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Rethinking Retirement Strategies

The adage “money can’t buy you happiness” may be more relevant to retirement planning than you think. A column in Research magazine says a well-planned retirement lifestyle has a greater impact on happiness than the amount saved. Activity, social interaction and a clear voluntary break from a job all can improve happiness.

The relationship between happiness and greater levels of wealth starts to decline at high levels of wealth. (A figure of $2.3 million was stated in the column.) A clear reason was not given, but the inability to spend savings and the additional effort put into managing a larger portfolio may be somewhat to blame. Conversely, pension and Social Security income help to boost happiness. This may be partially due to where this type of income comes from. Rather than depleting savings, retirees are spending money from a recurring third-party source of income.

Activity levels are correlated to retirement satisfaction. Social interaction, mentally tasking activities and exercise all boost happiness. Exercise gives the added benefit of improving health. Adhering to a routine helps to increase the likelihood of staying active. Doing so is particularly important later in retirement when health and energy levels decline.

Simply slowing down versus consciously choosing to retire on a specified date may actually cause somebody to be less happy. The reason is that the person who has not made a clear separation from his career may continuously weigh his options. A person who voluntarily opts to retire is more likely to buy into the permanence of retirement and is more likely to view his career as what he used to do, not who he now is.

This is not the first article to address the concept of incorporating a proposed lifestyle into retirement planning, and we don’t think it will be the last. With life-spans increasing, a person in their 60s could be looking at least 30 or more years of life if he is in good health. This is a significant amount of time to face without having a plan for staying occupied. The choice of lifestyle also has implications for financial planning: How much will the planned activities cost and what is the gap between likely financial resources and projected spending?

Source: “What Makes a Successful Retirement,” Michael Finke, Research Magazine, February 2014.



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