What Makes Retirees Happy? Ask the Europeans


    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 has shrunk, along with their portfolios.  Partisans in Congress threaten to cut

    Where less is more

    Social Security, a key component in retirement income, along with the new health care program. And for those retirees who want to work, they face rampant age discrimination in an increasingly competitive workplace.

    No wonder many retirees, and other Americans, are not happy.

    But a wave of new stories shows that countries which have the happiest populations, as measured by a number of factors, have a few common demoninators:


    –They have a social safety net, including universal health care;
    –They have high incomes;
    –They have government pensions.

    Among the nations cited as having the happiest, most content populations are Norway, Sweden, Australia and New Zealand.  All of these countries have what is known as “sicla safety nets,” that include government old-age pensions and health benefits.  They also have small militaries, strict border enforcement, tough immigrant worker standards, and high taxation.

    Is There a Better Way?

    But what is the price of these trade-offs?

    After years of working, investing in 401(k) plans and paying into Social Security, Americans expect a financially secure retirement.  This does not mean they expect a federal subsidy,  as many conservative commentators would suggest, but they want index market returns and do not expect to go bankrupt paying for health care costs.  Today, most bankruptcies are the result of medical costs and divorce.  Of those forced into bankruptcy due to health care costs, half of them carried health insurance.  

    In terms of their investments, S&P returns over the last decade show minimal or no gains, increased volatility and greater exposure to macro-economic events (debt problems in Greece and Italy, or the failures of large financial businesses)  that only create more stress.

    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 the  near life-or-death decision too many ill-informed and ill-prepared Americans are being asked to make on a daily basis.  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, so you assets don’t expire before you do.

    These are all dead-ends arguments, which basically have no answers.

    The real key is to examine the criteria which makes people in other nations happy. Despite the popular misconception, many of these nations have higher standards of living than the U.S.

    Nations with social safety nets can still have sophisticated financial services industries.  But as it becomes more clear that delivering alpha, or manager out-performance compared to an equity index, is becoming more illusive, the appeal of a retirement guarantee become much more attractive.

    And once people make the connection between the benefits of a social safety net and increased happiness, it will start a new discussion about the components of successful retirement.


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