Written by Josh Lantz, CRPC®/ Chief Investment Officer, Financial Advisor
As a doctor, you’re accustomed to following the latest medical evidence. Many doctors are surprised to learn there’s a large body of writings in both investing and financial planning. Today I want to walk you through some recent research regarding retirement backed by science.
I think you’ll find some of the results surprising. The research deals with satisfaction and well-being in retirement, something that applies to us all!
This research is based on the work of Michael Finke, one of my favorite retirement researchers. A link to the study is below.
What was this study about?
The research explores how spending and relationships contribute to satisfaction in retirement.
This is so important for doctors! You might spend 20 to 40 years of your life in retirement, depending on when you stop working and how long you live. If you’re going to spend 20% to 50% of your life doing something, you might as well optimize for happiness during that time.
Sometimes doctors get so lost in the habit of saving, that they don’t pick their heads up for a second to think about why they are saving, and what they’d like retirement to look like.
#1 Retire to something, not from something.
The most successful retirees are the ones that plan and think about what retirement might look like for them. Yes, having the financial resources available to support your lifestyle matters greatly, but it’s not the only thing to consider.
What do you want retirement to be like? Who do you want to spend it with? What types of things do you want to do? Maybe you want to work part time, travel the world, start a business, or do volunteer work.
If your life was only work prior to retirement, you could have a very difficult time transitioning to retirement. If your identity is wrapped up in only being a doctor, you’re going to have a more difficult time moving on from work. Your social status, relationships, and sense of purpose can all be wrapped up in your occupation. Cutting that off can be difficult.
Combating these challenges can mean developing relationships, activities, or hobbies outside of work. That way you’re not retiring from something, but to something.
#2 – Spouses matter.
There’s the phrase ‘I married you for better or worse, but not for lunch’. What that means is there’s a life routine before retirement that can conflict with your life after retirement. You often see your spouse briefly in the morning for breakfast. Then you see them after work in the evening for dinner. I know doctors that are so busy that sometimes they don’t feel like they even get to see one another.
The phrase references the fact that most spouses are not accustomed to seeing their spouse for lunch every day. For some spouses this is a radical change in retirement. They go from barely spending any time together to always being around. For some this is great. For others this is not what they signed up for.
It’s likely part of the reason late-in-life divorces (called gray divorces) have risen so much in recent years. According to the American Bar Association divorces in ages 65 and up now represent 10% of all divorces.[1]
The retirement study found happy spousal relationships have a substantial impact on life satisfaction compared to what you spend money on. In fact, the study found if you have a poor marriage, it's worse than being single.
Your relationship with your spouse is going to be a big part of your life satisfaction over time. Make sure to invest in your relationship now to prepare for your future.
#3 – The types of spending can matter.
The study reviewed many types of spending- housing, cars, housekeeping, clothing, healthcare, gifts, food, and more.
One spending category stood out as increasing life satisfaction. That category is leisure spending. Leisure spending includes dining out, vacation, event tickets, hobbies, and sporting equipment. The interesting thing about the study was that it showed the more you spent on leisure, the more it increased satisfaction in retirement.
There’s something about buying experiences that seems to matter. Part of this could be that most of leisure often involves being social with others.
Knowing this information, you can better plan today. Make sure to account for extra leisure spending in your retirement projections. Have your financial advisor run additional what-if scenarios showing money spent on leisure in retirement.
#4 – Friends matter.
The study showed friendships are positively related to life satisfaction. It’s important to invest today to have long lasting relationships in retirement.
Going back to our example from before, if you’re a doctor that’s so caught up in work and the day to day that you don’t have time to invest in relationships, it can be difficult to transition to retirement. Investing in relationships today compounds into better relationships years down the road.
An interesting result from the study was that there was no evidence that either the number or degrees of contact with children contributes to retirees’ life satisfaction. The magnitude for friends is far greater when compared to children and/or other family members. However, friends matter less than your relationship with your spouse.
Wrapping up
In summary, the research showed evidence that leisure spending, quality spousal and friend relationships, have the greatest impact on life satisfaction during retirement.
Hopefully, this article shares why retirement planning is not just about money. It’s about planning for so much more! It’s never too early or too late to start thinking about your retirement. I hope this inspires you to start thinking about a more satisfying future.
For those interested in reading Michael Finke and his co-authors' work you can read that here: Spending, Relationship Quality, and Life Satisfaction in Retirement.[2]
[2] Finke, Michael S., Ho, Nhat, Huston, Sandra J. (2017) Spending, Relationship Quality, and Life Satisfaction in Retirement. 2018 Academic Research Colloquium for Financial Planning. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3041761#
Josh Lantz, CRPC®/ Chief Investment Officer, Financial Advisor With over a decade of financial planning experience, Josh has worked on more than 450 doctors’ financial plans. “It’s very hard to find a doctor’s situation I haven’t seen before,” says Josh. This is only a snapshot of the expertise Josh brings to MD Financial. He is a four time Five Star Wealth Manager Award winner. In 2022, Josh was recognized as a Five Star Wealth Manager Under age 40. He can be reached at Josh@mdfinancialadvisors.com.