If you’re looking for happiness in retirement for yourself or your clients, you can forget relationships with adult children, buying a slick car to cruise the cul-de-sac or lounging at a beach cabin in Mazatlán, Mexico.

Instead, there are only three categories that lead to satisfaction—when you have enough money, when you have relationships with your peers and community, and when you have your health. These three things might seem different, but they have one critical thing in common: They all require investment before retirement.

This was the upshot of a panel dedicated to finding happiness in retirement held at Morningstar’s Investment Conference last week in Chicago—a panel that took the unusual tack of not just presenting thought leaders (although they were there), but also giving first chair to an actual retiree who could verify or dispute the points raised.

“I wish I had heard this [discussion] 10 years ago, because I probably wouldn’t have as many marks and scars on my shins from bumping into things finding these things out,” said Jim Linday of Chicago, who is now a retired individual investor but was once a financial professional and teacher. “The one thing I can add from somebody who has been through that transition is that when you plan for retirement, it’s like staging a very beautiful still photograph. And the very first day you’re in retirement it becomes a full-motion video. And you have to accept that retirement is not going to be exactly the way you planned it out because of a whole host of reasons. That’s not to say you were wrong, or you didn’t get it right. It’s just like when we were at work: Things change.”

Given that financial advisors are being called upon more and more to not just help their clients reach their financial goals but also to help them reach their life goals, it’s important to see the two inexorably intertwined, the panelists agreed.

What Makes People Happy?
In order to assess trends in what’s important in retired life, Michael Finke, professor of wealth management at the American College of Financial Services and a researcher in the areas of retirement spending, life satisfaction and cognitive aging, looks to a data set known as the “Health and Retirement Study.” 

“This is a study of 20,000 retirees that began in 1994, and we can follow them up to 2018. When we run analyses on life satisfaction, what we see is that there are three core elements to life satisfaction. I like to call them the Three Pillars of Life Satisfaction in Retirement,” Finke said. “The first pillar is money. Having more money does make you happier, and it seems to have a relatively linear effect up to about $4 million.”

More money doesn’t hurt, of course, but it doesn’t correlate to greater satisfaction. With $4 million, most people will experience peak happiness, he said. The second pillar is relationships with peers and community, and the third is health.

“All of these three things are investments. And what I mean by an investment is it’s anything you sacrifice during your working years in order to live better in the future. So our health is an investment when we exercise and eat better,” he continued. “Relationships are an investment, and this is something that as an economist it was a new way for me to think about relationships. That what you’re doing during your working years is not just accumulating money to live better.”

Each of these things on their own will not necessarily lead to happiness, he said, so both advisors and clients need to think about retirement as creating a new type of commodity, something that takes inputs from health, money and relationships, and combines them together to create happiness.

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