David Rae, Contributor
Sept. 16, 2020
Retirement is about more than money, investments, and never having to work again. I’ve helped many people retire happily over the years, and rarely is this happiness attributable to having the largest retirement account. That being said, financial stress can ruin an otherwise enjoyable retirement. Keep reading as we share some tips to have a happier, healthier, and wealthier retirement.
Whether or not you believe money can buy happiness, I will say a lack of money sure can bring misery. Either way, having an adequate source of income in your golden years is a major driver of a happy, healthy, and secure retirement. Here are just a few ways to increase your happiness during retirement, whether you consider yourself rich or poor.
What Will Your Happy Retirement Entail?
We can argue about whether money can buy happiness, but there is no debate, money can’t buy love or health. Having a solid group of friends and (or) the support of family is a key to a happy retirement. Study after study has shown that a fair amount of physical activity, mixed with a strong social connection, is key to maintaining your health as you age. Before leaving the workforce, consider how you will fill your days when you have nothing but free time.
Building a giant net worth, alone, won’t likely ensure a happy or healthy retirement. It should also be noted that loneliness and boredom could increase your chances of having a boring or depressing retirement. I can’t believe how busy some of the retirees I know are in retirement. Just thinking about it makes my head spin.
Can Money Really Improve Your Retirement?
I wouldn’t even ask this question, but there are so many posts out there about how people spend less in retirement. Yes, people spend less in retirement, often because they have less money to spend.
Constantly worrying about money throughout retirement sounds miserable to me. While money is an important part of a happy retirement, it isn’t the only thing to consider. Economist and Nobel Prize winner Angus Deaton once showed that people’s happiness was at its peak when their annual salaries were around $75,000. I would guess many of you would be in great shape if you could have $75,000, per year, guaranteed throughout retirement, regardless of how long you lived. I’m also aware that many others would have trouble surviving on that (small) level of income and would not likely be living your happiest and healthiest retirement. The point you should take away from this is that you will likely get diminishing returns as your income or net worth grows. Again, retirement isn’t just about the money.
Will Smarter Spending Increase Retirement Happiness?
Cost and value are not the same. For example, if two couples took the same cruise and stayed in the same level room, it would be fair to say that they got the same value from the cruise line. (Post COVID-19, of course) But if the first couple paid full price and the other couple booked at a discounted rate, like my mom always does when she cruises, there would be an obvious difference between the cost for each couple. I will give my mom credit; she is the queen of stretching a dollar. The couple who scored a deal on the cruise obviously would get more happiness from each of their travel dollars.
Set aside a certain amount of money for fun splurges, like a luxurious vacation or tickets to see a Broadway musical, perhaps Hamilton.
Many retirees are afraid to spend any of their retirement assets on anything beyond the necessities of life. I encourage my clients to set aside a certain amount of money for fun things, like travel. Without a spending plan for these types of expenditures, many retirees might never leave their homes. That is probably a little facetious, but if you have the money, you’ve earned the ability to enjoy some of it. Of course, don’t go crazy and blow your life savings. Instead, set aside a certain amount of money for fun. If there is money in the “fun account,” you know you can afford that dream vacation. With all of the travel discounts out there, you could take even more trips. We might not be able to travel safely at the moment, but I’m confident that the travel industry will come roaring back once we get a handle on the Coronavirus.
Transitioning from Saver to Spender
Many Americans are playing catch up when it comes to preparing for a secure retirement. Ideally, not a dollar has been wasted in terms of minimizing taxes, capturing all of your employer matching, profit-sharing, and other employee benefits. Transitioning from being a net saver to a retiree who needs to make their life savings last the rest of their life can be stressful.
I always get asked, “What can I spend without ever touching the principal?” and “Can I just take the dividends and interest?” If your portfolio doubles in value, your dividends and interest may not keep up with your larger net worth. Take money out, on a monthly basis, for basic expenses. This will help calm the nerves about pulling out a year of expenses on a day when the market closes lower.
Will I Need to Work in Retirement?
Large numbers of retirees plan to work in retirement, but a staggeringly small number of them actually do. Even if you can work in retirement, should you? Many people who have planned ahead still choose to work in retirement. I think in some cases, they do it to keep their sanity. Others work because they don’t have a choice. Even the dream retirement of sitting on a beach sipping cocktails could get old, eventually. The struggle is real.
People who choose to work past 65, or have other passions to pursue, are often the happiest in retirement. Jobs get us out of the house, force us to interact with more people and often lead to more physical activity. Believe it or not, all of that activity may keep you healthier (at least during a normal time without the risk of COVID-19). Also, earning extra money never hurt anyone’s financial security. Whether you are volunteering or spending time with friends and family, finding meaningful ways to fill your days will lead to a happier retirement.
What does your dream retirement look like? Take action today to make it a reality. Money may not be able to buy happiness but not having any money, sure sounds miserable. If you have no idea where to begin, work with a financial planner to be your retirement guide.
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