Here’s a question that, if you’re creeping closer to “retirement age”, you might want to ask yourself; what exactly are you saving for?
Think about it for a moment; the fact that you need to be saving money for your eventual retirement isn’t exactly “breaking news” but, according to William Bernstein, one of the cofounders of the investment management firm Efficient Frontier Advisors, knowing exactly what you’re going to do once you stop working, and how you’ll spend your time during your retirement, is vital to your actual happiness during that time.
He was recently featured in an article in a Wall Street Journal and quoted as saying that “golf is not a plan.” What he means by that is that many people go into retirement thinking that they’ll do “whatever they want” and spend their time leisurely milling about the golf club, tending to their gardens are doing other things that they believe are “relaxing” and enjoyable.
Indeed, for many people that might be completely true but, for quite a few others, it’s not. Not even close.
Bernstein has a formula for retirement that goes something like this; Retirement Happiness = (how much you like your job) X (how much you want to do something else).
In his opinion, in order to be happy during retirement both of those factors have to be counted. For example, if you love your job then that factor is zero. If you don’t have any clue as to what you’ll be doing every single day after you stop working completely, the other factor goes to zero as well. And, as the song goes, nothing from nothing leaves nothing.
Now, to be sure, there is no discounting the role that a hefty retirement savings account has in the “happiness equation”. There’s nothing less thrilling than having to struggle every month just to pay your basic bills and that’s why it’s vitally important to lay the groundwork for a healthy “nest egg” while you’re still young, strong and able to work. Face it, if you can’t afford to leave your job then the question of retirement becomes a moot point.
Still, as Bernstein argues, your happiness during retirement is a lot more than just a healthy balance in your retirement savings account. If you are extremely happy with what you’re doing now in your career and you don’t know what you’d do every day if you weren’t working, you probably aren’t ready to retire just yet. Not only that but, if you do, chances are you will be unhappy about it.
So again, as you near retirement ask yourself this question; what exactly are you saving for?