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The curve ahead: What the Science Says About Aging, Happiness and Spending · The Happiness in Retirement® Hour

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Welcome to the Happiness in Retirement podcast, where
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we help you turn your retirement dreams into reality. Each
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week, we'll dive into smart financial strategies, lifestyle
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tips, and expert insights to help you build a fulfilling and
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secure retirement. Whether you're planning ahead or
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already enjoying retirement, this is your go-to place
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for inspiration and practical advice. So sit
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back, relax, and let's make your golden years the
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Welcome to the Happiness and Retirement Program podcast.
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I'm your host, Bill Del Sette, certified financial planner,
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registered life planner, and creator of this podcast and
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the Happiness and Retirement Program. Thank you for joining
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me today. Well, last week we
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talked about retirement and happiness, and
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we looked at some research by Transamerica and also by
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a gentleman By the name of Mo Wang at the University of
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Florida, in which he found that only 5% of retirees experience
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a significant increase in happiness in retirement. Upon
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retiring, I should say, while another 20 to 25% actually
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may see a decrease in happiness and
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well-being. particularly if they leave a job that
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provided them with meaning and identity. Today
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we're going to talk about two related concepts. The
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first is called the U-bend of happiness. No, the U-bend
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is not a plumbing problem, I promise. has
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nothing to do with your sink and everything to do with your well-being, especially
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as you age. And then secondly, we're going to take a look at something
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called the retirement income smile, which if you are a
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client of Dell SETI, you may be familiar with. So let's start
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with this idea of the U-bend of happiness. What
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exactly is it? Well, it's a surprising pattern researchers have
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discovered when tracking people's life satisfaction over
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time. A lot of that going on now, psychology of happiness. The
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basic idea is this, happiness tends to follow a
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U-shaped curve throughout our lives. That means we're
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generally happiest in our youth and
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old age, and least happy, you ready for this? Midlife
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crisis in midlife. Usually somewhere around our 40s
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and early 50s, in fact, is where our happiness tends
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to bottom out, where we are the least happiest. Weird,
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right? But let's break it down. Economists and psychologists started
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noticing this trend when they looked at massive data sets from around the
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world that I'm talking about. Hundreds of thousands of people across
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countries, the United States, Europe, Latin America, Asia, it
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doesn't matter where people are from, the curve showed up
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again and again and again. People in their 20s and early 30s
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reported relatively high levels of life satisfaction, but
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then things took a dip. By middle age, there
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it is again, that midlife Many reported feeling unfulfilled, stressed,
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and stuck. And then, somewhat surprisingly, happiness
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levels began to rise again. People in their 60s
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and 70s, even in their 80s, often reported feeling more content, less
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anxious, and more at peace with their lives. Now, I know I
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certainly do. No doubt about it. My midlife, I definitely
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had a midlife. crisis i'm not afraid to say economist
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david blanch flower and journalist jonathan rauch is
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his name they're the two often associated with popularizing the
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idea. Roach even wrote a book called the
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happiness curve which i highly recommend checking out
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if you want to do a deep dive on the subject of
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the you kind of happiness okay so why does happiness take
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a dive in midlife. Well, there are a few theories. One
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is that in our 20s and 30s, we're full of energy, ambition, optimism,
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you know, all that stuff. We've got big dreams and high expectations.
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But as we hit middle age, what happens to a lot
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of us, reality sets in. Maybe
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the dream career didn't pan out. Maybe the daily grind of
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bills, work stress, and raising kids starts to wear on
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us. Let's not forget the biological and psychological
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factors. Midlife is often a time of self-reflection, sometimes
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even regret. We look back and wonder, is this it? It's
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that classic midlife crisis, except now it turns out it's not
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just a cliche. There's actually data. behind
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it, so it wasn't just me or you or anyone else. This is,
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again, across countries, this phenomenon of
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the midlife crisis, if you will, or the U-bend of happiness. So
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here's some good news. Things get better according to
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the research. In fact, as people age, they tend to become more accepting,
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less focused on material things, and more appreciative of
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relationships and small pleasures. It's the zen of
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getting older. There's even evidence that our brains change. In fact,
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older adults tend to pay more attention to positive experiences and
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are better at regulating emotions. Basically, they've
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learned what really matters. And I certainly, again, I can attest to
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this. I'm in my late fifties, but I can tell you, man,
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it's the little things. And I think it, for me, it always
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kind of was in one respect, because I didn't grow up
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with a lot of money. But I can tell you now, I certainly appreciate the
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little things more. Simple things like a walk, walking a dog,
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walking with my significant other, just
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reading, relaxing, quiet time. Plus, by
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the time we reach our later years, a lot of the pressures that weighed us down in
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midlife, work, kids, status, begin to ease. That
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frees up space for gratitude, reflection, and yes, happiness,
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especially if you're financially independent. Isn't that something that
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gives people a sense of life satisfaction to know they're not
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stuck on the treadmill if they don't want to be. So if you're in
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your 40s or 50s and wondering why you feel stuck, discouraged, restless,
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you're not broken, you're human, it's part of the plan,
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and you're not alone. The UBEN suggests that this slump is not
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permanent, it's part of a broader life arc. And knowing that
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things tend to improve can be a huge relief. That said, the curve isn't
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fate. You can take action steps to boost your well-being at
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any age. It's the usual suspects, folks. Building strong
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relationships, so important to happiness. Staying curious,
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really important. Exercise, moving your body, getting
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enough sleep. Finding purpose and meaning in
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your everyday life, so, so important as we talked about
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in the last podcast. as well. All are scientifically backed
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ways to lift your happiness no matter where you are on the curve. So
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next time you're feeling down, just remember, happiness is not a
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straight line. It's a curve. And if you're in the dip right
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now, there's a good chance the best is yet to to come. Okay,
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the U-bend of happiness. Next, let's talk about the retirement income smile.
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And this concept might just change the way you think about your golden
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years. If you've ever wondered how your spending might evolve after you
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stop working, or if you are in retirement, you may be experiencing this
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now. So let's get into it. So when I started my career,
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we thought people spent the same amount in retirement as
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they age. You started a certain level of
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spending and every year you spend that same amount
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and you give yourself a little raise for inflation every year. So you maintain
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your purchasing power, but that does not happen at all.
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In fact, in my career, it never happened. In
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other words, I never gave people a raise for inflation at
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the start of every year. No, never happened. In fact, people would
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request more money as they needed it, generally for one-time expenses.
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So retirement spending isn't that simple. You do
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gradually, though, spend less. This is interesting. But
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then, even more interesting, spending actually goes up
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again. So you start at a higher level of spending, gradually it
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decreases, and then it goes back up. First of all,
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it makes sense at first glance. You're not commuting, buying
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work clothes, or eating lunch out every day, but real life data
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tells this more interesting story because while you're
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not doing that, you're spending more money on discretionary things. So
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that's the idea of the retirement income smile, a concept coined by
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financial planner David Blanchett, who also coined the
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phrase go-go, slow-go, and no-go years
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of retirement. that's based on research that shows how retiree
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spending doesn't just decline smoothly, it actually follows
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a curve and just like a smile, it dips in the middle and rises again
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toward the end. So let's walk through this, okay? Shall we?
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Picture your retirement as having three distinct phases. First,
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the go-go years. Next, the slow-go years. And finally, the
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no-go years. So in the go-go years, the early part
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of retirement, again, it depends on when you retire, But it
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usually starts in your 60s, maybe your early 70s, you're still
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healthy, you're active, you're independent, traveling, dining
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out, maybe even spoiling those grandkids a bit. In
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short, you're spending money to enjoy your new freedom. Now, how long do
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the go-go years last? It's different for everyone. If
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you're really healthy, they could last a good long time. But then comes,
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inevitably for everyone, the slow-go years when you start to
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slow down. Maybe you're still active, but not hopping on
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planes as often or hitting every restaurant in town. Spending starts
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to decrease, mostly because lifestyle slows down,
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not because of income constraints, not at all. And
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then finally, the no-go years. In your late 70s, 80s and
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beyond, mobility and health may become more limited. Travel
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and entertainment spending drops off, but, and here's the
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catch, healthcare spending typically goes up. This increase
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can offset the savings from lower discretionary spending, hence
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the smile. High spending early on, a dip in the middle, and
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then rising again at the end, mostly due to medical costs and
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long-term care needs. So why does this matter? Well,
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it certainly challenges the old idea that your retirement income needs are
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flat. If you assume you'll spend the same every year, in fact,
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you could be over-saving and missing out on joy in your early retirement. On
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the flip side, if you don't prepare for those late-life healthcare costs, you could
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come up short when you need it most. That's where long-term care
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planning comes in, folks. Understanding a smile helps
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you build a more realistic retirement plan. Why? Well, can
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help you structure your income to align with your expected spending needs.
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Maybe drawing more early on than adjusting in the mid retirement
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years and reserving funds for late life care.
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It also makes sense, by the way, to use tools like
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long-term care insurance or health savings accounts, which can help
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cover that late life spending bump. Also very
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important to do asset protection planning, a big part of
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financial and retirement planning, maybe the biggest asset
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protection planning. Here are a few practical things you can do
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today with a retirement income smile in mind. First, segment your
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retirement budget by phase. Sit down with your spouse, break
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down the early, middle, and late retirement years,
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and ask yourself what you'll likely spend at each stage,
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travel, hobbies, healthcare, and so on. Build some flexibility into
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this, okay? Don't assume a flat withdrawal from
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your portfolio. Instead, plan for more
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discretionary spending early on and rising fixed costs
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later. Next, consider your health. If you are
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one of those folks who will most likely have a long health
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span, meaning you will be healthy, you will have more go-go years
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in your retirement because you've been more active, because of genes, genetically,
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you got the golden ticket, so to speak, then maybe you're
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going to have more go-go years. There's some great longevity calculators
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on the internet that can help with this. One is called Living to 100. If
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you just Google Living to 100 age of mortality calculator
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or longevity calculator, my favorite is from
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Project Big Life. Google Project Big Life
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mortality calculator. And then Plug in your specific information,
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kind of a cool exercise, and it takes a few minutes, but
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certainly much more accurate than just guessing that you're gonna
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live to the average age of mortality. As I like to
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say, a man with his head in the oven and his feet in the freezer may
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have an average temperature, but he doesn't feel very well. Averages
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can be very deceiving. 50% of people are gonna live longer
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than the average. Hopefully you're in that camp,
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with good health, by the way, and 50% are not going to live as
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long. Some food for thought. Next, review your portfolio.
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Are you positioned to draw more early on and still have security later
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in life? Are you using income generating assets like
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stock dividends effectively? Now, this is where the income guardrail
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approach comes in handy that we use at Dell City Capital.
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The tool that we use actually, we can front load spending in
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the early years and still
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hopefully have security later in life. Finally, talk to a
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planner, folks. Can't emphasize this enough. A good financial advisor can
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help tailor a strategy that fits the actual shape of your retirement
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smile, not just a generic model. So there you have
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it. The U-bend of happiness and the retirement income smile.
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Simple concepts with big implications. If
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you're middle-aged, hang in there. It gets better. And if you're in
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retirement, front load that spending in a methodical way.
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Don't willy nilly it. Retirement isn't one flat road, it's a
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journey with peaks and valleys. By planning for the real pattern of
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spending, you can live fully in the early years and still protect yourself
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later on. Thanks for listening, folks, to the Happiness in Retirement Program
13:51
podcast. If you found this helpful, share it with a friend who's planning
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for retirement or perhaps already in it. And don't forget to subscribe
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so you never miss an episode. either at Spotify or
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Apple, or just go to our website, happinessinretirement.com. If
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you have any questions for me, shoot me an email, bill at happinessinretirement.com, I'd
14:11
be happy to answer. Okay, until next time, I'm Bill
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Del Sette, reminding you that the road to retirement should
14:17
be an adventure, not a survival strategy. Talk to
14:23
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its accuracy is not guaranteed. There is no representation or
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warranty as to the current accuracy, reliability, or
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completeness of, nor liability for, decisions based on
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such information, and it should not be relied on as such. Del
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Ceti Capital Management, LLC. Del Ceti is
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are properly licensed or exempt from licensure. For additional information,
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please visit our website at www.happinessinretirement.com. That's
15:18
it for today's episode of the Happiness in Retirement Program podcast.
15:22
We hope you found some valuable insights to help you create the retirement
15:26
you deserve. If you enjoyed this episode, be sure to
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subscribe, leave a review, and share it with someone who's planning
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time, here's to a happy, healthy, and financially secure