Certainly “a comfortable retirement requires a significant amount of savings and deft investment management,” as David Ning, one of our favorite financial-advice columnists, writes in a usnews.com piece. “But achieving financial freedom isn’t the only necessity to retire well. You need to be able to use that money to create an enjoyable lifestyle that will last for decades, and find a way to fill those years with meaningful hobbies and social gatherings with friends and family.” Here, in excerpts from his article, are three of the steps he recommends to create a happy retirement.
“Make an investment plan you can stick to. You need to create an investing strategy you feel comfortable with through thick and thin. No investment plan is going to outperform every other strategy during all phases of the business cycle. There may come a time in the future when your investment strategy falls out of fashion and makes you question whether it’s the right one to follow. You may feel like you made a poor decision, while everyone you know seems to be doing better than you. Yet, the key to investing successfully is to find a strategy that has stood the test of time, and stick with it throughout your lifetime. Unless you are confident you can outsmart the market and earn enough to offset the excess fees and taxes incurred by trading in and out of investments, you’re likely to be better off sticking with low cost index funds that capture the returns of the overall market. Compound interest can produce huge returns in your favor, but in order to take maximum advantage of it you need time in the market. That means riding out the volatility so that your earnings will grow over the long term.
“Find a passion you enjoy. Many people who build a significant nest egg enjoy watching their wealth grow. This habit is certainly useful when saving for retirement. But it can be difficult to start the decumulation phase, because you have to accept watching your life savings slowly decrease. In order to be comfortable in your golden years, you need to find hobby you like more than looking at your investments. Otherwise, you’ll end up being too frugal and fail to enjoy the wealth you worked so hard to accumulate. Sure, your heirs will be happy if you leave them a significant inheritance. But don’t become so obsessed with your investments that you fail to take advantage of the retirement you have earned.
“Use money to increase happiness. One strategy to save is to spend extravagantly on things you value, and not a penny on anything that creates zero happiness. Many people I know love traveling and spend luxuriously on trips, while driving a beat up old car. I have a pretty nice ride, but haven’t paid for cable TV for a long time for a long time. There are different things that make all of us tick. Find out what they are, and you can ignore the other things that are sucking money away from your long-term goals. You can spend a lot of money traveling in style, leasing new cars and wearing nice clothing, but if you don’t get lasting enjoyment from these things you are just throwing money away. Instead, aim to spend money only on the things that boost your happiness, and eliminate the things that don’t.”