When I talk to the happiest retirees I know, their retirement joy is rarely about the money. On the other hand, when I talk to retired people who are not enjoying retirement, financial stress is often a major culprit. Are you ready for the retirement good life?
We can argue until the cows come home about whether or not money can buy happiness. Whatever your opinion – money is a major part of a happy, healthy and secure retirement. There are rich retirees who are miserable just as there are many poor retirees who are loving their retirements. Wherever you are on the richness scale, here are some ways to have a more enjoyable retirement.
What do you need for a happy retirement?
First off, you can’t buy love and you can’t buy health.
Taking care of yourself and feeling good will make it easier to have an active social life.
Friends, family and fun are some of the bedrocks of a happy retirement.
Study after study has shown that a strong social connection and a good amount of physical activity are crucial for maintaining health as you age.
I recommend that all of my clients think long and hard about how they will fill their days once they aren’t stuck slaving away in an office every day.
A big net worth alone won’t likely ensure a joyous retirement.
On the other hand, loneliness and boredom will increase your chances of a depressing retirement.
When I talk to some of the retirees I know, they wear me out. The social schedules they keep would wear out the most outgoing among us.
How much difference does money really make in retirement?
Don’t let anyone fool you, a retirement without financial security sounds miserable to me. I hope you agree. While money is important, 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 reading this would be in great shape if you could have $75,000, per year, in retirement. Still, others would have trouble surviving on that and would likely be miserable.
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.
Can you spend smarter for more happiness?
Cost and value are not the same thing.
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.
But if one 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.
Set aside a certain amount of money for fun splurges, like a cruise or tickets to see Hamilton.
Some people are afraid to dig in and spend any of their hard-earned life savings but I often have people 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 home.
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 but set aside a certain amount of money for fun. If there is money in the “fun account” you know you can afford that cruise.
With all of the travel discounts out there, you could take even more trips. Just saying.
Smooth the transition from saver to spender
For many playing catch up on retirement, the past few years have likely been a marathon of scrimping and saving. Ideally, not a dollar has been wasted.
Transitioning from this mindset to being a footloose-and-fancy-free retiree often throws many people for a loop.
I always get asked, “What can I spend without ever touching the principal?” or “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.
Can I work in retirement?
You can work in retirement, but should you?
That depends. Many baby boomers today will need to work just to get by while others will choose to work in order to keep their sanity.
I dream about a retirement where I’m sitting on a beach sipping daquiris but after a long enough period, even that could lose its appeal.
In reality, people who 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 be more physically active.
Also, the 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.