Millions of people in the first wave of Baby Boomers entering retirement face more stress than they did in their working lives.
Their home equity and portfolios have shrunk. Partisans in Congress threaten to cut Social Security, a key component of retirement income, and the new health care program. And for those retirees who want to work, they face rampant age discrimination in an increasingly competitive workplace.
According to the 2024 Happiness Index, national policies are determined by the index’s results. The factors considered are GDP per capita, social support, healthy life expectancy, freedom, generosity, and corruption. These factors are then measured in terms of how they infused citizens’ lives.
When these factors are low, they result in negative outlooks and the adoption of bad politics. No wonder many retirees and other Americans are not happy.
Happy Nations Have Good Politics
But a wave of new stories shows that countries that have the happiest populations, as measured by several factors, have a few common denominators:
–They have a social safety net, including universal health care;
–They have high incomes;
–They have government pensions.
Norway, Sweden, Australia, and New Zealand are cited as having the happiest, most content populations. These countries have what is known as “sickle safety nets,” which include government old-age pensions and health benefits. They also have small militaries and high taxation.
Among the factors contributing to the Index are social support, health, life expectancy, generosity, the scope of life choices, corruption levels in the national government, confidence in the judicial system, institutional trust in the courts, confidence in the honesty of elections, confidence in the local police force, and perceived corruption in business.
But what happens when these factors decline? And what is the price of these trade-offs?
Most Americans would opt for a financially secure retirement. This does not mean they want to go on the government dole, as many conservative commentators suggest, but they only want a fair return for the taxes they paid over their working years and investments. Look at S&P’s returns over 10-year snapshots, and you can see that more recent returns have been flat to negative, depending on the period.
So, who would want to trade the long-term bet (up to 30-40 years) on market returns for a secure retirement?
Increasingly, this is a near-life-or-death decision too many ill-informed and ill-prepared Americans are being asked to make daily. Worse, most 401(k) company sponsors and financial advisors don’t have any good answers either.
Choosing Between Money or Happiness
So while the financial media, which now resembles the Tower of Babel, continues to churn out stories about the need to hedge retirement assets, chase the best-performing funds, annuitize your assets by turning them over to your friendly insurance company, or calculating how long you will live, your assets don’t expire before you do.
These are all dead-end arguments that have no answers.
The real key is to examine the criteria that make people in other nations happy. Despite the popular misconception, many countries have higher living standards than the U.S.
Nations with social safety nets can still have sophisticated financial services industries. But as it becomes clearer that delivering alpha, or manager outperformance compared to an equity index, is becoming more elusive, the appeal of a retirement guarantee becomes much more attractive.
Once people make the connection between the benefits of a social safety net and increased happiness, a new discussion about the components of successful retirement will start.
