For a lot of boomers, saving was a given: we worked hard, saved and planned. We lived within our means. We paid off debt. Many of us strived to be able to retire on our own terms even – early – and then travel and enjoy life in our later years. And hopefully still have something left so we're able to leave an inheritance to children/grandchildren.
Fast forward: Here we are, sitting on some fairly sizable assets we've accumulated. Now what? What should we do with that wealth?
The Money Misconception
A lot of people think they’d have no troubles if only they were rich, if only they had a million dollars. Most of us know it doesn't work like that. Even rich people are unhappy and sometimes, unfulfilled. Yes, money can buy us a lot of things we need. Wealth grants access to healthier eating alternatives and better health care and provides peace of mind. When you have money, you don't panic over an unexpected expense. But in reality, money’s just a tool, not a cure all. You’re the one who needs to put that tool to constructive use. Money is important but a “mission'' is even more important.
In his book, You Can Retire Sooner Than You Think, financial planner Wes Moss shares five “secrets” of a happy retirement. He surveyed 1350 retirees in 46 states and found that the number-one predictor of feeling content is having a sense of purpose.
“[Happy retirees] have a well-defined understanding of their purpose in life,” he writes. His research showed: An impressive 91% of happy retirees are clear about and comfortable with their sense of purpose, while 89% of unhappy ones report that they're uncomfortable (or only “slightly” comfortable) with their sense of purpose.The net-net? “Happy retirees know what their retirement money is for.”
Pursuits Prompt Purpose
Moss encourages his clients (and readers) to develop a few “core pursuits” — activities they feel passionate about that bring them joy. By cultivating these before you reach retirement or financial independence, you'll be better prepared for your next act.
Similarly, in Choose Your Retirement, Emily Guy Birken writes that “a retirement based on values will be a fulfilling and contented experience”. Barker’s idea of a “values-driven retirement” makes perfect sense. Think of volunteers at local hospitals or animal shelters. Even voter registration. Many of them are older.
The Drifting Dilemma
If you achieve financial freedom without having identified your direction or purpose, you'll likely drift somewhat aimlessly. Hopefully you won't do any harm to yourself or others or cause misfortune or undue problems. But you're not going to really be adding anything of value to the world or making a difference either. You’ll have the freedom to do whatever you want…why not choose to do some good?
Destruction & Despair
At worst, attaining wealth and financial freedom without a plan/purpose can lead to an unhealthy overindulgent lifestyle and depression or even deep despair. We often hear about the formerly famous or lottery winners who blow their money on extravagant luxury items. Money can buy freedom, without a doubt. But you have to make the most of the freedom or it’s all kind of a waste and a bit of a shame.
“Money is important but it's far from most important,” says Jim Wang, founder of the financial blog Wallet Hacks. “This becomes clearer when you reach financial independence, when you no longer need to work as hard to sustain yourself. You risk losing your sense of purpose if it was deeply tied to working for an income. This is why many retirees have trouble in retirement!”
So, the retirement remedy? Figure out what your purpose is well before financial freedom materializes. And remember, it's not enough to just not make things worse – when we can try to make them better!