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.

Go back to homepage

IMPORTANT NOTES: All rights reserved. The above article or post is strictly for information purposes and should not be construed as an offer or solicitation to deal in any product offered by GYC Financial Advisory. The above information or any portion thereof should not be reproduced, published, or used in any manner without the prior written consent of GYC. You may forward or share the link to the article or post to other persons using the share buttons above. Any projections, simulations or other forward-looking statements regarding future events or performance of the financial markets are not necessarily indicative of, and may differ from, actual events or results. Neither is past performance necessarily indicative of future performance. All forms of trading and investments carry risks, including losing your investment capital. You may wish to seek advice from a financial adviser before making a commitment to invest in any investment product. In the event you choose not to seek advice from a financial adviser, you should consider whether the investment product is suitable for you. Accordingly, neither GYC nor any of our directors, employees or Representatives can accept any liability whatsoever for any loss, whether direct or indirect, or consequential loss, that may arise from the use of information or opinions provided.

GYC Perspectives

Markets are often irrational. Even among experts, forecasting does not consistently work. We instead believe in Evidence-Based Investing (EBI), which uses decades of empirical data and the greatest ideas in financial science to optimise investment outcomes. No market predictions, no forecasts, no emotions. All those things rely on gut-feel and intuition that cannot be consistently replicated.

Here, we share with you the evidence on why EBI works and why forecasting doesn't, as well as articles on topics such as behavioural finance to help you become better investors. New here? You can start with this introduction to EBI. Happy reading!

© 2017-9 GYC Financial Advisory Pte Ltd | Co Reg No 199806191K