Saving for retirement: Why you may not need as much as you think

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Happy older couple in retirement
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Which type of retiree would you rather be: striving to keep up with the Joneses or living contently as a “millionaire next door?”

If you answered the latter, chances are pretty good that you’ll have a happy retirement. Because the fact is, the size of your bank and investment accounts isn’t the most important factor when it comes to the quality of your retired years.

During my research on the happiest retirees, I discovered something interesting about money. I call it The Plateau Effect. Simply put, once you achieve a threshold amount of wealth or hit a certain level of monthly spending, you experience a diminishing marginal return on happiness. What’s the magic number to get to your happy place? It depends, but my data indicates the sweet spot is a monthly spending range of between $4,000 to $5,000.

What I took away from this information is that more income and more spending only lead to more happiness up to a point. After that inflection point, more spending money doesn’t noticeably increase happiness.

On the same point, one of the most critical factors in determining happiness during retirement is your attitude towards money and wealth. I’ve worked with many people over the years and I have seen firsthand how money mindsets make a difference.

Many folks remain humble and modest with their spending, despite having a surplus of money in the bank, and they are perfectly happy. Others, however, yearn for celebrity treatment and fall into the “bigger-better-faster-more” mentality.

I’m here to tell you, the “give me more” mentality is not always a happy place. These people tend to be disappointed because whatever their wealth brings them is never enough. They aren’t at peace with their money because they are always chasing the next “big thing.”

Many of the listeners to my radio show, Money Matters, fall into the other category.

Typically, these families live in the Atlanta suburbs, where houses range from $200,000 to $600,000 ‘ not in Buckhead where homes usually go for $1 to $4 million. These people are truly living the life Thomas J. Stanley talks about in The Millionaire Next Door.

For them, financial planning and investment strategy are less about status and more about what Stanley describes as beings PAWs (“Prodigious Accumulators of Wealth”). In my experience, these people march to a different tune ‘ one that says, “I’ve got enough money to be pretty darn comfortable and to do what I like.” These are among the happiest retirees.

So, what makes them tick and how do they spend their time? The answer is as varied and individual as the people themselves. Here are a few examples of some of the lifestyles these “millionaires next door” are living:

Bernard and Doris are in their mid-sixties and love being athletically active. Every day, they make a point to go for a walk, play a round of golf, take a bike ride or play tennis.

Amelia and Harold love to travel and have never been to Asia. They are planning a trip there later this year.

Cora loves spending time with her granddaughter, Celeste. Both Celeste’s mom and dad have full-time jobs, so Cora steps in and is an ultra-active grandparent.

Helena and Scott love their RV and have already visited half of the states in the US. They plan to make their way through the rest ‘ including Hawaii and Alaska.

We can learn a lot from “non-VIP” retirees. They typically view their money as a vehicle to get them where they want to go. They seem satisfied with where they were in life. And, best of all, many of them are having the time of their lives!

All in all, these retirees are a much happier group, probably because they are entirely content living as “masters of the middle.” They don’t need extravagance at every turn, but they do indulge in luxury now and then.

What is different from these folks and those that worry about “keeping up with the Joneses” is that they put luxuries in perspective. They have a balanced approach to wealth and are at peace with their money.

Disclosure: This information is provided to you as a resource for informational purposes only. It is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.

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Wes Moss About the author:
Wes Moss is the host of Money Matters ‘ one of the country’s longest running live call-in, investment and personal finance radio show ‘ on WSB radio. He is the Chief Investment Strategist at Capital Investment Advisors (CIA), and a partner at Wela, a digital financial advisory service. In 2017, Barron’s named Wes …Read more

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Wes Moss About the author:
Wes Moss is the host of Money Matters ' one of the country's longest running live call-in, investment and personal finance radio show ' on WSB radio. He is the Chief Investment Strategist at Capital Investment Advisors (CIA), and a partner at Wela, a digital financial advisory service. In 2017, Barron's named Wes ...Read more
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