Here’s what to avoid if you want a happy retirement

Happiness, joy, pleasure. These are the fruits of a life well-lived. And there’s no riper stage for harvesting these emotions than during our retired years, when our time is truly ours and we can create our own bliss. Your happiness may be cultivated by spending time with the grandkids, traveling the world and engaging in what I call core pursuits: those hobbies you are most passionate about and do often. No matter what you do, my wish for you is that you enjoy it.

But there are some warning signs for your golden years to heed as I’ve learned throughout my career as a financial adviser working with families planning for retirement. I first noticed some trends of the happiest and unhappiest retirees, which prompted me to conduct several research studies over the past decade to measure habits that lead to a happier retirement. My findings are part of my book “You Can Retire Sooner Than You Think.”

The counterpart of being a happy retiree is, of course, being an unhappy retiree. My data identified folks who reported lower levels of life satisfaction than the joyful participants. What’s more, a handful of traits emerged as being tied to unhappiness during retirement.

Let’s talk through four key traits that make for an unhappy retirement.

1. Pessimism

It’s almost impossible to be a successful investor in America if you’re a pessimist. The happiest retirees check that mindset at the door. Skepticism is one thing, but if you have a pessimistic outlook on the U.S. economy and the world, it may be the primary long-term factor holding back your investment accounts, which can bleed over

into limiting what kind of core pursuits you can afford.

I’ve talked about the perils of fear and greed as emotional drivers in investing, but pessimism can often lead to a persistent mentality of fear. So it’s a dangerous way to think if you want to build real wealth. You can’t afford it, literally.

Yes, it’s easy to feel pessimistic anytime you turn on the news, particularly a year into a pandemic. However, happy retirees nearly always choose to focus on what is going right, what will likely improve and what is likely to get better over the course of time. This way of thinking, that tomorrow will be better than today, is not only the key to building wealth, but also breeds a healthy outlook for life.

2. The Rich Ratio

You can have millions put away for retirement and still be unhappy — poor, even. It boils down to your “Rich Ratio,” or the relationship between what you have and what you spend.

Calculating your Rich Ratio is easy: Take your income each month and divide it by your monthly financial obligations. For happy retirees, this number is typically greater than 1.0. If it’s less than 1.0, you’re generally in unhappy territory.

Include all of your income streams, those tributaries that flow into your monthly income pool. Things like Social Security, pension and veterans’ benefits make the list, as do rental income and perhaps a paycheck from a part-time job that’s also a core pursuit.

And don’t forget your investment accounts and the 4%+ Rule, which demonstrates how you can potentially withdraw 4% to 4.5% of the total balance of your nest egg in the year you retire and every year after while adjusting for inflation. Studies have shown that the 4%+ Rule often allows retirees’ money to remain intact for 30, 40 and even 50 years. However, be sure to do your research on the 4%+ Rule to understand the different parameters that need to be in place for it to work.

Now let’s consider the Rich Ratio in the following scenarios:

Jim and Betty have $8,000 of total disposable income each month after taxes. Their expenses, including housing, taxes, utilities, travel, groceries — the whole lot — come to $6,000. When we divide $8,000 by $6,000, we get a Rich Ratio of 1.3. Well done, Jim and Betty!

Now look at the same scenario, but the numbers are flipped. Jim and Betty have a total monthly income of $6,000 and expenditures of $8,000. Now their Rich Ratio is 0.75. This puts them in the unhappy camp. Even if Jim and Betty had $1 million in disposable income, they are poor if their expenditures are $2 million, with a Rich Ratio of 0.5.

In my opinion, it’s critical to keep your Rich Ratio above 1.0 if you want to be a happy retiree. Doing so may mean tightening your spending belt, or it may mean an extra year or two on the job. This brings me to my next point.

3. Too little retirement planning

My survey results showed that the happiest retirees spend a minimum of five hours a year looking at their retirement timeline and planning financially — just five hours. The unhappiest among them kept their heads in the sand, rarely planning (if at all) for the years after they call it a career.

To me, this is a no-brainer. I think of the year in quarters, so five hours is really just a couple of hours a quarter reviewing your financial plan for retirement. Whether on a sophisticated computer spreadsheet or with good ol’ pencil and paper, knowing where you are (and where you want to be) is a key factor to retirement happiness.

4. Splurging after you stop working

Want a new car? A boat to explore the water? How about an RV to travel the country? All of these bigticket purchases can be well worth it, so long as you make them with the taxman in mind. Pulling a big chunk of cash out of your retirement accounts (401(k)s, IRAs) will likely raise your overall level of taxable income, potentially pushing you into a higher tax bracket. This extra tax bill is something that you may not have accounted for with the initial purchase.

The unhappy group in my research often made big spending decisions during retirement, which can be a costly mistake. Take home renovations, for example. It’s not uncommon that a $30,000 budget gets blown out to $50,000, or a $100,000 kitchen and bath project creeps to over $150,000. If these projects go awry and are taken on after our working years, we often don’t have the same opportunity to make up for this overspending through extending our retirement date. One solution is to make these purchases and big maintenance items like a new roof or HVAC system one to three years prior to your retirement date. That way, if the costs balloon, there’s time to absorb it.

So there you have it. My hope is that you will avoid all of these traits of unhappy retirees, while keeping on the sunny side of life and reaping all of the rewards of your hard work.

These are four of the eight main traits of unhappy retirees that I’ve identified. If you’d like to read about the other four, you can do so at wesmoss.com.

Wes Moss has been the host of “Money Matters” on News 95.5 and AM 750 WSB in Atlanta for more than 10 years now, and he does a live show from 9-11 a.m. Sundays. He is the chief investment strategist for Atlanta-based Capital Investment Advisors.