It may be true that money can’t buy you love, but can it buy happiness in retirement? Most people would say it can, but financial planner Wes Moss wanted the details: Just how much money does it take to retire happily – and is there a point of diminishing happiness return on the size of a nest egg?
Moss surveyed 1,350 retirees about net worth and income, assets and home equity. But he wasn’t hunting for the number of dollars it takes to live – rather, he wanted to understand how money correlates to retirees’ levels of happiness. To that end, he posed a series of detailed questions about their lives: where they shop, what kinds of cars they drive, how many vacations they take annually, their family lives and the activities they pursue. Then he associated their levels of reported happiness with their financial condition.
Here’s what he found: Most people can be happy in retirement with savings of about $500,000. A higher number can buy more happiness, but only to a point. “There is a plateauing effect above that number, and the higher you get the rate of increase gets smaller,” Moss says. “I call it diminishing marginal happiness.”
Learn more in my column today at Reuters Money.