5 Financial Factors Americans Say They Need for a Happy Retirement

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An ideal retirement looks different for everyone. For some, it might mean spending as much time as possible with loved ones, while for others it might mean traveling the world. Some retirees may want to work part time, while others may want to dedicate their time completely to their hobbies.

But most retirees will agree that having the financial security to live their ideal retirement is the key to all of this. A recent Empower survey asked Americans what it would take for them to have a happy retirement, and these financial factors came out on top.

Being Able To Pay All of Their Bills

Nearly 7 in 10 Americans (68%) said that being able to pay their bills on time and in full is necessary to be happy in retirement.

“To determine how much net worth you’ll need in retirement so you can pay bills on time, you’ll need to think through when and where you’re planning to retire and how much your desired lifestyle is going to cost,” said Keith Jones, senior financial professional with Empower.

Affording Experiences That Bring Joy

An equal percentage of Americans (68%) said that having the wiggle room in their budgets to afford experiences that bring joy was essential for a happy retirement.

“Americans are preparing for retirement by saving funds for emergencies (57%), travel (33%), hobbies and leisure (32%) and healthcare (31%), according to Empower data,” Jones said. “If you relate to the 42% of people who say satisfaction in retirement comes from being able to travel the world, you’ll need more retirement income compared to someone who prefers to spend their golden years at home with their family.”

To ensure you have enough money to live the type of retirement you desire, it’s important to maximize tax-advantaged retirement accounts, such as your 401(k).

“At the very least, ensure you are contributing enough to take advantage of your company’s 401(k) match if they offer one,” Jones said. “The amount you contribute reduces your taxable income, so consider contributing more than your employer’s 401(k) match to take advantage of that double benefit — saving for retirement and reducing your tax bill.”

Another strategy is to diversify with a Roth 401(k).

“Roth 401(k) [plans] work differently than traditional 401(k) [plans] because Roth contributions are made with after tax-income, meaning you pay taxes on that money and then make the contributions,” Jones said. “However, as the funds grow over time and the account value increases, you are not taxed on capital gains, nor are you taxed on withdrawals during retirement.”

Jones also said that it’s a good idea to start saving for retirement way ahead of your planned retirement age.

“Take advantage of compound interest, especially if you still have a significant amount of time before you plan to retire,” he said. “Compounding becomes more powerful through time, which is why it’s great to start investing early and often.”

It’s also a good idea to diversify your investments overall.

“Holding a variety of assets helps reduce the risk in your portfolio,” Jones said.

Not Having Any Debt

Over 6 in 10 Americans (63%) said they want to enter retirement without any debt.

“A key component of maintaining good financial health is managing your debt, especially when you’re preparing for retirement,” Jones said. “Two common debt repayment methods include debt snowball — paying your balances in order from smallest to largest amount — or debt avalanche — order your debts by interest rate and start by paying off the amount with the highest interest. Choosing the right strategy depends on your financial plan and situation.”

Having Sufficient Retirement Savings by Their Goal Age

When asked what happiness looks like in retirement, 41% of Americans said it entails reaching their retirement savings goal and 40% said it means being able to retire at their goal age. It’s possible to achieve both with the proper planning.

“The first step in retirement planning is setting goals,” Jones said. “This is critical to ensure you’re on track to achieve your desired timeline and lifestyle, especially in a challenging or uncertain economic climate.”

When setting retirement goals, Jones said to ask yourself important questions, such as:

• When do I want to retire? “If you plan to retire early, you’ll likely need a higher net worth for retirement to cover those additional years you aren’t working,” he said.
• Where do I want to retire, and what does it cost to live there? “Where you choose to retire will impact housing prices, taxes and other factors that determine your cost of living,” Jones said.
• How do I want to spend my retirement — traveling, gardening, reading, attending sporting events or shows, etc.? How much will it cost to fund these activities?

“Establishing clear goals while planning your retirement provides direction and purpose, motivating you to work toward a more secure and happy financial future — however you personally define happiness,” Jones said.

To ensure you’re able to retire by your ideal age, Jones recommends maxing out your 401(k) contributions.

“Contributing as much as you can afford — and is within the limits set by the IRS — can be a good method to help you achieve that goal,” he said.

Leaving an Inheritance

Forty percent of Americans said that leaving an inheritance for their children is part of having a happy retirement.

“If leaving behind an inheritance is a priority for you, it’s important to factor that goal into your overall retirement plan and financial strategy,” Jones said.

“Consider working with a financial professional who can help you with creating a strategy to achieve your desired retirement goals,” he continued. “A financial professional can also help you create an estate plan and make sure you understand the tax implications of however you plan to pass along your assets to your beneficiaries.”

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