Most of today’s pre-retirees and recent retirees face a serious planning dilemma: They don’t have sufficient retirement savings, together with Social Security benefits, to retire full time at age 65 and continue to spend at the same level as when they were working. This conclusion is supported by several research reports.
As a result, pre-retirees and retirees face potentially difficult choices: Will they work beyond age 65, reduce their spending, or do some combination of the two? To help choose among these options, you’ll want to think about your answers to these two questions: Can you work beyond age 65, perhaps part time, and still be happy? Can you reduce your spending in retirement and still be happy?
To help you think seriously about these choices, let’s focus on two key aspects of “happiness”:
- Being happy, using whatever criteria that works for you, and
- Not being stressed or unhappy
When planning your retirement, you’ll want to consider each of these two aspects, which can require different strategies.
What does it mean to be happy?
There’s a plethora of research and articles out there on what makes people happy. It turns out that happiness can be a complex goal, with many nuances. For the sake of this post, I’ll cite an article from Martin Seligman, the founder of the Positive Psychology movement. He prefers the goals of “wellbeing” and “flourishing” over happiness. He suggests that these goals have five dimensions: positive emotions (such as pleasure and immediate enjoyment), engagement, relationships, meaning, and accomplishment.
These dimensions have all been cited frequently by many books, articles, and research reports on happiness in retirement.
Note that many advertisements on retirement focus solely on the first dimension—positive emotions or pleasure. They often depict a smiling couple walking hand-in-hand on the beach at sunset or people talking in easy chairs. In essence, they focus only on the “vacation” part of retirement. While it’s natural that you might want pleasurable experiences in retirement, life in retirement is much more than a 20- to 30-year vacation.
Many more possibilities open up when you broaden your view of “happiness” to include the other dimensions of wellbeing and flourishing: engagement, relationships, meaning, and accomplishment. Examples include working part time, volunteering, helping your family and your community, and pursuing interests and hobbies.
You’ll want to think about how you’ll satisfy these other dimensions of happiness and how much money you need to support the life you want.
Preventing stress and unhappiness
When retirees are asked in surveys what makes them happy, “good health’ is often at or near the top of the list. Actually, it’s possible that good health enables people to be happy, but as noted above, there are more dimensions to happiness.
On the other hand, poor health could truly be a source of unhappiness and stress. As a result, it’s important to take steps to improve your health through nutrition, exercise, and reducing your emotional stress.
Similarly, many surveys of retirees say that money isn’t crucial to their happiness. However, not having enough money to meet your basic living needs can also be another source of unhappiness and stress. As a result, it’s important that you spend the time it takes to make sure you satisfy the basic formula for retirement security for the rest of your life:
I > E, or
Income greater than living expenses
If your current situation doesn’t satisfy this formula, you have two ways to make improvements: Take steps to increase your income, or reduce your living expenses. Both steps might require significant research and effort on your part, but it may be necessary to achieve the retirement you want.
For some people, another source of unhappiness can be family disruptions, conflicts, illnesses, addictions, or legal troubles. It’s been said that parents are often as happy as their unhappiest child. As a preventative measure, you might want to consider how you can be of service to help your extended family thrive. That often involves spending your time on them, but not necessarily your money. Being involved with your extended family also helps satisfy the positive goals of engagement and relationships.
Yes, the steps described here can take a lot of time and effort, but nobody promised it would be easy to plan for a 20- to 30-year retirement. If you really want to enjoy a long retirement, spend more time planning for this period in your life than you might spend planning your next vacation.
The first month of 2023 has been relatively kind to the stock market, at least compared with 2022. The…