While fantasies of luxury travel experiences and long days of leisurely pursuing expensive hobbies may fuel the desire to move into the retirement phase of life, there’s a lot of research that shines a light on the difference between the retirement fantasy and what really makes us happy during the retirement years.
Johnathan Clements (Johnathan Clements Money Guide 2016) is an expert on happiness and money says that feeling great about life in the later years comes from having a sense of purpose, not a high net worth.
Working toward a cause that ignites excitement and passion brings retirees one step closer to the feeling that their current day-to-day life has great meaning. Engaging in a hobby or even in a part-time job or volunteer job that is challenging and rewarding also leads to a sense of purpose.
In the long run, saving money makes people happier than spending money
It’s the human condition; we work harder to make more so we can buy more. Psychologists call this drive to have more money the hedonic treadmill. People on the treadmill work hard toward their goals, only to find that the luxury car loses its ability to provide happiness after only a few months. They learn that their dream house comes with high maintenance costs and feels too big for them.
It seems that many retirees already understand that saving money brings contentment. Many people reduce their spending as they age at a rate that is adjusted for inflation. It’s likely that they are spending less on taxes, as taxpayers past 65 years of age get a higher standard deduction. In some communities, retired homeowners qualify for a property tax exemption, as well.
The expenses taken for granted during the working years, like dry cleaning, dress clothes, commuting costs, and lunches out disappear in retirement. At a certain age, many types of insurance are no longer necessary. Whole life policies with huge payouts may be reevaluated and disability insurance premiums may also become a thing of the past. Travel and entertainment become less expensive as retirees enjoy various discounts and the flexibility to travel on short notice or to see the world in the off-season.
Many retirees, living a simpler and quieter life with close friends and family close by and pastimes that they truly enjoy, understand that while a large bank account may offer peace of mind, it certainly doesn’t deliver happiness.