Drivers of Life Satisfaction Among Retirees

This past week, I attended a presentation (via webinar) featuring a prominent retirement researcher, Michael Finke. I made notes on the items I found interesting and want to share them with you. Here they are in no particular order:

The single most important factor influencing happiness and well-being in retirement is…

  • Creating and maintaining friendships.
  • The most important relationship, by far, for married couples is the one with their spouse. It is very difficult to be happy in retirement if you are not happy in your marriage.
  • Maintaining friendships is costly in terms of time and effort.
  • Women are better at maintaining friendships. Many men rely too much on their wives for social interaction in retirement, which can put a strain on the marriage.
  • Having spouses retiring at different times often leads to marital friction. Spouses should try to retire at or near the same time.


  • We romanticize what we will do in retirement (golf, beach, vacation), but the #1 activity is watching TV.
  • Relaxing all the time does not make us happy. It is important to find activities.
  • A good use of financial resources (in terms of happiness) is investing in hobbies that lead to social interaction (e.g., golf, classic cars, biking).

Financial Security is Definitely Correlated with Retirement Happiness.

  • Life satisfaction rises with wealth up until about $4–4.5 million; then satisfaction maxes out. Additional wealth above that level did not increase retirees’ happiness levels, and in some cases, ultra-high net-worth folks were less happy.

Spending & Income: What Type and How Much to Be Happy?

  • Spending more on social activities makes people the happiest—eating out with friends, travel, entertainment. These expenditures, which may be deemed “frivolous or optional,” make people happier than any other type of spending (e.g., on material things).
  • The typical retiree spends about the same amount in their first year of retirement as they did in their final working year. However, they do not need the same amount of gross income, since they do not need to save a portion of their income in a 401k or IRA, nor do they pay payroll taxes. Workers with over $100k in pre-retirement income typically only need to replace about 60-70% of pre-retirement gross income.
  • Real spending (after subtracting inflation) tends to decline each year during retirement. Spending falls faster among wealthier retirees.
  • When people had pensions, they spent more on frivolous things and were happier. In fact, an additional $10,000 in pension income made people as happy as an additional $643k in investible assets!
  • Many retirees who do not have a pension are not comfortable spending down their retirement assets. In one survey, 84% of participants indicated that they were uncomfortable with the idea of using up some of their nest egg to supplement their income. Many people develop a mindset of thrift during their working years and are unable to change that, even when it is no longer necessary.

Do Children Make You Happier in Retirement?

Retirees who had children were slightly happier than those who did not. However, if kids live within 10 miles, this tended to reduce happiness due to unrealistic expectations of what the relationship would be (kids don’t take advice, retiree becomes cheap babysitter, spouses want different amounts of time with kids/grandkids).

What Type of Housing Makes Retirees Happiest?

People should consider and discuss lifestyle changes in advance. Many people figure they will give it a few years once retired to decide where/how they want to live (downsize, relocate, etc.). However, keeping options open makes people less happy. Once people make a choice and move forward with decisions, they are happier. Michael Finke recommended making choices early in retirement and sticking with them.

Homeowners are happier than renters up to their early 80s. Then people are happier when they can have an active social life without having to travel (e.g., senior living, continuum of care community)

Health: How Does It Impact Life Satisfaction in Retirement?

It is no surprise that health is very important for enjoying your life. However, excellent health alone does not make people happy. On the other hand, poor health directly reduces life satisfaction, and the worse your health, the more unhappy you become.


Longevity Insights

  • The gap in longevity between men and women has narrowed. In 1980, a 65-year-old woman could expect (on average) to outlive her husband by approximately four years. Now the longevity gap has narrowed to approximately two and a half years. Apparently, men used to abuse their bodies (excess drinking, smoking, poor diet), but are now making better lifestyle choices.
  • A healthy, mid-upper income, 65-year-old couple has a 43% chance of one spouse living to age 95.
  • Longevity increases significantly with income. The richest 1 percent of men live 14.6 years longer on average than the poorest 1 percent of men, while among women in those wealth percentiles, the difference is 10.1 years on average.
  • The wealth and longevity gap is also growing. Life expectancy has increased by 2.34 years for men and 2.91 years for women who are among the top 5 percent of income earners in America, but by just 0.32 and 0.04 years for men and women in the bottom 5 percent of the income tables over the past 15 years.

So, the bottom line is invest in relationships, experiences, and your health. It helps to be reasonably wealthy and have secure income, but do not get obsessed with saving every penny.

I hope these insights were helpful.

Questions? Comments? Thoughts? Email me.