“Sailors plan for safety. For escape. For survival. Sailors rely on plans, on strategies that have worked before. Trust me. Most mariners are conservative. We stick to the tried and true. The familiar." -- Randall Peffer, "Listen to the Dead"

Saturday, November 13, 2021

What Makes Us Happy in Retirement?

     Here are some notes made by Jeremy Kisner who attended a presentation given by Michael Finke, a retirement researcher at American College of Financial Services. Finke holds a PhD in consumer sciences from Ohio State as well as a PhD in finance from University of Missouri. But he has discovered that wealth and income play a only limited role in determining happiness in retirement.

     Jeremy Kisner, who has graced us before with his wisdom, is director of financial planning at Surevest Private Wealth in Phoenix, AZ. He writes a blog called Clear and Concise Financial Advice and knows very well how other factors, besides money, bring us happiness. I'll let him explain . . . 

     The single most important factor influencing happiness and well-being in retirement is . . . 

     * Creating and maintaining friendships.

     * The most important relationship, by far, for married couples is the one with their spouse. It is hard to be happy in retirement if you are not happy in your marriage.

     * Don't kid yourself, maintaining friendships takes some time and effort.

     * Women are better than men at maintaining friendships. Many men rely too much on their wives for social interaction, which can sometimes put a strain on the marriage.


     * We romanticize what we will do in retirement, dreaming of the golf course, the beach, the exotic travel destinations. In reality the #1 activity in retirement is watching TV.

     * Relaxing all the time does not make us happy. It is important to find activities that interest us.

     * Perhaps the best use of financial resources, in terms of happiness, is investing in hobbies that lead to social interaction -- anything from golf to biking, collecting classic cars to joining a knitting circle.

     Financial security is correlated with retirement happiness -- so what should we spend our money on?

     * On average life satisfaction does rise with wealth, up until about $4 million in assets. Wealth above that level does not increase happiness, and in some cases ultra-high-net-worth folks are less happy.

     * Spending more on social activities makes people happier -- eating out with friends, traveling, entertaining. These expenditures, which may be considered "frivolous" or "optional" are actually more important for making people happier than any other type of spending.

     * The typical retiree spends about the same amount of money in their first year of retirement as they did in their final year working. However, they do not need the same amount of gross income, since they do not pay payroll taxes, do not need to add to savings. Workers with over $100K in earnings typically need to replace about 60% to 70% of pre-retirement gross income.

     * Real spending (adjusted for inflation) tends to decline as the years go by. Spending falls faster among wealthier retirees.

     * If people have pensions, they spend more on so-called frivolous things and are happier. Surveys show that an additional $10,000 in annual pension income brings as much happiness as an additional $643K in investable assets.

     * Many retirees who do not have a pension feel uncomfortable spending down their assets, even if they have a lot of savings. In one survey 84% of participants indicated that they were uncomfortable with the idea of using up even a portion of their nest egg to supplement their income.

     Do children make us happier?

     * Retirees who have children are slightly happier, on average, than those who do not. However, if the children live within 10 miles, this tends to reduce happiness -- due largely to unrealistic expectations of what the relationship should be. Some of the pitfalls: Children don't take their parents' advice; retirees become a cheap babysitting service; spouses want different amounts of time with the kids and grandkids.

     What type of housing makes retirees the happiest?

     * Many new retirees figure they will take a few years to decide where and how they want to live -- whether they want to downsize, for example, or relocate. However, keeping options open for too long makes people less happy. Once people make a choice and move forward with decisions, they are happier.

     * Homeowners are happier than renters, up to their early 80s. After that, people are happier when they can have an active social life without the burden of ownership, and without having to travel -- which can often mean going to an independent-living facility or continuing-care community.

     How does health impact life satisfaction?

      * It is no surprise that health is important for enjoying life. Poor health reduces life satisfaction, and in general the worse your health the more unhappy you become. However, excellent health alone does not make people happy.

     Longevity insights

     * The gap in longevity between men and women has narrowed. In 1980 the average 65-year-old woman could expect to outlive her husband by about 4 years. Now the longevity gap has narrowed to approximately 2 1/2 years. Men who used to abuse their bodies with excess drinking, daily smoking, poor diet, are now making healthier lifestyle choices.

     * A healthy, upper-middle-income 65-year-old couple has a 43% chance of at least one spouse living to age 95.

     * Longevity does increase with income.  For a host of reasons related to wealth, the richest 1% of men live 14.6 years longer than the poorest 1% of men. For women the gap is less: 10.1 years.

     * The wealth and longevity gap is growing. Over the past 15 years, life expectancy has increased by 2.34 years for men and 2.91 years for women in the top 5% income bracket. But life expectancy has increased by just a few months for men, and less than one month for women in the bottom 5% of the income tables.


     The bottom line

     So Jeremy Kisner concludes:  To live a long and healthy life, it helps to be reasonably wealthy and have a secure income (in the form of a pension for example). But do not get obsessed with money. Instead, invest your time and effort in relationships, in experiences and in health.


DUTA said...

The bottom line is this:
Retirement is the last stage of our life (after childhood and adulthood). We come alone in this world and we leave it alone, even though there are people around us(family, friends) at birth, at burial, and during our lifetime.
So,the most important thing in retirement is to come to terms with our individual person, understand its needs and act accordingly to ensure a smooth third and last stage of life.
Health is first on the agenda; money and people are not always helpful, they might weaken us.

Kay said...

This is very interesting. Hmmm...
We have really missed socializing because of the pandemic. Our children live very, very far away since we're in Hawaii and they live in Maryland and Illinois. I really wish they were closer. Hmmm... we do have pensions but we don't spend money on frivolous things. Hmmmm... I shall have to tell my husband that we could be happier here.

Barb said...

I'm not wealthy but I di have very secure inco.e forever and I would beying if the knowledge of the pension ( and SS, I font think it's going anywhere for us). I spend more income on si called frivolous think like lunches and such snd hobbies than I do on clothes or other things. I don't spend my time in front of the tube but I suppose reading is just as sedentary as TV watching.

Miss Merry said...

We were beginning to go on our "Senior Field Trips" prior to the pandemic. I'm not sure when and if we would be comfortable traveling again. We aren't even eating in local restaurants yet. We are not "wealthy" but we do have piece of mind by planning well for retirement and living within our means. I think everyone has to decide how they want to live when the retire - BEFORE they retire. We actually have no problem being the unpaid babysitters. We enjoy it. Now - virtual elementary schooling, not so much.

Mage said...

Isolation is us too. My lung cancer keeps me home, but himself still docents at the automotive museum.

Anonymous said...

I was lucky to make it through the pandemic closures with a secure income and a caring spouse. And I understand the value of investing time and effort in relationships and experiences, as Kisner says. As one who leans Homebody, it is a real push to get back out in the world. So far, we've signed up for a 5 day senior trip to national parks, and worked a monthly shift at a food bank. More to come!

Linda Myers said...

We spend half the year in a retirement community in Arizona, and we love the easy friendship and multiple available activities. Our place has only 620 square feet but that is enough. The rest of the year we live near Seattle in our daylight-basement-remodeled apartment. Also small. It's more isolated there because most of our neighbors work. But we're both lifelong learners and are enjoying online Olli classes. Fortunately, we have enough money to do what we want.

Wisewebwoman said...

I'm far from wealthy and live alone so friendships are important to me, both distant and nearby.

My rent is pension fixed, so that is great. The impact of the cost of living increase since Covid has really impacted everyone around me. Energy costs, fresh food costs, etc. It is alarming have this extra chunk taken out of careful budgeting with no corresponding increase in OAS.

Of course the wealthy and partnered are happier as the risk of financial insecurity doesn't affect them.

But men don't make life long friendships as women do which leaves them depressed and lonely when their spouse dies.


Kathy @ SMART Living 365.com said...

Hi Tom! Really great information. I especially thought the idea that many pensioners are happier than those with just investable assets. Like he/you said, those of us who receive retirement income from our assets tend to be averse to touching any of it for regular spending. It seems that those on pensions spend it like a "pay-check" while those of us with fixed assets continue to treat it like a "savings." Very interesting and a good reminder that just keeping it in the bank does little to promote our happiness. Thanks! ~Kathy

Meryl Baer said...

We are big on experiences like travel - our first post-covid trip is planned for January. We are into taking classes and volunteer work also. I miss socializing with friends and attending social events. I can see where a regular income - like a pension - offers financial peace of mind.

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Jennifer (UnfoldAndBegin) said...

I think the big keys are having someone you enjoy in your life and having a game plan. Retirement isn't about sitting around and watching TV. It's about enjoying the time you've earned. But maybe that's me because I'm a planner. LOL.