consumers about the actual health benefits of cereal, crackers and other processed foods. The agency sent a letter to companies saying it will begin cracking down on inaccurate food labeling.

Out-of-Network ATM Fees? iPhone to the Rescue

Thanks to technology, keeping on top of your bank accounts and locating a nearby surcharge-free ATM is as easy as updating your Facebook status.

And the ‘Fiery’ Recalls Continue

If you’ve got one of these Handy Switches, unplug it — now. About 1.3 million of these remote control light switches are being recalled by Idea Village Products Corp., the U.S. distributor of the Chinese-made product. Nine fires have been reporting due to the switch overheating, according to the U.S. Consumer Product Safety Commission.

Yankee Candle Product Recalled

If you have one of the Haunted House Screen Tea Light Holders sold at Yankee Candle stores nationwide as well as on Yankeecandle.com since August, don’t light that match. It turns out that the window panes can catch on fire when the tea light candles are in place. Three fires have been reported.

The Paradox of Choice and the Dangers of Perfection

As important as I believe National Save for Retirement Week is, I have to confess that after four days (five, if you count Sunday), I’m bored of it. My short attention span has dwindled. (Imagine the difficulties I’m having as I try to concentrate on writing a book for three months solid!)

Instead, I want to shift gears for a moment and talk about a subject with immediate real-life implications: the dangers of perfection.

Good vs. perfect
While doing research for my book (Your Money: The Missing Manual), I re-read The Paradox of Choice by Barry Schwartz. The Paradox of Choice is about how we think that choice will make us happy — but it doesn’t. In fact, too much choice just might turn you into a basket case, especially if you’re a certain type of person.

Schwartz describes his research into two groups of people, Maximizers and Satisficers:

• Maximizers are those who only accept the best. Every time they make a purchase (or do anything else, for that matter), they need to be sure they’ve made the best decision possible. When shopping for shoes, for example, a Maximizer wants to look at all of the options. She wants to compare <iiall of the prices. And even after she’s made her purchase, she worries that maybe she missed a better shoe or a better price at another store.
• Satisficers, on the other hand, have learned that, contrary to conventional wisdom, good enough often is. Satisficers have learned to settle for something other than the best. A Satisficer still has expectations and standards, but once she’s found something that meets those standards, she buys it. When shopping for shoes, a Satisficer makes do with a pair that meets her needs at a price she can afford.

Many Maximizers believe that Satisficers are comfortable with mediocrity. That’s not necessarily true. Satisficers are just as interested in quality as Maximizers — but they’re not willing to spend the extra time moving from “excellent” to “best”.

The problem with perfect
As you might guess, Maximizers are not as happy as Satisficers. In his research, Schwartz has found that:

• Maximizers are more likely to regret their purchases despite the fact that they have (in theory, at least) come closer than Satisficers to making the best decision.
• On the flip side, Satisficers generally feel more positive about their purchases. They know they’ve made a choice that met their expectations.
• Maximizers enjoy positive events less than Satisficers, and they don’t cope as well with negative events.

Maximizing and satisficing have important implications in the world of personal finance. Researchers have found, for example, that when an employer increases the number of options for retirement savings, the likelihood that employees will actually save for retirement goes down. Similarly, you could spend a lot of time searching for the bank with the best CD rates or the mutual fund with the best returns. Soon, though, something better would come along and you’d be unhappy. For most people, it makes more sense to make a good choice and stick with it.

Maximizing in real life
I like to think that I’m a Satisficer (and in many ways, I am), but the reality is I’m a Maximizer. Too much choice paralyzes me. Let me give you an example I’ve been saving for months.

Last spring, I got a haircut I really liked. As we were finishing, the stylist offered to sell me some “product”. But when I saw the prices, I balked. I could walk next door to the supermarket to buy “product” for much much less. So I did. But when I got to the hair care aisle, I was greeted by this intimidating sight:

I count at least 49 different options in this photo (and there were more!)

And that’s just a small portion of the hair gels, creams, and mousses available to me. I spent fifteen minutes looking at all of the options (no joke) while Kris did the grocery shopping. And you know what? I still wasn’t able to pick one. I went home without any “product”, and just combed my hair with water, as I always have.

Too much choice is no choice at all. Researchers have demonstrated repeatedly that if you give a consumer a handful of options, he’s happy. He feels in control of his life. But when there are dozens of choices available, he’s all at sea. (This is one reason I’m happier picking from six dinner options at our local Italian place than 120+ options at Claim Jumper.)

Less than perfect
The Paradox of Choice is a fascinating book. Schwartz offers plenty of data and real-world examples (some pulled form his own life) to illustrate how too much choice actually makes us unhappy. In the end, he offers almost a dozen tips for Maximizers that would like to be a little less stressed. Among them are these:

• Don’t sweat unimportant decisions. Did it really matter which hair gel I selected? Of course not. I should have just picked one in the first ten seconds and called it good enough.
• Limit your options. If you’re faced with overwhelming choices, arbitrarily reduce the field. When shopping for a new bicycle, for example, restrict yourself to a certain store or a certain brand.
• Learn to accept “good enough”. If you’re a Maximizer like me, it can be tough to make the leap to the land of Satisficing. But remember: The perfect is the enemy of the good. You’ll be happier if you accept a good option and stop looking for perfection.
• Stick with what you know. Schwartz argues that unless you’re dissatisfied with a product, you should stick with what you always buy. Don’t be tempted by “new and improved” options. Habits make people happy. (My research shows that this last fact is true in many ways.)
• Don’t second guess yourself. Once you’ve made a decision, stick with it. Buyer’s remorse can nag at your heart. Ignore it. Be decisive.
• Embrace restraints. Schwartz argues that it’s possible to learn to love limitations. Limits give us boundaries. They eliminate uncertainty. When we know our boundaries, we can focus on thriving within them.

While it’s true that some choice is a good thing, too much is not. It’s easy to pick the best option from a pool of three, but it’s difficult to find the perfect choice in a pool of thirty. The truth is “perfect” is a moving target. It’s nearly impossible to hit. It’s better to make a solid decision today than a perfect decision next week.

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Related Articles at Get Rich Slowly:

• When Consumers Cut Back
• Daily Links: Hermit Mode Edition
• links for 2007-03-10
• Confess Your Shopping Sins with Spendster
• Reader Survey: Which Personal-Finance Books Should I Review?

3 signs of the next real estate collapse

When the FDIC closed Chicago’s Corus Bank last month, it may have signaled the beginning of the next shock to the banking system: commercial real estate defaults.

Getting back on the retirement horse

Jason and Patty Simkins, both 40, have saved next to nothing for retirement in the past year. They were rattled by the rocky market, which caused the value of their portfolio to tumble 40% at its low point.

Tips for an investing newbie

Question: I’m 30 years old and have savings of about $50,000. I’ve never invested in stocks or mutual funds, but I would like to start. Can you recommend some resources that can help educate me about investments and give me a better understanding of how they work? –Suresh T., Jacksonville, Florida

Getting back in the game

Jason and Patty Simkins, both 40, have saved next to nothing for retirement in the past year. They were rattled by the rocky market, which caused the value of their portfolio to tumble 40% at its low point.

No One Cares More About Your Retirement Than YOU Do

This is a guest post from Robert Brokamp of The Motley Fool. Robert is a Certified Financial Planner and the advisor for The Motley Fool’s Rule Your Retirement service. He contributes one new article to Get Rich Slowly every two weeks.

In recognition of National Save for Retirement Week, let’s take a gander at some numbers:

• The average Social Security retirement benefit is $1,159 a month, or $13,908 a year.
• According to the Employee Benefits Research Institute (EBRI), approximately a third of the 60-and-over crowd receives a monthly check from a defined-benefit plan, also known as a traditional pension. The average annual benefit is about $18,000.

Put those together, and you come to two conclusions:

1. If you aren’t covered by a traditional pension and choose not to save for retirement, you’re left with just Social Security and an annual retirement income that is not far from the poverty line ($10,830 for a single American in 2009). Not fun.
2. If you’re one of the lucky few (and getting fewer) who will receive a monthly check for life from a defined-benefit plan, those checks combined with your Social Security would amount to an annual retirement income of bit over $30,000, assuming the averages. That’s not a bad income, especially since many expenses really do drop in retirement (though some retirees go nuts with the cruises and RVs). But here comes the bad news: Most pensions don’t adjust for inflation. So an $18,000 benefit today would be able to purchase just $13,274 worth of goods in a decade, assuming a 3% annual inflation rate.

Oh, and there’s another little issue. Social Security and many (if not most) pensions may not have enough money to pay off projected benefits.

The bottom line is this: If you want an above-the-poverty-line retirement, and you want to feel comfortable that it will stay that way for the length of your retirement, then you must save, save, save, and then save some more.

It’s obvious, I know. At least, I think it is. But clearly not everyone is getting the message.

The EBRI reports that “among all families with a defined-contribution plan [such as a 401(k)] in 2007, the median (mid-point) plan balance was $31,800…Among all families with an IRA/Keogh plan, the median value of their plan was $34,000 in 2007…” Keep in mind that those are figures as of 2007, before the stock-market crash last year. So if we assumed that someone had both an average-sized 401(k) and average-sized IRA, then they’d have savings of $65,800 or less. That would be a nice chunk of change to find in the sofa cushions — but it wouldn’t last long as a primary source of living expenses.

How much do you need to save?
In a previous post, I described how you could use an online financial calculator to estimate when you can retire given your current savings rate, how much you need to save now to retire when you want, and the impact of various scenarios (e.g., working part-time in the first few years of retirement, downsizing to lower-cost living arrangements, etc.). As I wrote then, these calculators aren’t crystal balls; the future is just too unknowable. But they will provide a very enlightening estimate of whether you’re on track, and what changes will have the biggest effects on your retirement success.

Furthermore, they show the long-term benefits of saving. Go ahead, run your numbers, and then do it again, but this time assume you’ll save, say, an additional $200 a month. Chances are, you’ll be impressed, especially if you’re on the young-ish side.

Or for a different take, fill out a retirement calculator and assume you don’t save another dime. Then see what kind of retirement you have in store. For most people, it won’t be pretty…and that might provide a necessary kick in the pants.

I’ve confessed before that, despite being the retirement-planning guy at The Motley Fool, I don’t plan to fully retire. Yet I continue to max out my 401(k), year after year. I know there may come a time that I may no longer be able to work, and it’s also likely that I’ll join that Great Tax Shelter in the Sky before my wife. I save now because I want my future enfeebled self and widowed wife to be taken care of.

So do a big favor for your future self and (if you’re the marrying type) your future spouse: Save, save, save, and then save some more.

A stiff upper lip
Finally, on an unrelated note: If you’d like to spend money right now rather than save it, but you’d prefer it goes to a good cause, and you’d like the added bonus of seeing some really horrible collections of facial hair, support this year’s Mustaches vs. Cancer campaign.

Along with five other Motley Fools, I am participating in this two-month mustache-a-thon (much to the chagrin of our female friends). You can sponsor my ‘stache at my profile page. Yes, I know it looks like a balding caterpillar died on my lip. But it’s only been a couple of weeks, and it raises money to help kids with cancer. So give a hoot, support my snoot!

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Related Articles at Get Rich Slowly:

• The Perfect is the Enemy of the Good
• Ask the Readers: What Can I Do If My Girlfriend Isn’t Serious About Money?
• Budgeting for Non-Budgeters: The 60% Solution
• 43% Won’t Have Enough in Retirement
• Follow-Up on the 63-Page Credit Card Agreement

Trashing old credit cards? Be careful

You’re asking for big trouble by simply cutting up and tossing your old credit cards. Instead, try these 6 methods for fooproof data destruction.