Some good advice for those planning their retirements
Investing for retirement means more than just putting money into a pension, ISA or buying property.
The long-running Harvard Study of Adult Development has followed hundreds of Harvard University graduates and inner-city Boston residents and their descendants, since 1938, in order to understand predictors of longevity and health and happiness in later life.
When asked at a recent conference, study director, Prof. Robert Waldinger, answered, “What are the best predictors? We thought it was going to be their cholesterol level. We thought it was going to be their blood pressure… It turned out to be the quality of their relationships.”
And, as with investing for retirement, the earlier you make the non-financial investments, the better. According to research from Carol Ryff, a professor of psychology at the University of Wisconsin-Madison, people should ideally start focusing on relationships and developing a sense of purpose, outside of work, in middle age. If you don’t, the transition into retirement can be difficult. Having non-work pursuits and friendships can compound over time, just like the returns from shares and property.
This sense of purpose influences longevity and predicts reduced risk for diseases, including Alzheimer’s and strokes.
Jeffrey Hall, a professor at the University of Kansas, has done some research into friendships. He says that “On average, it takes 200 hours over four months to build a close friendship and up to 60 hours to establish a casual friendship” He also says that friendships fade without periodic efforts to reconnect.
Careers can be all-consuming, especially in the peak earnings years that often coincide with middle age. This means that it is important to experiment when laying the groundwork for having a sense of purpose in retirement. Jaye Smith, a retirement coach and co-founder of Reboot Partners LLC recommends that you think about the interests you had earlier in life.
It’s easy to go down the route of maximising the amount you save for retirement by putting everything into work, so that you have more financial resources when you do stop. But this research shows that it is equally important to invest in friendships and a sense of purpose. That may mean that you end up with fewer financial resources (after all, there is only a limited amount of time in the day!), but that when you do retire, you are healthier and happier.
Philip Wise | philip@sussexretirement.co.uk
Managing Director and Chartered Financial Planner
