Is more money the key to a happy retirement?
With so many people approaching their retirement years with meager retirement savings, rather than aiming to fully retire and not work at all, it might be more realistic to aim for being happy. To help you get there, it's important to think about how much money you really need to be happy.
A long time ago, someone said "money can't buy you happiness," and indeed considerable thought and research has gone into the question of whether having more money makes you happier. The so-called "Easterlin paradox" maintains that once your basic needs are met, having additional income won't add to your happiness.
The research behind this theory compared relative levels of happiness and income across a number of countries. One key piece of supporting evidence for this paradox is that per capita income in the U.S. rose significantly between 1946 and 1970, but average reported happiness showed no long-term upward trend.
Of course, this theory has some practical problems. For example, many people have different ideas about how to define their "basic" needs. One person's basic need could well be considered a luxury by another.
Another difficulty is that defining happiness is a complex concept. You might get different answers if you're asking about short-term, day-to-day happiness vs. life satisfaction or well-being over the long term.
Recent research challenges the Easterlin paradox and asserts that happiness does indeed increase with income, but more slowly. The website CivicScience has been asking Americans about their level of happiness and other habits since 2013. It has found that additional wealth and income does lead to more happiness, but only up to a point. Reported happiness peaks around incomes ranging from $100,000 to $125,000, where people are 12 times more likely to report being happy than unhappy.
Surprisingly, CivicScience finds that older people are happier than younger people, and those age 65 and older are 14 times as likely to report being happy compared to unhappy. Not surprisingly, those who report being very healthy are 11 times more likely say they're happy than unhappy, so getting exercise and eating well are good steps to help improve your happiness.
Job satisfaction is another significant predictor of happiness: People who are "very happy" in their jobs are 21 times as likely to report being happy overall. Those who report being "very unhappy" with their jobs are much more likely to say they're unhappy overall.
Given that many boomers will need to work in their retirement years to make ends meet, it's a worthwhile goal to seek work that makes you happy, or at least find ways to make your current job more enjoyable.
People who travel frequently are also more likely to report being happy than those who don't travel. Other activities associated with happiness include volunteering, doing a good job of managing your finances and eating healthily. Even if you can't fully retire, it might help to figure out how you can travel more frequently and do more of the other things that you enjoy.
While it can be insightful to read about research on happiness and money, perhaps the best expert on your money and happiness is ... you. Spend some time thinking about what makes you happy and how much money and stuff you really need.
Can you work a little and still be happy? For some people, that goal might be more realistic and fulfilling than getting frustrated trying to save a gazillion dollars for that elusive, traditional retirement of "not working."
Steve Vernon
View all articles by Steve Vernon on CBS MoneyWatch»
Steve Vernon helped large employers design and manage their retirement programs for more than 35 years as a consulting actuary. Now he's a research scholar for the Stanford Center on Longevity, where he helps collect, direct and disseminate research that will improve the financial security of seniors. He's also president of Rest-of-Life Communications, delivers retirement planning workshops
and authored Retirement Game-Changers: Strategies for a Healthy, Financially Secure and Fulfilling Long Life and Money for Life: Turn Your IRA and 401(k) Into a Lifetime Retirement Paycheck.
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