It is no secret that many people are not adequately saving for their retirement. Our extensive research supports this alarming trend.

The National Retirement Risk Index

Since 2006, we have been publishing the National Retirement Risk Index (NRRI), a comprehensive analysis that utilizes the Federal Reserve's triennial Survey of Consumer Finances. This index compares projected retirement income with targeted replacement rates needed to maintain a comfortable standard of living. If a household's projected replacement rate falls more than 10% below the target, it is considered to be falling short. Shockingly, after nearly two decades of evaluation, the NRRI continues to reveal that almost half of today's working households are ill-prepared for retirement.

Scrutinizing Satisfaction Levels in Retirement

Critics often question our model and assumptions, arguing that the results cannot be accurate since many retirees claim to be content with their retirement lifestyle. In order to address these concerns and gather data for a larger project, we analyzed satisfaction measures from the esteemed Health and Retirement Study, which follows older households over time. Participants were asked three recurring questions regarding their satisfaction:

1. How satisfied are you with your life as a whole? Would you classify yourself as completely satisfied, very satisfied, somewhat satisfied, not very satisfied, or not at all satisfied?
2. Overall, do you find your retirement to be very satisfying, moderately satisfying, or not at all satisfying?
3. When comparing your retirement years to the years just before you retired, would you say that your retirement years have been better, about the same, or not as good?

Our primary focus was on question No. 2, where responses were coded as follows: 3 = "retirement is very satisfying," 2 = "moderately satisfying," and 1 = "not at all satisfying." Surprisingly, our findings indicate that not only are satisfaction levels notably high, but they also improve as individuals age (refer to Figure 1).

The Myth of Retirement Satisfaction

Introduction

Understanding the Data

The perception of retirement satisfaction can be misleading. Studies have shown that individuals who describe their retirement as "not at all satisfying" tend to be those who are economically disadvantaged and in poor health. Unfortunately, these individuals also have a shorter life expectancy, which skews the overall satisfaction levels of retirees. Taking this attrition into account reveals a more nuanced picture of retirement satisfaction.

A Closer Look at Retirement Happiness

Contrary to popular belief, older people tend to report higher levels of happiness compared to their younger counterparts. This phenomenon has attracted significant attention in the field of psychology, with researchers attempting to understand the factors behind this positivity. Evidence suggests that older individuals possess a remarkable ability to shield their thoughts and emotions from negativity, coupled with a strong capacity for adaptation and coping.

Personal Reflection

As an older person myself, I can relate to the resilience and resourcefulness often associated with this life stage. A vivid example of this is displayed in the worn Oriental rug in our entryway. In the past, we would have immediately sought out a replacement. However, now we simply place colored paper beneath the hole, resolving the issue without fuss or unnecessary expense.

Rethinking Retirement Assessment

Assessing the adequacy of retirement savings solely based on individual self-reported satisfaction or happiness may not provide an accurate reflection of financial security. Surprisingly, retirees consistently express regret over not saving enough or starting their savings journey earlier. These findings challenge the assumption that all retirees are financially secure and content.

Seeking New Metrics

Given the complexity of retirement satisfaction, it is evident that alternative measures are necessary to fully grasp the realities of this life stage. Researchers and experts are actively exploring new metrics that can provide a more comprehensive understanding of retirees' well-being.

In conclusion, the notion that all retirees experience unwavering bliss during their retirement years is far from accurate. By delving deeper and considering the various factors at play, we can gain a more realistic and nuanced understanding of retirement satisfaction.