Over the past few weeks I’ve been sharing parts of the book You Can Retire Sooner Than You Think
and giving my thoughts on it.
It’s a great retirement book that I highly recommend because it’s helpful for almost anyone interested in retirement. Those who are 5-10 years before retirement can use it to fine-tune their plans while those farther out can use the book to design an awesome (or what the book calls “happy”) retirement.
For those who may have missed a post or two, we’ve covered how to have a happy retirement, what makes people unhappy in retirement, and the five secrets of the happiest retirees.
Today I’m going to share a list the book calls the “18 traits of the happiest retirees.”
Since I’m a happy retiree, I thought it might be fun to see where I stack up on their list. So I’ll share their thoughts, give my comments on each point, and talk a bit about how we compare to the happiest retirees.
You might want to do something similar if you’re retired, or estimate where you’d be (and make any adjustments needed now) if you’re planning for retirement.
The list isn’t an end-all guide to happiness in retirement. As such, the book gives this preamble to the list:
Think of these 18 traits as behaviors and characteristics—common threads that show up, time and again, almost the happiest retirees. Please don’t think of it as a checklist: I’d be a fool to instruct you to adopt every one of these 18 traits for yourself. But they do help us map out how a happy retirement looks—and they should give you some ideas of how you increase your own chances of happiness as you approach your golden years.
With that said, here we go…
18 Traits of the Happiest Retirees
1. During their “peak earning” years, happy retirees average $97,869 in household income (unhappy retirees average $77,522).
It’s interesting to me that both of these are decent incomes, well over the U.S. average.
It’s true that one is $20k higher than the other which obviously can add up. An extra $20k over many years is a large number. If you don’t believe me, think about your income with an extra $20k tacked on.
That said, $78k per year income is nothing to sneeze at.
Our household income was well over twice the earning levels of happy retirees for the majority of my career. It was even more in my “peak earning years.”
However I did give up many of my peak earning years to retire and lost a few million dollars as a result.
But retirement has been well worth it for us as I LOVE it. Plus I have gotten so much time back — we’re up to something like 10-12 years in “value” since retirement years are like reverse dog years.
Besides, I’d won the game so why not stop playing?
2. Current income of the happy group, either in retirement or close to it, averages $82,770 (unhappy retirees average $53,370).
So the happy group drops down $15k in earning when they retire while the unhappy group drops $22k (and from a lower amount to begin with).
Now we start to see why the unhappy group is unhappy, especially when we’ve previously found out that the cutoff income for happiness in retirement is around $72k.
As shared in our annual update, our projected income this year is $130k and that doesn’t count our dividends, which are mostly in retirement accounts and that we reinvest.
3. Happy retirees have at least $500,000 in liquid net worth.
The book notes under this point that the “happiest retirees’ average liquid net worth is $874,479 while unhappy retirees average $437,500”.
It’s not clear if the $500k is just a cutoff or if it’s the median number while the others are average.
In the end I think we can say that to be happy you want at least $500k in liquid net worth and the closer you get to $900k, the happier you’ll likely be.
Again, in our recent update, we’re well above this level.
4. They have a well-defined understanding of their purpose in life.
Having a “well-defined understanding of your purpose in life” seems like a pretty lofty goal. Does anyone ever have this?
Sure, I know people are happy, driven, have a sense of what they are called to, etc. but having your “purpose” in life and knowing it’s “well-defined” seems like something only a rare few achieve.
Or maybe I’m reading too much into this.
Anyway, I’m going to give myself a “nope” on this one.
5. They have at least 3.5 core pursuits—the activities and interests they love to pursue.
If you retire to something (like core pursuits), you’re more likely to be happy.
If you retire from something (like a terrible boss, nasty job, etc.), you’re probably not happy.
In other words, retirement seems to be better for most people when they are running towards something (that they like) rather than away from something (that they hate).
I have somewhere around 12 core pursuits currently, so I could stand to lose a few. Ha!
6. Their home value is at least $300,000.
In an earlier post I said I found this stat confusing since the book Stop Acting Rich
seems to advocate homes below $300k. Their thoughts:
What we don’t realize is that the true cost of living in certain homes and neighborhoods is unseen but truly devastating. I believe the greatest detriment to building wealth is our home/neighborhood environment. If you live in a pricey home and neighborhood, you will act and buy like your neighbors. In other words, human beings have an innate tendency to act and be like those around them — to fit in — and even compete. The type of home we live in and where we choose to live often takes the greatest toll on our financial wealth, and from it, all other perils flow.
The reason why so many homeowners today are having a difficult time making ends meet goes way beyond mortgage payments. When you trade up to a more expensive home, there is pressure for you to spend more on every conceivable product and service. Nothing has a greater impact on your wealth and your consumption than your choice of house and neighborhood. If you live in a pricey home in an exclusive community, you will spend more than you should and your ability to save and build wealth will be compromised.
The more expensive, the more affluent neighborhoods are a vortex of sociological forces. The more affluent the neighborhood, the more its residents spend on almost every conceivable product and service. From cars to haircuts, and from wine to watches, those living in “prestige estates” spend more. We take consumption cues from our neighbors. If many of our neighbors have a much higher level of income and wealth than we do, we will have set ourselves up to lose the war before we have even begun to battle.
My research has found that most people who live in million-dollar homes are not millionaires. They may be high-income producers but, by trying to emulate glittering rich millionaires, they are living a treadmill existence. In the United States, there are three times more millionaires living in homes that have a market value of under $300,000 than there are living in homes valued at $1 million or more.
Though they do offer a bit of leeway later in the book:
The most productive accumulators of wealth spend far less than they can afford on homes, cars, clothing, taxes, vacations, food, beverages, and entertainment. As many millionaires see it, living in a pricey neighborhood is a bad idea. Why live in a million-dollar neighborhood when one filled with $300,000 and $400,000 homes will serve the purpose? Real and actual millionaires understand that when you live in a luxury house, you are also buying a luxury lifestyle. Included in this lifestyle are the social pressures to redecorate frequently, join the country club, and send your children to private schools. Your property taxes continue to skyrocket, along with the cost of utilities and insurance. Plus the prices of nearby services tend to be higher, from grocery stores to dry cleaners.
Contrary to popular belief, however, most of the self-made millionaires I have studied have one thing in common: They were able to build wealth precisely because they never lived in a home or neighborhood environment where their domestic overhead made it difficult for them to build wealth. In essence, they ran their households like a productive business. It is not only about how much you make. More important, it is how much you keep. And the “keep” component begins and ends at your home address.
If you want to become wealthy [the way other wealthy people have], live in a neighborhood where your household is among the top income generators. For example, what if your household’s total realized income is in, say, the high five figures? Then live in a neighborhood where the median market value of a home is less than $300,000. Do so, and the chances are that among your neighbors, your household will likely be in the top 20 percent along the income continuum. Then live and consume as though your household’s income was only 80 percent of what it actually generates. Save and invest the rest. Now you are on your way to becoming wealthy.
To enhance your chances of becoming financially independent, you should live in a home and neighborhood environment that has high wealth-building characteristics. You need to be surrounded by neighbors who have lower incomes than your household generates.
Of all that, I can especially relate to this: “They were able to build wealth precisely because they never lived in a home or neighborhood environment where their domestic overhead made it difficult for them to build wealth.”
This is what we did. We lived in low cost of living markets which was conducive to building wealth.
Recently we were talking to a group of young people and they lamented the home prices in Colorado Springs (way too high for them.) My wife and I mentioned that our 3,400 square foot house in a good neighborhood in Grand Rapids, Michigan (where we lived 14 years) cost us $180k. Many of the attendees gasped when we said it. Ha!
Couple a low cost of living with a high income and you have a recipe for building wealth.
The point above implies that happy retirees live in huge homes with very high values.
But here the author clarifies his point with “even the happiest retirees don’t have home values that exceed $400,000 (on average)”.
This makes more sense.
We were between $300k and $400k in house value when we bought here in Colorado. Then the market caught on fire and we’re probably at $450k now.
It could be worse, right? 😉
7. They don’t have a mortgage, or if they do, their mortgage payoff is in sight.
We paid off our mortgage over 20 years ago and have really enjoyed owing nothing to anyone all these years.
That said, it was a pretty easy choice for us since interest rates in the late 90’s were high compared to today.
Now there’s a great debate about paying off a mortgage or keeping it and investing instead. I’ll let you decide your preference since either option can work IMO if executed well.
8. They are married, not divorced.
Divorce is expensive.
It’s hard enough to amass wealth, but when you then divide it in half once or twice, that’s simply a financial killer.
For example, let’s say you have a $4 million net worth and get divorced twice. You move to $2 million and then $1 million.
There’s a big difference in having $4 million versus $1 million.
Plus marriage gives you an advantage. The book talks about how married couples have two incomes. This allows them to make a great income together even if neither of them has an outstanding salary.
For us marriage worked economically because I played offense while my wife played defense. Together this was a great one-two punch.
It’s also important who you marry — not just that you are married.
For instance, I have a friend who makes a great income. He and his wife pull in about $100k per year. But she spends it all and then some!
Financial life can be brutal if you’re married to a spend-thrift. No matter how much you can make, it seems they can always find ways to spend it.
9. Happy retirees have at least two children (and three seems to be the magic number).
Darn! We missed it by one! Ha!
We have two great kids…
This point is interesting to me since I see posts now and then on how expensive kids are. Yet the happiest retirees have more kids (50% of unhappy retirees have no or one child), higher net worths, and higher incomes.
10. They have at least two (sometimes three) different sources of income in retirement.
I think they need to rephrase this one a bit.
In The Top Five Money Secrets of the Happiest Retirees, Part 3 we noted “The average number of income sources for happy retirees is 2.6”.
I also commented that based on the book’s suggestions for post-retirement income, two income streams seemed pretty easy for almost everyone (Social Security and part-time work).
If I was the author I would suggest having three or more sources of retirement income.
We’re at seven, though three of them provide most of our income.
11. Happy retirees spend at least five hours per year (and usually more) planning for retirement.
It seems like someone could fall off a log and do five hours of retirement planning per year. Or am I missing something?
I’m not sure what they count in adding up the hours, but we did budgeting, had long chats about retirement, read about it, etc. before we took the plunge.
And now that I’m retired, I probably read even more about it than before.
Not sure “reading” counts as “planning” though…
12. Their spending level in retirement is approximately $53,000 per year.
Note that this is after taxes. According to the book they need to earn about $72k gross to spend $53k per year.
In the end, it looks like a $50k retirement is pretty close to making most people happy.
We could get that low if we cut way back, but it would put a big crimp in our lifestyle. I probably wouldn’t have retired if I could only spend $53k per year (or even earn $72k). I likely would have worked longer and saved/invested more.
13. They live in the city or suburbs, not the country.
Haha! 37% of unhappy retirees live in a “rural” area — probably like the town I grew up in.
I can see why they are unhappy — there’s not much to do there. I loved growing up where I did (the town was more vibrant then anyway) but there’s no way I’d move back or I’d probably die of boredom.
Even my parents, who have a lot lower threshold for needing something to do, are bored in their small town. That’s why they sold their home, bought an RV, and are seeing the U.S.
We live in the northern suburbs of Colorado Springs, close enough to get almost anywhere in the city in 20-30 minutes. Denver is an hour away and we are there often — we use the Denver airport when we travel since it’s not that much farther than the Colorado Springs airport, the prices are usually better, and we can get direct flights to almost anywhere (we’re strictly a no-connections family unless there’s no way to avoid it).
14. Happy retirees hate fast food and love steak.
Yes, I love steak. We get tenderloin at Costco, cut it ourselves (the tube version is often on sale for $12 a pound), and I grill it on the Traeger. Yum!
BTW, we grill usually at least once a week, making enough meat for several meals. I’m hoping to trade my grill in for a newer/larger version this year, but we’ll see if that happens.
I also love fast food, but it’s not healthy, so I eat it in limited quantities. If I had to pick my favorite fast food it would probably be Taco Bell.
15. They don’t drive BMWs.
My personal opinion is that as long as you can afford it, drive what you like.
It seems many (most?) BMW owners may have over-extended themselves, buying a car they couldn’t really afford, and that’s why they are unhappy.
We currently have a Toyota Highlander and a Subaru Forester. My son owns a Honda CRV (which is in our garage while he’s away on ministry training). No BMW’s for us or in our futures.
16. They shop at Macy’s and Kohl’s.
Personally, I’m not a great fan of either.
We do most of our shopping at Costco, King Soopers (Kroger), Sprouts, and Amazon.
Walmart and Target round out our second tier of stores. After these six, we do very little shopping.
17. Happy retirees take at least two vacations per year, and when they do vacation, they spend more than unhappy retirees.
We take two “big” vacations (at least 10 days and/or to a nice place like Hawaii or Grand Cayman) each year and supplement those with smaller trips here and there.
We try to do it in the least expensive way that allows for the luxury I like (I don’t like to penny-pinch on vacation), so I classify our vacations as upper middle class.
We also live in Colorado, so it’s kind of like we live on vacation. 🙂
18. Their education level includes some college or above.
The book didn’t talk about this point much until the very end (this list) but I would assume that education level correlates with earning, so it makes sense.
Both my wife and I have Master’s degrees. Her degree hasn’t been used in over 25 years, but mine has been worth a few million.
So that’s the list, my thoughts on it, and where we stand on each point.
Looks like we have most of them covered. No wonder we are happy in retirement!
Any comments on the list? And how do you measure up?