Prime Time: Follow these steps to a happy retirement
Most people focus on saving as much money as possible before they retire. That's because most studies look at only the economic well-being of retirees, assuming that more money leads to increased happiness. And while it is true that income and wealth do increase retirement satisfaction, they do so less than you might think. "Dollars are nice, but they don't have a large marginal impact," says Keith Bender, associate professor of economics at the University of Wisconsin. He found that a $10,000 increase in pension income per year increases the probability that people are very satisfied with their retirement by only 1 percentage point.
Retirees with defined benefit plans like company pensions are generally happier than those with only defined contribution plans like 401(k)s. Those with both are also happier.
But here are some other things that will make your retirement a happy one:
Take care of your health. Your physical well-being is the single most important factor in retirement happiness. Quite simply, the better your health is, the happier you are. If you or a relative is sick, every other concern takes a back seat. Conversely, better health allows for more fulfilling participation in all the activities that make you happy. Eating healthy foods, exercising regularly, and getting routine checkups before you reach retirement will increase your well-being during retirement.
Pick your retirement date. People who choose when they retire rather than being forced to quit because of illness or a layoff enter retirement much happier and the effects continue for many years. Employees forced to retire are significantly less happy than those who can pick the time to quit. This gap persists for up to 10 years after retirement, says Bender.
Plan early. The time to be thinking about retirement is now, well before the date arrives. "So key to post-retirement happiness is to plan earlier in one's life cycle," says Debra Dwyer, assistant professor of economics at SUNY–Stony Brook. "Even if you don't have a lot, you can plan your preferences and needs and invest the resources you have efficiently." Figure out what you might like to do when you retire, and also where you might want to live. Explore places ahead of time; try different hobbies and learn about other types of work. Retirees who work part time or volunteer report feeling happier. Also, if you are married, research shows that you will probably be happier if you and your spouse retire at about the same time.
You may not have that much control over when or how you retire. But with a little bit of planning—including researching your financial, health, and lifestyle options—you will be better prepared when the time comes. And that is likely to mean a happier retirement.
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