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Transcript

Maria: Hi. I’m Maria Bruno, head of U.S. Wealth Planning Research here at Vanguard.

Joel: And I’m Joel Dickson, global head of Advice Methodology at Vanguard. Welcome to our podcast series, The Planner and the Geek, in which we will discuss topics that are important to individual investors.

Maria:  And we’ll have some fun along the way.

Joel Dickson: So, Maria, what’s the best thing you did over the last week?

Maria Bruno: Oh, we had Mother’s Day weekend.

Joel Dickson: We did have Mother’s Day weekend.

Maria Bruno: Yes, so it was good. Had the family over. So we had a good time.

Joel Dickson: Yes? Who made the food?

Maria Bruno: I did. It’s my gift.

Joel Dickson: Great, great Italian family. Somebody’s gotta make all the food.

Maria Bruno: Actually, we had an American…

Joel Dickson: Had American?

Maria Bruno: We had an American dinner.

Joel Dickson: Yes?

Maria Bruno: Steaks.

Joel Dickson: Nice!

Maria Bruno: Steaks on the grill, yes.

Joel Dickson: Steaks on the grill.

Maria Bruno: But, as usual, as customary, we spend a lot of time at the kitchen table. In an Italian family, that’s where the heart of the home is.

Joel Dickson: That’s right. So that connectedness to family you do?

Maria Bruno: Yes.

Joel Dickson: Okay, good.

Maria Bruno: So, had a good weekend. How about you? What’s going on?

Joel Dickson: Well I had a fairly quiet weekend. You know, being a father on Mother’s Day can lead to you know, not as valued time there.

Maria Bruno: No, but you’ll have your day coming up soon.

Joel Dickson: Of course! You know, that’ll come up. No, I actually ended up doing some shopping.

Maria Bruno: Spending money made you happy?

Joel Dickson: Spending money, actually, I don’t know that it made me happy. I had to go to the mall. I had to deal with the crowds there. But I needed some shoes in this case and I don’t know that the shoes, though, themselves make me happy, or happier I should say.

Maria Bruno: Well that’s interesting because it doesn’t sound like the process of shoe buying makes you happy. There are ways around that in terms of online shopping, where shoes come to your house. You can try them on and then ship back what you don’t want.

Joel Dickson: That’s a good takeaway. I guess I just am in this habit of wanting to actually go to the store and experience looking at the shoe and feeling the shoe and feeling how it is on my foot, so.

Maria Bruno: Understood.

Joel Dickson: What, what can I say?

Maria Bruno: All right, so, Joel, I think we’re leading to our topic of the day, which is happiness.

Joel Dickson: Happiness! I’m all for happiness. Who isn’t pro-happiness? Oh, I stumped you with that one?

Maria Bruno: Yes, you did. So we’re talking happiness in retirement.

Joel Dickson: Happiness in retirement and happiness generally?

Maria Bruno: Well, generally. But, I think in terms of what we’re talking about today if we focus in on retirement—which is kind of funny because you would think that most people are happy in retirement—that we shouldn’t have to spend a whole podcast talking about happiness in retirement.

Joel Dickson: Yes. And how, what are the determinants of that, right? Money? Wealth?

Maria Bruno: Or what?

Joel Dickson: I mean, because we talk about wealth and money around here, right? I mean.

Maria Bruno: We do, and you, when you think about retirement, most of us are saving for retirement, so that is our goal. So, money leads us to be able to retire.

Joel Dickson: Yes, does that lead to happiness?

Maria Bruno: Correct. That’s the big question, right?

Joel Dickson: I guess that’s the question? So how do you think about then money or savings within that context of happiness?

Maria A. Bruno: So, I wanted to just tee up our guest today. So, we recently sat down in the studio with Michael Finke, who is the chief academic officer at The American College here in our backyard.

Joel Dickson: That sounds very stuffy. The “chief academic officer.” Basically, he’s a retirement expert, right?

Maria Bruno: Actually, he’s one of the top retirement experts in the industry, but, you know, currently he’s at The American College. He previously was at Texas Tech University. So, he’s published a lot on this topic—not just retirement, but investor behavior—and, we had the privilege of sitting down in the studio with him recently, and we talked about this. So, I think it’ll make for an interesting discussion. Fun fact about Michael Finke, because you know I enjoy my fun facts.

Joel Dickson: You do enjoy your fun facts, yes.

Maria Bruno: Michael has two Ph.Ds.

Joel Dickson: Ooh, that’s double the number I have.

Maria Bruno: Exactly. So, when we think about geeks and the geek factor there, I had a lot of fun with the two of you.

Joel Dickson: Geeks squared.

Maria Bruno: And I thought, you know, if we ever need a geek replacement, Michael could be one of the top contenders.

Joel Dickson: Oh, you’d take that in a second.

Maria Bruno: I’m just saying.

Joel Dickson: Just saying.

Maria Bruno: Just saying when we’re talking about happiness in retirement.

Joel Dickson: Or happiness not in retirement, yes, uh huh, I know where I stand in this. All right. I got it.

Maria Bruno: So, yes, so he’s going to talk a little bit about the paper that he did last year. It’s on satisfaction in retirement. So, it made for an interesting dialogue and got the two of us talking around happiness in retirement. But it basically boiled down to three things. One is, happiness is not so much around money but basically what you do with that money. The other is the relationships that you have, and that’s going to make for an interesting discussion. And then, thirdly, is your health, right? There’s this old adage out there that if you have your health, you have everything, which kind of plays itself out a bit.

Joel Dickson: It’s interesting how you define happiness, right? Do you define happiness as from the kind of the opposite of lack of stress or lack of worry, or do you define happiness as sort of that joyous sort of feeling or, or approach? I think in many ways, the way that, you know, we talk about health is one of those. You know, I’m happier if I’m healthier, but you know, it doesn’t mean I’m necessarily feeling happy. It’s just that I’m not as much feeling stress at times.

Maria Bruno: Well, I would agree. And when you ask somebody, “Okay, well what makes you happy?” sometimes like, “All right, well, I can tell you the things that make me unhappy.” Because people I would think are generally happy or want to be happy.

Joel Dickson: Yes, I would hope so, right? So when we think about, though, from a personal finance standpoint, it’s actually kind of mixed what that relationship is. It’s actually a pretty well-done field in, you know of research in, in economics recently about the relationship between income, wealth, and, and sort of measures of happiness. And, you know, there isn’t necessarily a particularly strong relationship at times between those measures.

Maria Bruno: No, and it’s actually interesting, because if we take a step back, we started off talking about happiness, and then we were like, okay, happiness in retirement.

Joel Dickson: Yes.

Maria Bruno: Is it different, right? Is happiness in retirement different than happiness during your working years?

Joel Dickson: Wow, I don’t know. What do you think?

Maria Bruno: I think it is.

Joel Dickson: Yes, how so?

Maria Bruno: Because when you think, much of what we do in our working years is built around the workplace. For instance, we spend an awful lot of time at work and the people that we work with.

Joel Dickson: I make you happy, don’t I, Maria?

Maria Bruno: Don’t put words in my mouth! So, a lot of the time that you spend, and your energy is built around work, as a means to retirement or provide, you know, stability for your family, for instance. So, your time is split between work and family.

When you retire, and you take this workplace out of the equation, or if you’re semi-retired and you start to phase out of the workplace, the focus is different, right? You have maybe more free time or more free time with those individuals around you, whether they’re friends or family. So, I do think it’s different. In your working years, you had mentioned stress. Time is probably one of the things that you don’t have enough of during your working years. And maybe that’s flipped a bit when you’re in retirement because you have more time to do leisure activities and things like that, hopefully.

Joel Dickson: I agree. I think the time allocation and the ability to control that time allocation can certainly look different. If we want to tie this back to enablers of happiness and so forth, you know at what point do we start thinking about it? I mean one of, one of the differences is retire or not retire. If you’re working consistently and steadily, you know, there is that cashflow of your income in that situation, you may have less financial concern or worry. You know, you’ve got that, that income to do that. In retirement, maybe you have to develop that income yourself, you know, off of your investment portfolio or from other sources, you know, over time.

Maria Bruno: No, I agree. But, also, during your working years, though, you need to make the decision of consumption today versus saving for retirement. All right, so you do have that, that decision point. So, you have that work cut out for you when you’re working. You don’t have that human capital, right? You don’t have that inflow of earnings when you’re retired. And that is a game-changer, because then you have your pool of assets, or you might have your—if you’re fortunate enough to have a pension payment, for instance, or Social Security—your cash inflows are very different during retirement then they are during your working years. Your expenses are different as well.

Joel Dickson: Well, yes. And the reason that I kind of mention that is that the economic sort of research that I was alluding to earlier would suggest that, there is a lot of value to some more wealth or some more income when you are struggling to meet sort of basic life necessities. So, you get a lot of extra value by being able to better meet those necessities. One you have a sufficient amount to sort of meet your daily life expenses, then, the additional value of more wealth or more income is much more attenuated. So we normally think of, well, more is better, but in many ways happiness is not once you’ve reached a certain level to that point. But that saving consumption decision that you were talking about is a critical component, if you will, to that because once you’ve gotten to where the human capital, as you said, has been depleted, well, it’s now hard to save more. You kind of have what you have and, you know, how do you then allocate it in such a way that it can enable whatever it is that your goals and objectives and approach is for retirement? So, yes, I think we talked about it in an earlier podcast, which is if you get to, you know, 3 years before retirement and figure out, oh, I haven’t saved enough, well, really, there’s not a lot more you can do then, you know, maybe work longer in order to have the cashflow piece still there

Maria Bruno: Right, you really need to adjust your plans at that point. Absolutely. But, also, to add to that, when you think about the earnings cycle of a typical wage earner, right, it increases as you get closer to retirement. So, you know, maybe in your 40s or 50s you’re in your peak earning years. So, you do have probably more of a decision-making point at that time in terms of savings versus consumption.

Joel Dickson: Or you have different sets of goals maybe…

Maria Bruno: Right, but then because at that point, you’re probably working a lot, and time is probably more critical at that stage as well, right? So, you’re kind of I guess dealing with this decision of, okay, do I work more and earn more or do I, you know, I want to ease back a little bit to enjoy the time that I have.

Joel Dickson: Yes. This relationship between how you view your money, your assets, or so forth and how it might relate to meeting your goals and objectives or let’s loosely define that as, happiness if you will, for a moment, we show statements, we show dollar values. You know, it’s, “Hey, how much money do I have to meet my retirement needs?” And, you know, more is better. But at some point, “good enough” is happiness. We’re guilty of it in the financial services profession. It’s Dr. Seuss’ The Lorax, where just want to be biggering and biggering and biggering. You end up showing these statements or these charts that just go “growth of a dollar” and you know, more is better, if you have reached a point where you get enough so you can remove the financial stress in your life. It’s not at all clear that it’s kind of the way to be thinking about how to maximize, if you will, your happiness.

Maria Bruno: Yes, I would agree. And, you know, when you, we think about the things that we talk about maybe as an industry, a lot of it is performance based. Oh, what did the markets do today and let’s look at your number, but the reality of it is, it’s paper money. Right? So, we look at our 401(k) balances, for instance, these are numbers. Unless I cash that out today, that number is not very meaningful because I’m going to want that money down the road.

Joel Dickson: And if you do cash it out today, you might have other problems still. You know, the penalties and taxes and you just made it even worse.

Maria Bruno: Thank you, geek. Yes, correct.

Joel Dickson: I had to play the geek role. Sorry.

Maria Bruno: That underscores that what that dollar amount there is on paper what I’m actually going to get is going to be even less, right?

Joel Dickson: I just think about when we often talk about things like goals-based investing—I’m saving for retirement, I’m saving for education—that’s a bit of a different conversation than, how am I going to allocate my time and my resources to live my life in the way that I want to live it and so forth? And in some ways, though, I don’t know if you’d agree with this, but, this move from a goals-based standpoint away from, hey, how many dollars do I have, to, hey, what’s the chance that I’m able to live the way that I want to? So, you know, maybe it’s the ability to achieve a certain income level each year in my retirement. Oh, there’s a 90% chance of, of me meeting that let’s say.

Maria Bruno: Right, so what, I think what you’re suggesting there is you’re turning this number into something that is a little bit more meaningful. Right? So, you have this big number. Well, what are you going to do with that? Well, this is what it may mean in terms of a monthly income, for instance.

Joel Dickson: Well, and a chance of not running out of resources or not being in the situation where you feel that financial stress.

Maria Bruno: Right, and when you have multiple goals, it’s also a series of trade-offs, right? So maybe saving for retirement is more important. So, if I save more there, well, that may mean I may not be able to fund this percentage of my child’s education or what not right? So it’s a series of trade-offs there. But being able to prioritize the goals and then attach success towards meeting those goals.

Joel Dickson: Yes, that’s certainly one. Yes, and the success metric of, hey, you know, is there really any difference between 90% chance of success and 92% chance of success? That may be $50,000, but really, is there any material difference between that? You know, it’s do I have enough, and do I feel comfortable? Do I have the peace of mind to, in my financial resources, to be able to do that? Obviously, if you don’t have the peace of mind, then suggest maybe that consumption saving trade-off that you were talking about earlier is kind of out of balance.

Maria Bruno:  I think we are, as planners, for instance—ooh, and me being one of them—or advisors, are really moving towards that in terms of, all right, well let’s help understand what this big number is and based upon what your goal is and the probability of achieving those goals. So certainly, you know, working with an advisor could help. There’s also online tools and calculators. We have some on vanguard.com, for instance, that can help, so I do think that we’re trying to help investors reframe that and say, “Okay, well, you have this number. What does this really mean?” But there is this focus on this number, and I think we need to do more in terms of breaking that down and say, “Okay, what does this really mean?”

Joel Dickson: I’ll even add another piece to that, which is, the whole planning process about what are the goals that are important to you? Often, we’re not saying, “the goal is to have a million dollars.” Right? The goal is to have the resources that I want or need to do the things that are of value to me. Right? So, it’s that goal discovery process that can be so important in terms of the planning. It’s not, oh, I have to have a million dollars or $300,000 or whatever it may be.

Maria Bruno: Yes, I would agree, and I think the other thing is the, the question of, well, when can I retire? Right? So that depends upon what your goals are. I’ll put a plug in for vanguard.com. If you actually search that term, you can actually get some information there and some tools there, but the when can I retire is contingent upon, well, what do you want to do in retirement? So, there’s this focus—and I think we’ve talked about this in prior podcasts as well—in terms of, well, you shouldn’t just focus on this number. You need to focus on, well, what do you want to do in retirement and then do you have enough? And Michael talks to this too in terms of, well, money is a means to achieving happiness. So, it may not be things. It may be leisure, it may be whatever. You and I probably have different goals and how we would define it differently. So, it’s reframing that and then understanding how you can get there.

Joel Dickson: Well, and that’s why, you know, at the beginning when you were mentioning about the family gathering around Mother’s Day, those are the things that we tend to value; those experiences, those interactions and, and so forth. And so, in many ways, money is that, if you will, that enabler to have the experiences that you value, in that way. And, again, hopefully, without the stress cause there is a lot of research that suggests there is financial stress if you don’t have the income or the wealth to support a basic living… And so, then a little bit more money does matter. But once you’ve gotten to the point where those things are covered, maybe not as much.

Maria Bruno: I want to get your take. Do you think this evolves over time, as one gets older, their views on how they use their money changes?

Joel Dickson: I don’t know. It’s definitely evolved for me.

Maria Bruno: Yes, do you value things as much now besides your shoes, now differently than you did maybe when you were younger, when maybe you didn’t have as much money?

Joel Dickson: Well, I think when I was in grad school, yes, I valued, a little bit more money because I was like trying to figure out which credit card, bill to sort of partially pay off each month.

Maria Bruno: Didn’t you have a spreadsheet for that?

Joel Dickson: Yes, that was the pre-spreadsheet era. I definitely value, and not just in my own personal life, but how I think about giving say, presents to family members and so forth. I definitely value experiences or things to do much, much more than I did with, you know, physical things. I mean, you think about a vacation or an event or something and, you know, those are the things that you end up talking about and bonding over with other people, years later. I certainly see it varying over time, for example, with my mom. And … why are you looking at me? You look like you’re going to crack up!

Maria Bruno: All I’m saying, Joel, is that you spend an awful lot of time talking about your mother. We should have a segment around Joel’s mom.

Joel Dickson: Yes, Joel’s mom.

Maria Bruno: Mike Rowe has his mom. Which is actually quite funny. If you haven’t actually read some of her posts, they’re hilarious, so.

Joel Dickson: Well, clearly, Joel’s mom can play the perspective of the retiree given that we don’t have the retiree in the room.

Maria Bruno: Okay, okay.

Joel Dickson: Ugh, jeez. So hard to deal with people.

Maria Bruno: Continue on, your mother.

Joel Dickson: You see, in her shift from working to retired and kind of what she values and, and so forth, it’s the experiences, it’s the family interaction; or it’s the planning of visitors, friends, and family that may come. It’s the ability to be able to afford those basic sorts of things, that gives her much more pleasure than having a piece of art work or, you know, having an expensive car or anything like that. So, you definitely see it.

Maria Bruno: You also don’t live close to your parents.

Joel Dickson: I don’t.

Maria Bruno: Right. So, I wonder if that contributes to her happiness at all.

Joel Dickson: Well, we may hear about that in fact, from Michael in our interview with him.

Maria Bruno: And, actually, that’s probably a good segue into our chat with Michael. We sat down with Michael recently in the studio and talked around happiness or satisfaction in retirement and some of the survey work that he and his team have done. And I think it’s quite an engaging and eye-opening and fun conversation.

Maria Bruno: Michael, thanks for joining us today. We’re happy to have you.

Michael Finke: My pleasure.

Maria Bruno: So, you’ve done a number of research pieces, but most recently you did a piece, it’s a working paper around satisfaction in retirement, and really honing in on the variables that lead to satisfaction, first and foremost, would be a happy marriage. Can you talk about that a little bit more?

Michael Finke: Sure. We have done a number of studies now on life satisfaction in retirement. We use a big survey done by the University of Michigan called the Health and Retirement Study, and they’ve got this terrific series of questions that allow us to measure how happy retirees are. And this is a subject that hasn’t seen a lot of research. As an economist, I’m kind of interested in the topic because that’s why we’re saving all this money for retirement, right, is so that we can live well. It might be a good idea to figure out actually how to spend it and then what to do in retirement. What we see is that there are a lot of inputs that go into being happy in retirement, and I like to see those inputs as part of a commodity, and the commodity is the activity that you engage in during retirement. So, having, for example, a lot of money doesn’t make you very happy, it’s just money. But if you combine the money with people that you like and time and maybe some skills and a nice location, you can actually make yourself happy by being more strategic about how you spend money in retirement. And, of course, relationships are incredibly important in retirement because that’s who you spend your time with in retirement. What we see is that the relationship that you have with your spouse during your working years, they say, you know, you marry for breakfast and dinner, but not necessarily for lunch. And retirement creates this whole different type of dynamic between spouses where they become your primary source of companionship, and you spend your free time with that person, and it’s very important then to have a positive relationship with your spouse, even more important than it is during your working years. And it also lends support to this idea that you should, in addition to investing in money, you should invest in maybe counseling if you think that there may be some potential cracks in that relationship. And there’s actually an advisor in San Francisco who recommends that her clients take a month off, just take all your vacation time and don’t go on vacation. Spend a month with each other and see how that works out as a way of practicing what it’s actually like to live in retirement.

Joel Dickson: Does that counseling count as that leisure time activity that you mentioned in the paper as well or in your research?

Michael Finke: You know, I think the counseling is more of an investment. You’ve got to think of all these inputs as the end result of an investment.

A great example is health. So, during your working years, are you making that investment in maintaining your health because health becomes an incredibly important input into happiness in retirement. In addition to your marriage with your spouse, if you’re not in good health, then you can’t really enjoy yourself.

Joel Dickson: Although it’s interesting in many ways, we talk about what do you do in the early years of retirement? That’s when you can spend more, and you may have the capacity to do that. But one of your findings is actually that people later in retirement seem to be more satisfied than those earlier in retirement. How does that all sort of fit together?

Michael Finke: You know, and that’s interesting, and I think what happens is like all human beings, we fall into a routine after a while.

Joel Dickson: So it’s complacency.

Michael Finke: Well, you know, I think you do what you’re comfortable with; and you also change physically and cognitively as you get older. And I think when we look at how people spend money in retirement, we do see that they spend a lot of money between the ages of 65 and 70, but that rate of spending starts falling in your 70s. And it coincides with that sort of gradual decline in the amount of time that you spend traveling. The one thing that seems to be the strongest predictor of happiness in retirement is how much time you spend socializing with other people, and I think it may take retirees a little bit of time to realize that what really makes them happy is spending time with friends instead of traveling.

Maria Bruno: So, what about single individuals, Michael?

Michael Finke: Well what we see is, and I should make a note, which retirees are the happiest, married retirees are happier. But the happiest retirees—and this doesn’t show up in this paper, but I asked my graduate student to study it. When you sort retirees by marital status and age, the happiest group of retirees are women who got divorced between the ages of 61 and 65.

And I think one of the reasons is because very often what happens is the husband will have a more narrow social network. Their social network will be more tied to the workplace, and women tend to have a more broad social network that isn’t entirely tied to the workplace. And what ends up happening is they get retired, and a woman may want to spend more time with friends, and the husband may feel like the wife needs to spend more time with him, and there may be a certain amount of resentment that builds up, and that creates a lot of friction, especially in those couples where they haven’t really figured out what each spouse’s responsibility is in retirement. And what you see is especially the men who are divorced are far less happy, but younger in retirement women who get divorced are far more happy.

Maria Bruno: Now that’s interesting.

Joel Dickson: It’s all the guy’s fault. Come on. That’s the summary.

Maria Bruno: So, you brought something up that was interesting, Michael, and we talk about this with retirement planning, because you mentioned counseling, right? But part of this is to understand what retirement means. So, you might have a married couple, and their definition of retirement is quite different. That has to play into this, right, in terms of, okay, so taking a month off and spending time with each other. But there’s a point where you need to understand what makes you happy versus your spouse and reconciling that.

Joel Dickson: Like if one doesn’t like traveling and one does or whatever it might be?

Michael Finke: Yes, you know, a great example of this is living within 10 miles of your children. And what we find is that couples who live within 10 miles of their children are significantly less happy. And that is, again, not entirely surprising, because what very often happens is one spouse will drive that decision to move close to the kids. And very often what happens is they get close to the kids, and they may have had expectations. You know, they were sacrificing to move close to their kids, and they’re going to have this wonderful relationship, but you know how life works out. You end up either becoming a cheap babysitter or the kids don’t listen to your wonderful advice or maybe there’s one spouse that wants to be closer to kids and the other one that wants to be more independent. So being able to anticipate some of these potential problems, I think that’s one of the funnest things about looking at the research is we can begin to identify where some of these cracks are so people can start to plan for them before they retire.

Maria Bruno: So, kids are cracks?

Joel Dickson: Oh, boy. Yes, that’s the way that we think about it.

Maria Bruno: No, so that was interesting in the research in that you might have plans to go live with the kids, but that may not be such a good plan for you. Kids might be happy because mom and dad aren’t moving in with them.

Michael Finke: Maybe, but I think that all depends on the relationship you have. Again, it’s all about expectations and setting boundaries and having each member of the couple speak honestly—I’m an economist, so I’m not even going to begin to talk about the importance of things like counseling and communication; but it does seem like that’s really what’s driving happiness, you know, in addition to money, and it is the truth that money does make you happier in retirement. Having more of it really gives you access to being able to do different things in retirement but, really, when we look, when we dig down more deeply and see what money actually gets you, money gets you access to more social types of activities. And those are really the things that make you happier, including living environment. Something as simple as moving somewhere where you have more frequent access to other human beings is going to make you far happier than becoming socially isolated, which is really the big danger in retirement when it comes to life satisfaction, is that you’re going to choose a living environment that’s going to make you socially isolated. By the way, the number one activity, other than sleeping in terms of time use in retirement is, can you guess?

Maria Bruno: Eating?

Joel Dickson: No. I don’t know.

Michael Finke: It’s watching television.

Maria Bruno: While you’re eating.

Joel Dickson: So, you go back to your teenage years.

Michael Finke: In a way, kind of. Like it becomes an extended weekend. But I think we have this idea that we’re going to retire, and we’re going to move to the beach, and it’s just going to be bliss. We’re going to play golf all the time, but the reality is that golf was a lot of fun when you worked really hard during the week, and you got a chance to escape and be out in nature and by yourself. But after you do that for a few weeks, it starts to seem like a job. And you start to forget that the things that really made you happy in life were those sort of challenges that you had from being around other people. And there’s actually some great new research. I was a discussant for a conference last week where someone presented some research on retirees who ended up continuing working in retirement, even part time. But that increase in social activity actually did seem to improve their cognitive outcomes in retirement. Anyway, it doesn’t have to be work for money. It can be things like social engagement through volunteerism; but that constant interaction with human beings can actually be healthy for your brain as well.

Joel Dickson: I wonder if taking retirement for a test drive might be something that’s worthwhile. Like Christine Benz from Morningstar was in here talking with us about her sabbatical that she had, and she called it her “faux-tirement” and how it was different when you weren’t working and seeing sort of like a six-week vision of what the future might hold from a retirement standpoint.

Michael Finke: Yes, you know, and I think that’s why that advisor recommended that people take a month off, just to practice retirement. But I think this whole concept of retirement is really interesting when you take a step back and think about it. I mean why is it that when someone gets laid off when they’re 62, it’s a tragedy; but when they voluntarily retire at age 65, it’s something to be celebrated? You know, what is retirement? Isn’t retirement just a big, long extended vacation? Well, if it is an extended vacation, should we give some thought to, maybe we should have had more vacation time early in life and then worked a little bit longer? I had a really interesting conversation with a friend of mine who is a professor at the Art Institute of Chicago. And because he’s not an economist, he’s more rational about money things. We had this discussion about whether I should take a sabbatical that was half a year at full pay or a full year at half pay. And, of course, being a money guy, I was like, “Oh, I’ll just take a half a year off at full pay. And he’s like, “What are you, an idiot? Like just take the full year off at half pay, because wouldn’t you rather be retired for a year when you’re in your mid-40s versus when you’re 75? Because you can enjoy it a lot more now than you could later. You can just work an extra year.” And I thought, wow, there’s a lot of wisdom in that comment. You know, there have been some studies recently that show that life satisfaction, there’s this nadir of life satisfaction, a sort of peak misery that occurs right at my age, sort of the late 40s. And I think one of the reasons is because we are at our peak of productivity in the labor market, and we tend to work all the time because of that. But would it make more sense in terms of smoothing out leisure over the course of our lifetime to maybe take it a little bit more easy in our late 40s but maybe work an extra few years in our 60s.

Joel Dickson: I keep telling Maria to take more time off. It would be just wonderful if she did.

Maria Bruno: I was just wondering if this is what you’re going through, Joel, at your age as well. So it’s misery.

Joel Dickson: Yes, I’m going through a lot of things at my age. Let’s not go down that path.

Maria Bruno: So, Michael, if someone did want to learn more about your research, your website is probably a good starting point.

Michael Finke: Well, yes, probably my Research magazine, I now write a quarterly column. I used to write a monthly column for Research magazine, so there’s a few dozen articles that were written by me about many of these topics on there. If you want to look at my academic articles, you can find them on Social Science Research Network.

Maria Bruno: Okay, good.

Joel Dickson: Michael, thank you for joining us. We really appreciate the time and the insights on all of these about retirement and associated topics.

Michael Finke: My pleasure. Always fun to talk about.

Maria Bruno: That was fun, yes, thanks, Michael.

Joel Dickson: What could we leave people with?

Maria Bruno: Well I think as, you know, the planner in me, right, we do a lot of number crunching to determine do you have enough, right? And I think it’s really important to really think through what does enough mean? So, I think what we talked about, what Michael talked about in terms of money being an enabler to happiness, I think that’s a good way to take a look at that, right. But, really, when you think about it again, I mean the, the three things. The most satisfied retirees are those that spend more money on having fun, right, not things, but life experiences. Personal relationships matter more than ever cause you’re spending a lot of time.

Joel Dickson: As long as you have to drive to get there.

Maria Bruno: Right. The personal relationships in terms of spouse and friends.

Joel Dickson: Family. Yes.

Maria Bruno: Right. So, children are an add-on to that. And then the other is really focus on maintaining your health, right. That’s one thing you can’t control. But I think the message there is make health a priority. And you should, frankly, do that throughout your life not just when you’re focusing on retirement.

Joel Dickson: It’s almost in many ways just asking yourself or asking your spouse or family member, “So what makes you happy?” and then tying that, that answer back to those goals and objectives then become a little bit clearer. And then, you know, what’s the, what’s the way to achieve that?

Maria Bruno: I know, but you would think after years of marriage that you shouldn’t have to have that conversation with your spouse. The thought there is like, oh, you, you should know what makes each other happy. But the fact of the matter is you’re going to be spending an awful lot more time together in retirement, hopefully, right, so you need to think through that.

Joel Dickson: Actually, I was just having a conversation today with, with somebody here at work, and she was saying that, you know, she and her husband spent six months kind of looking at each other going, “What do we do?” when the kids went out of the house, you know, and they became empty nesters. It’s kind of that same thing.

Maria Bruno: Well, actually, that’s a good point because many couples hit that sooner. But, again, there you most likely still have work as an outlet.

Joel Dickson: Exactly. So, I mean ultimately, what’s makes you happy? And how do you achieve that either together or not? And, and then more money isn’t necessarily the answer to that question: What makes you happy? More money. I don’t think many people ask that at all. Have you saved enough? Do I have the ability to meet the objectives that I have? You know, if not, then maybe you need to think about reallocating some things, but that’s ultimately not the answer, if you will, is the wealth piece.

Maria Bruno: Yes. I think they all fit together in terms of gauging one’s happiness in retirement.

So, yes, I thought it was a great discussion. It was neat to have Michael in the studio with us.

Joel Dickson: So, what are other ways that people might think about this idea of what my goal is and how I think about what makes me happy and, and how that ties to, retirement decisions or how I think about the use of my money?

Maria Bruno: Well Michael talked about it a bit, right? So, there are advisors who are really making this part of their practice. That’s one, you know, one channel. The other is, you know, for those individuals that want to start thinking through that online resources. If you look at vanguard.com, for instance, we have some materials.

Joel Dickson: In particular, we have a whole retirement page, right, you know, that looked at that.

Maria Bruno: We do. So vanguard.com/retirement, right. So there, regardless of what life stage you’re in, that can help drill down and provide some tools. And that actually might be a good start before either one person or a couple goes in to get financial advice to maybe have some of that education, and, and maybe think about these financial planning tools or these online calculators as a starting point.

Joel Dickson: Yes, and the calculators might give a sense of the income that might, you might want to be able to achieve in retirement in order to meet some of the goals that you might have.

Maria Bruno: Oh right, right. Tools I think are good. I think they’re a good starting point. They’re not a replacement for a financial plan. I think they’re a starting point or maybe an input to the financial plan. But, certainly, you know, do your homework, as a start. So, those are some resources that I would suggest.

Joel Dickson: I think at the end of the day it’s, it’s not about how much you have. It’s, in many ways, it’s that emotional piece of advice. I mean the geek in me thinks all analytical most of the time, but it’s that peace of mind, an element of, do I have what I need in order to be happy in order to do the thing I want to do? That emotional connection with money, if you will, with wealth, with income, is really what we hear from clients more and more rather than a particular number.

Maria Bruno: Correct, yes. And I think we can end with when, you know, you talk about happiness during your working years. Just look at how, you know, you, we started off by saying how happy you are, and I think that’s attributable to the people that you work with including me.

Joel Dickson: Of course it is. I think, ultimately, what we were talking about today boils down to pretty much one question. So, what makes you happy? Figure that out, that’s the biggest part of the plan in the planning process, right?

Maria Bruno: With your spouse.

Joel Dickson: Yes.

Maria Bruno: Figure it out together if you’re married.

Joel Dickson: That’s right.

Maria Bruno: Or have a partner. Correct.

Joel M. Dickson: I would also just mention that if there are topics that you would like The Planner and the Geek to discuss on future podcasts, please feel free to include them in a review on iTunes or vanguard.com, or on other places where you have subscribed to the podcast. We certainly will see those comments and really value the input that you have in terms of topics of interest to you.

Maria Bruno: Joel, thanks, it was fun as always.

Joel Dickson: It was nice being with you today too, Maria.

Maria Bruno: We hope you enjoyed this episode of The Planner and the Geek. Just a reminder that you can find more episodes of The Planner and the Geek on iTunes and on vanguard.com.

Joel Dickson: Or simply subscribe to our series and you won’t miss an episode. And please don’t forget to rate us on iTunes. Your ratings will make it easier for others to find us when they’re looking for investing podcasts. Please join us next time for another episode of The Planner and the Geek.

Notes:

Please remember that all investments involve some risk. Be aware that fluctuations in the financial markets and other factors may cause declines in the value of your account. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income.

Diversification does not ensure a profit or protect against a loss.

All investing is subject to risk, including possible loss of principal.

We recommend that you consult a tax or financial advisor about your individual situation.

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