Does money make people happier in retirement?

Wealthy senior woman is sitting on bed and stretching arms sideways. Her eyes are closed with relaxation

Image: YacobchukOlena/

The answer to the question is . . . yes, according to one study. Conducted by the University of Michigan, the study surveyed about 20,000 individuals in the US aged 55 years and older. It asked questions about life satisfaction.

‘One of the first questions we asked was . . . whether money makes people happier in retirement,’ reports researcher Michael Finke. ‘The answer was yes—in fact, quite a bit happier.’

They found that, according to the responses, more money meant a more satisfying retirement, to a point. And it’s quite a high point—at about $US3.5 million of ‘investable assets’. More than that and happiness levels tended to drop.

Please don’t think that the super-rich may be living in misery with their extra cash and assets, but they tended to report being less happy than those with the $3.5 million.

So, does spending bring happiness?

It’s true that the wealthy do spend more, but the research found that it wasn’t that much more. ‘They spend about two times as much as people who are in the lowest wealth quintile and living on social security’.

Despite having a lot more money that they could spend in retirement, wealthy retirees only spend about $US20,000 more each year than retirees among the bottom 20 per cent of wealth.

So, it seems, happiness is not found in spending, which means it may have something to do with the security that the funds and assets offer.

And, in case you’re wondering, ‘In general, everybody tends to spend a little less each year [in retirement]’.

Aiming for a big nest egg

Does this research mean we should do all we can to have several million in our retirement nest egg? And, if not, will we be cheating ourselves out of happiness?

Two things: The first is that it’s good to have the largest nest egg possible for the sense of financial security this gives for retirement. Few of us, though, will get anywhere near the kind of figure ($US3.5 million) mentioned here.

And the reality is that you don’t need that much to have a comfortable retirement.

The other thing to remember is that if your entire focus for retirement is on finances, you limit planning for the breadth and depth of life that retirement brings.

Besides, if we become too focused on the money side of things, you’re in danger of sacrificing your overall wellbeing for financial gain (check out a post on that topic here).

Having the money side right is important, but not at the expense of your health or your marriage or your relationships with others or . . .

Living life in its wholeness is important both before and after retirement.

Bruce Manners: the author of Retirement Ready?, Refusing to Retire, and founder of

Category: Finances, Planning

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