The retirement question most people seem intent on answering is “How am I going to pay for it?” That’s an important question, of course, but retirement is more than just a math problem.
In my opinion, we spend too much time thinking about how to get there (math) and not enough time thinking about what we’re going to do once we arrive (meaning). If you focus solely on your finances, you risk having a retirement that is cash rich and lifestyle poor.
Cash is great, but it’s not the end goal. Your money is nothing more than fancy paper that our government has created to make commerce and exchange easier. The end goal is not to have money. It’s to use that money to do things that you really care about; things that provide joy, meaning and fulfillment. If you do that, then money (contrary to popular opinion) CAN buy happiness. Let me show you what I mean. I’m assuming you’re all familiar with the mathematical proof: If A=B and B=C then A=C.
Applying that to our discussion:
- If money=control
- And control=doing what fulfills you
- And doing what fulfills you=happiness
- Then money=happiness.
Of course that transitive logic only holds true if you use the time you control to do what fulfills you. Which brings me back to my original point: If you want a meaningful retirement, then you need to treat your planning like more than just a math problem. You need to decide what it is that you really want out of life and use whatever resources you have and time you control to pursue those things. Are you doing that? If so, great. If not, spend some time thinking about what it is you actually want to do with all that money you’re saving.
Have a great week.
Quick note: As you may have noticed, I’ve been writing a little less frequently the last several weeks. I’ve been burning the midnight oil studying for an exam I need to take for work. That will be out of the way soon and I’ll be back to posting a few times per week. Onward to today’s article.
Since happiness is an almost universal goal (especially for retirees), I periodically write about what, according to the latest research, makes us happy. Today is Part 3 in that series. Feel free to go back and check out Part 1 and Part 2 if you missed them.
I was browsing through Netflix recently looking for something to watch and I came across a documentary with the eye-catching title of “Happy.” The filmmaker interviewed researchers as well as regular people from all walks of life in 14 different countries in order to get an idea of what makes people happy.
According to the research our individual happiness is attributable to three areas:
- Genes: 50%
- Circumstances: 10%
- Intentional Activity: 40%
Looking at the glass half empty, we have very little control over a majority of our level of happiness. We don’t control our genetic makeup and our circumstances are often the result of what Warren Buffett calls the ovarian lottery (for example, being born in the U.S. instead of the slums of Kolkata).
Looking at the glass half full, we can still have a huge impact on our level of happiness by being intentional with how we spend our time. [Side note: This site is called Intentional Retirement for a reason.] With that in mind, what kinds of activities can we focus on that will help increase our happiness level? The film lists several:
- Focus on activities that release dopamine. Dopamine is the chemical in our brain that is responsible for feelings of pleasure. Our bodies naturally produces less dopamine as we age, but you can boost those levels through diet, exercise, game playing and cultivating happy relationships. In other words, you will be happier if you cut out the junk food, go hiking, play chess (or engage in other fun activities) and spend time with family and friends.
- Vary what you do. Sometimes having a routine makes life routine. Vary your day. Try new things. Learn new things. Meet new people. That variety leads to increased happiness.
- Get off the hedonic treadmill. I talked about this concept in Part 2. Rather than spending your money on more stuff that you will quickly get used to, spend your time and money on experiences that have a longer happiness shelf life.
- Have a close, supportive family. Every happy person the film studied had a close, supportive family. It wasn’t a perfect family and they didn’t get along with everyone in the family, but they had key family relationships that were healthy, loving, and encouraging.
- Work on something bigger than yourself. Focusing exclusively on your own wants and needs can be fun for awhile, but it eventually grows stale. Have a mission that is bigger than just you and involves things like helping others or volunteering.
- Focus on Intrinsic Goals rather than just Extrinsic Goals. People focused on Extrinsic Goals (e.g. money, image, status) reported less happiness and more depression than those focused on Intrinsic Goals (e.g. personal growth, relationships, a desire to help others).
So it turns out that achieving happiness shouldn’t be that hard. The things we love doing—play, experiences, friends, good food, meaningful activities, being thankful, helping others—are also the things that are the building blocks of happiness.
Late last month an advertising executive (a real life Mad Man) named Linds Redding died of esophageal cancer. After being diagnosed in 2011, he would regularly write about the disease, his treatments and his thoughts on life at his blog.
Earlier this year he wrote a post called A Short Lesson in Perspective in which he reflected on how wholeheartedly he had thrown himself into his career over the years. As he rapidly approached the premature end of his life, he wondered aloud if it was worth it.
His insights and conclusions were so raw and honest that I wanted to excerpt a small portion of his post below so that you and I could reflect on our own priorities as we live life and plan for retirement. One day (hopefully not soon) we will be where Linds was when he wrote that essay. How great would it be if we could heed his words of warning so we could look back on our life with pride, satisfaction and few regrets?
A quick note: Linds refers to something called “The Overnight Test.” When creating advertising campaigns, he and his team would often let ideas simmer overnight. If it still seemed like a good idea the next day, they would say that it passed “The Overnight Test.”
From A Short Lesson in Perspective:
“Countless late nights and weekends, holidays, birthdays, school recitals and anniversary dinners were willingly sacrificed at the altar of some intangible but infinitely worthy higher cause. It would all be worth it in the long run…
This was the con. Convincing myself that there was nowhere I’d rather be was just a coping mechanism. I can see that now. It wasn’t really important. Or of any consequence at all really. How could it be? We were just shifting product. Our product, and the clients. Just meeting the quota. Feeding the beast as I called it on my more cynical days.
So was it worth it?
Well of course not. It turns out it was just advertising. There was no higher calling. No ultimate prize. Just a lot of faded, yellowing newsprint, and old video cassettes in an obsolete format I can’t even play any more even if I were interested. Oh yes, and a lot of framed certificates and little gold statuettes. A shit-load of empty Prozac boxes, wine bottles, a lot of grey hair and a tumor of indeterminate dimensions.
It sounds like I’m feeling sorry for myself again. I’m not. It was fun for quite a lot of the time. I was pretty good at it. I met a lot of funny, talented and clever people, got to become an overnight expert in everything from shower-heads to sheep-dip, got to scratch my creative itch on a daily basis, and earned enough money to raise the family which I love, and even see them occasionally.
But what I didn’t do, with the benefit of perspective, is anything of any lasting importance. At least creatively speaking. Economically I probably helped shift some merchandise. Enhanced a few companies bottom lines. Helped make one or two wealthy men a bit wealthier than they already were.
As a life, it all seemed like such a good idea at the time.
But I’m not really sure it passes The Overnight Test.”
I recently had a friend who quit his job after working there for almost 20 years. When I asked him why he said, “I had just gotten too comfortable.”
Too comfortable?! Is there such a thing? After all, isn’t that what we’re all striving for? What’s wrong with being too comfortable?
As I thought about it, I think I caught his meaning. For him, comfort had become risky because:
- It was sapping his drive and motivation
- It was keeping him from taking risks
- It was making him lazy and fearful of change
- It was causing him to give up on certain dreams
He had a stable income and a warm bed, but he was starting to feel stuck and stagnate. He was comfortable, but he wasn’t feeling particularly fulfilled. Not only that, but he was afraid to do anything about it for fear that things would get uncomfortable.
Have you ever felt that way? I have. Comfort is nice, but it can be dangerous if it leaves you feeling overly content. That’s because contentment demands little. It steers you into a rut that can be hard to get out of.
This comfort paradox can be especially worrisome as we get close to retirement. Why? Comfort is often a by-product of successful retirement planning (e.g. no job, financial independence, etc.). In some ways that can be good. After all, who wants to be worried about where your next meal is going to come from or how you’re going to pay the electric bill.
Unfortunately, it can be bad too. First of all, retirement is a major transition and transitions can be uncomfortable. You’re leaving a job and a routine you’ve know for decades. You’re dealing with unfamiliar things like Medicare and Social Security. You may be moving to a new house or a new city. Being too focused on comfort can cause you to make decisions during that transition that favor short-term comfort over long-term good.
Second, retirement is the time to make your plans and dreams a reality. That means you’ll be doing new things, visiting unfamiliar places and meeting new people. To make that happen, you can’t be content to sit back and play defense.
In other words, both the transition into retirement and your lifestyle in retirement require you to get out of your comfort zone. There needs to be a tension between your desire for comfort and your desire to strive for more. If your primary goal is comfort, don’t expect great things. If, however, your primary goals are growth, fulfillment and personal satisfaction, then you can expect a remarkable retirement, but you can also expect to be a bit uncomfortable in the process.
Photo by Becky McCray. Used under Creative Commons License.
When I was in college, I rented my body to science so I could have enough money to buy groceries. There was a medical testing facility not far from my apartment and they would pay you around $500 to check in on Friday, check out on Sunday and allow them to test some new wonder drug on you in the interim. I didn’t have much in those years (as you’ve probably already deduced), but I was happy.
After graduating, I was able to leverage my finance degree into a career that no longer required me to spend my weekends subjecting myself to Hunter S. Thompson style pharmacological testing. I got married and moved into a nicer apartment. We eventually moved into a house and continued down the path of pursuing the “American Dream.”
Given that little bit of information, you’d think I would be happier now than I was 20 years ago, but that’s not really the case. I’m happy for sure, but my level of happiness doesn’t seem to have grown in tandem with my standard of living. I was happy then and I’m happy now.
Behavioral psychologists refer to this phenomenon as the hedonic (or happiness) treadmill. It is our tendency to quickly return to a relatively stable level of happiness despite changes to our standard of living. Basically, our expectations rise in tandem with our income. The more we have, the more we think we need.
Because we want to be happy, we (somewhat predictably) deal with the hedonic treadmill by constantly upgrading our “stuff.” We buy the new iPhone, television or car and it makes us happier for awhile, but we eventually get used to those things so we upgrade to the next gadget or gizmo. The more we have, the tougher it is to move the needle on our happiness meter. We run faster and faster without really getting anywhere.
Is there a way to get off the treadmill and actually derive some lasting happiness from the resources that we’ve been blessed with? Yes, according to behavioral finance expert Dan Ariely. “The best way to maximize happiness is to spend money on things you won’t get used to,” he says. Here are three examples:
Travel: I’ve written before that it’s better to spend your retirement dollars on experiences instead of assets. After learning about the hedonic treadmill, I understand why. We quickly get used to stuff, but the happiness that comes from experiences sticks with us long after the stuff has gone to the Goodwill. Travel is a great example of a purchase that has a longer happiness shelf life. As Ariely says: “If you’re deciding between a sofa and a vacation, go for the vacation. You’ll quickly get used to the sofa, but the vacation will bring long-lasting memories.”
Learning: Another way to spend your money on things that result in longer-term happiness is to invest in learning. For example, signing up for tennis lessons or learning to play an instrument will likely yield more lasting happiness than if you spent those same dollars on a new flat-screen T.V. Learning something new will keep you challenged and will give you a sense of accomplishment. It will also give you a skill that will stick with you. If you’ve been around here for awhile, you know that we’re big on learning here at Intentional Retirement. Follow along with our learning challenges or start one of your own to boost your happiness quotient.
Relationships: One of the side effects of a stuff heavy life is less time for your spouse, kids, grandkids and friends. How so? Everything we own requires some of our time and money. Columnist Ellen Goodman described it this way: “Normal is getting dressed in clothes that you buy for work, driving through traffic in a car that you are still paying for, in order to get to the job that you need so you can pay for the clothes, car and the house that you leave empty all day in order to afford to live in it.”
Rather than being a slave to your stuff, focus your time and resources on building relationships instead. Go on regular dates with your spouse. Take the grandkids fishing. Go on a guy’s (or girl’s) trip with your friends. Those things cost money, but they will pay dividends for years to come.
How about you? Are you stuck on the hedonic treadmill? If so, think about how you can start spending your money in ways that will actually bring more lasting happiness.
Note: See Part 1 of the Happiness Series here.
When talking with clients about retirement, I almost always hear some variation of the following sentence: “I just want to be happy.”
The more I heard the “H” word, the more I asked myself “What actually makes us happy?”
There’s certainly no single answer to that question. In fact, the answers seem limitless. Not only that, but we don’t seem particularly good at knowing what will make us happy. The things we choose—say, money for example—often provide a short-term, fleeting sense of pleasure rather than a deep, abiding sense of happiness.
With that said, I decided to do a series of posts (300 should do the trick :)) on well researched, quantifiable things that have been proven to make us happy. When I come across a particular fact, idea or action that is likely to make us happy, I’ll write about it.
Happiness Principle #1: Balance Pleasures and Comforts
In his book The Joyless Economy, Tibor Scitovsky argues that there are two kinds of potential experiences in life: pleasures and comforts. By pleasures he means risks or pursuits. These are the new experiences in our lives. The things that get us out of our comfort zone and stimulate our minds. Pleasures include things like meeting someone new, exploring an unfamiliar city, ordering something new off the menu or learning a new hobby or skill.
“A ship is safe in harbor, but that’s not what ships are for.”
Then there are comforts. These are the things that we know and are used to. They’re safe and predictable. They provide stability. Comforts are things like our home, family, longtime friends and the job we’ve had for years.
“Be sure you put your feet in the right place, then stand firm.”
Every day, we’re presented with choices between pleasures and comforts. Left to our own devices we tend to choose comforts. In fact, many times we’re so reluctant to embrace the unknown that we will choose unhappiness over uncertainty. We’ll persist in a bad job or a bad relationship, simply because we’re afraid of what would happen if we didn’t.
Not surprisingly, Scitovsky argues that finding balance between pleasures and comforts will ultimately make us happier than if we have a lopsided tendency toward only one.
Choosing the safe, predictable path (comforts) too often will leave you feeling unchallenged, uninspired and bored. Always taking the risk and stepping outside your comfort zone (pleasures), however, can leave you feeling stressed and unmoored. The key is to find a balance.
So how do we apply this to life and retirement? I certainly don’t have all the answers, but what I have tried to do is lay a solid foundation of comforts that give my family a sense of stability. Our home is not opulent, but it’s comfortable and meets our needs. We have great friends, a church where we feel connected and our daughter is in a good school. In addition, we’ve tried to manage our finances in such a way that we’re not always stressed about money.
What those things do is provide a sort of safety net so we can feel more comfortable (and sure footed) when taking a risk and pursuing pleasures. If we take a risk and it doesn’t work out, the foundation is still there. We can travel and know that we have a warm bed to go home to. We can go back to school (as my wife is doing now) or learn a new skill without feeling like we’re out-punting our coverage. Our daughter can join the soccer team or take up piano lessons and know that she can crash and burn and still have a family that loves her.
How about you? How are you doing balancing pleasures and comforts? Is there an area in your life where you’ve gotten too comfortable and you know it’s time for a change? Has the dogged pursuit of something left you feeling like you’re on shifting sand? If so, spend some time this week thinking about balance and you’ll be well on your way to achieving the happiness that we all look for.