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Does Money Buy Happiness in Retirement?

Credit: iStock

by Joe Casey

Will  your retirement happiness be soley linked to your bank account? State Street Global Advisors recently released their 2018 Global Retirement Reality Report titled The Happiness Formula.

The survey is macro-focused and the formula consists of three factors – Trust in the Savings Systems, Ownership of Retirement Role and (financial) Preparedness. Of eight countries, the US scored highest in Ownership and Preparedness and second in Trust, far behind Sweden. The Netherlands scored the lowest in two of the three categories and the UK was in the bottom three in two of the categories. From the US perspective, it was interesting to see the gap between these two questions:


% Optimistic About Financial Situation in Retirement                 27%

 % Who Said They Are Happy in Their Retirement                          53%


It got me thinking about an age-0ld question: Does money buy happiness?

Happiness or Well-Being?

Sometimes when Happiness is used it’s as an all-encompassing term. However, the more useful concept may be well-being, of which happiness is one aspect.  Psychologists differentiate between three types of well-being. Hedonic well-being is what we tend to think of with happiness – the feeling of happiness. But there’s also Evaluative well-being, which is about life satisfaction and Eudemonic well-being, which is about purpose and meaning (1). Emily Esfahani Smith, author of The Power of Meaning writes about this and highlights the value of pursuing Eudemonic well-being over Hedonic well-being, as the latter is fleeting.

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Well, it Depends on What Kind You’re Talking About ” username=”RetiremntWisdom”]

Well, It Depends 

There are a lot of studies on money and happiness. One that captured my interest is by Daniel Kahneman of Princeton University (author of Thinking Fast and Slow) and Angus Deaton. They highlighted that high incomes impacted the Evaluative well-being, but not Hedonic well-being – the emotional feeling of happiness. Writing about the concept of “hedonic adaptation“, they conclude that:

“More money does not necessarily buy more happiness, but less money is associated with emotional pain. Perhaps $75,000 is a threshold beyond which further increases in income no longer improve individuals’ ability to do what matters most to their emotional well-being, such as spending time with people they like, avoiding pain and disease, and enjoying leisure.”(3)

Be Proactive

If money is not the sole path to satisfaction, then it’s smart to take a balanced approach to retirement planning. The first step is taking charge. An interesting 2017 study of early retirees noted that people with proactive personalities reported a higher level of life satisfaction, perhaps due to a higher level of initiative. While the study focused on personality tendencies, the authors note that proactivity may be learned, and training and coaching can be beneficial in preparing for the transition to retirement. (4)

Seven Ways to Be Proactive About Your Well-Being in Retirement

Much of the focus of retirement planning is on the financial side. That’s certainly important – but it’s not the whole story. Why not be proactive about also planning for how you’ll invest your time? Laura Carstensen’s Socioemotional Selectivity Theory tells us that as people perceive that time is more limited, we become more selective about how we choose to use our time. (5)

1. Look to Your Past 

Remember those things you loved to do when you were younger? Not the ones you just liked, but the ones you really loved to do? Maybe you put them aside or gave them up entirely because you simply didn’t have time with the responsibilities of mid-life. Retirement, or semi-retirement, offers the freedom to pick one or more them up again.

2. Look at Your Present

What things that you do today give you the greatest enjoyment and satisfaction? Pick two weeks and track how you’re spending your time. You’ll probably have some surprises. It doesn’t need to be a complex analysis. Circle the things you’d like to do more off. Zero in on the things to spend less time on and free yourself up to do more of those things that give you greatest joy.

3. Look to Your Future

Do you have goals in your retirement?  I’ve heard some people say, “No. I gave those up when I stopped working.”  Well, that’s where redefining your purpose comes in. Having a vision for what you’d like your retirement life to be like in the future can be a strong motivating force.

4. Try New Things

It turns out that there’s a lot of wisdom in the old saying “Variety is the spice of life.”  Are you stuck in some repeated loops?Has the phrase “Rinse and Repeat” become your personal motto? Fielding casting calls for a role in Groundhog Day II?

Mix it up. Take a different route. Try something new for dinner. Be open to that new restaurant when you notice that your first reaction is an eye roll. Look at a course to take online or locally on something you’re curious about.

5. Take on a Challenge

Often people think of retirement as a time to finally kick back and relax. That can certainly be a key part of any retirement, but too much of a good thing can be problematic – even too much relaxation. In his new book Better with Age: The Psychology of Successful Aging, Alan Castel notes that we can also benefit as we get older by embracing new challenges. It may be mastering a sport or an activity or learning a new language. Having something in your life that stretches you can be an important ingredient. (6)

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6. Stay Connected (but with the Right People)

Loneliness can be a real problem in retirement, so it’s important to cultivate social relationships beyond your workplace. But it’s wise to look at who you’re spending your time with.  Take a step back and look at your relationships. Where you have a choice, are there people you want to spend more time with or less time with? Do they bring out your best or drag you down? (Listening to complaining can be draining. Is it time to do less with Debby Downer or Negatron Nate?).

7. Be Physically Active 

And last, but not least, build the habit of exercise and activity. We know that physical activity is something we should do regularly for our health. It turns out that the benefits may be broader. It’s one of the most important factors connecting subjective well-being and health (1).

Money may not buy happiness, but it does help to create freedom. And freedom offers choices about how to wisely invest your time. So, be proactive about preparing for the non-financial side of retirement. Your retirement happiness may depend on it.


Joe Casey is an executive coach and retirement coach, who also helps people think through and create their Second Acts and life in retirement, at


Related Podcasts:

Why Settle for Happiness in Your Retirement?

How Can You Be Better with Age?



(1) Steptoe, A., Deaton, A., & Stone, A. A. (2015). Subjective well-being, health, and ageing. The Lancet385(9968), 640-648.

(2) Smith, E. E. (2017). The power of meaning: Crafting a life that matters. Random House.

(3) Kahneman, D., & Deaton, A. (2010). High income improves evaluation of life but not emotional well-being. Proceedings of the national academy of sciences107(38), 16489-16493.

(4) Maurer, T. J., & Chapman, E. F. (2017). Relationship of proactive personality with life satisfaction during late career and early retirement. Journal of Career Development, 0894845317697381.

(5) Carstensen, L. L. (1992). Social and emotional patterns in adulthood: support for socioemotional selectivity theory. Psychology and aging7(3), 331.

(6) Castel, A. D. (2018). Better with Age: The Psychology of Successful Aging. Oxford University Press.



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