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How Non-Financial Factors Can Affect Your Retirement Happiness

07 December 2018

Most people look forward to retirement, expecting that they’ll be happy when they can finally stop working. But is that always the case? Besides ensuring that your financial plan is on track, what else goes into a happy retirement?

While most research and discussions on retirement are primarily focused on being financially prepared, a new study by leading retirement researcher Dr Michael Finke looks at other important factors that contribute to retirement happiness, or ‘life satisfaction’, as they call it in the study. Here are some of its main points:

1. Leisure Spending

Finke and his co-authors noted that leisure spending was positively correlated to life satisfaction. Among the retirees they studied, the thing that made them the most happy was their spending on leisure activities (experiential goods as opposed to materialistic goods).

Interestingly, they noted that although new retirees initially compensated for the loss of social status accorded to them by their profession by spending more in categories that helped them maintain their social status, this changed over time. Overall, retirees spending money on time-intensive leisure activities made them happier than acquiring more material goods. The fact that retirees now had more leisure time changed how they valued the goods and services that saved them time.

This change in spending pattern can actually lead to spending less in retirement without a corresponding decrease in life satisfaction, which would have some impact on how traditional financial planning looks at post-retirement spending.

2. Spousal Relationship

The quality of one’s marriage had an even greater impact on retirement happiness than spending. The study highlighted that retirees in unhappy marriages were worse off than unmarried retirees in terms of life satisfaction. They also needed to spend much more on leisure (up to double the amount) in order to achieve the same positive life satisfaction as those in happier marriages.

What this translates to in terms of financial planning is that someone may have to set aside more in retirement spending to achieve the same amount of happiness compared to someone in a happier marriage, all other things being equal. As critical factors in retirement happiness, activities that can improve and maintain a happy marriage should thus have priority in retirement goals and spending.

3. Friends

Surprisingly, the study also found that friendships played a bigger part in life satisfaction than relationships with children and grandchildren. However, this effect was still smaller than the quality of one’s marriage.

This may be reason to reconsider moving overseas to be closer to one’s children and grandchildren, if it will mean being away from close friends. However, this study was conducted in the US, where family relationships are typically not as important as they are in Asia. It is possible that results may differ among Singaporean retirees. Nonetheless, it is always good to encourage building up close friendships for a happier retirement.

4. Health

It is no surprise that the old adage of “health is wealth” is very applicable here. The authors noted that health status had a substantial impact on life satisfaction. Healthy retirees were able to derive greater happiness from leisure activities than those who were less healthy.

From a financial planning perspective, healthier people also had lower medical expenses, allowing them more funds for leisure and other activities that improved their quality of life. Healthier people also typically spent less on services like housekeeping, preferring to do it themselves.

5. Gratitude

In a different study by Harvard Medical School on mental health, gratitude was found to be “strongly and consistently associated with greater happiness. Gratitude helps people feel more positive emotions, relish good experiences, improve their health, deal with adversity, and build strong relationships.”

In this study, psychologists asked one group of people to write down the things they were grateful for in that week. Another group were asked to write down the things that irritated or annoyed them. The third group were asked to write either a positive or negative thing for the week. After two and a half months, the group which expressed gratitude was found to be more optimistic and felt better about their lives. They also exercised more and had fewer visits to the doctor than the group which focused on the negative stuff.

Thus, astute financial advisers will be able to tell from the demeanour of clients who is more likely to be happier in retirement, as well as have better outcomes on their retirement plans.

At the end of the day, while the above factors can greatly enhance retirement happiness, it will mean little if you are not adequately prepared for its financial demands, which in turn can increase stress and cause you to develop a negative outlook towards your life, spouse, friends and health. Having a proper financial retirement plan is still key.

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