Ah... retirement

I am at that age in life where general happiness and well-being tend to be at a low point. I guess that is because I have been working for c.20 years of my life but still have 20 years to go before I can retire. So, I am exhausted but realise that I am only at half time.

There are many things I could do to improve my well-being. As someone once quipped: 

“Nobody knows what the purpose of middle-aged men is, but Ferrari dealers say we should let them live.”

I don’t want to buy a Ferrari but prefer to dream about retirement. Because at least for me, retirement is likely going to lead to increased happiness. 

To be sure, this happiness will not come from having more money or being better at managing my money. When we grow older, we may have to manage our money ourselves because we no longer have defined benefit pension funds and instead end up with a lump sum retirement nest egg that we can manage as we please. However, as we grow older our cognitive abilities decline and with it our financial literacy, while our financial confidence remains pretty much unchanged – the financial equivalent of becoming a stubborn old fogey. The result of this decline in ability is that the returns of retired people tend to decline as well because they are less and less able to grasp the complexities of financial markets.

Financial confidence and literacy in old age

Source: Finke et al. (2017).

No, I expect my happiness in retirement to increase simply because I can do what I want. There are plenty of studies that investigate mental well-being in retirement. And they show that voluntary retirement tends to increase mental well-being because with it comes the freedom to focus on the things in life that give you joy and cut out the stress. Involuntary retirement, however, be it due to invalidity or because you are made redundant and can’t find another job, is linked to a significant decline in mental well-being.

But barring this kind of drama, people tend to get happier after retirement…

…or at least some of them. A study from the Netherlands showed that married men get a significant boost in mental well-being after retirement. Meanwhile, single men don’t. They show on average a small decline in mental well-being. The study explains this with loneliness in retirement. Single men who retire face the very real prospect of losing their links to other people and falling into depression due to social isolation. So, if you are not happily married like I am, make sure, you build a large circle of friends and nurture your social life. It will become incredibly important as you get older.

Did you notice that I so far only talked about men? Of course, people have also looked at the mental health of women after retirement. And while the above-mentioned study finds that married women see an increase in their mental well-being after they and their husbands retire, other studies have found no effect on the well-being of married women after retirement. I guess whether the mental well-being of women increases after retirement depends very much on the man they have to live with all day long…