The curve ahead: What the Science Says About Aging, Happiness and Spending

In this episode of the Happiness in Retirement podcast, I, Bill Del Sette, delve into two fascinating concepts that can significantly impact your retirement experience: the U-bend of happiness and the retirement income smile.

We begin by exploring the U-bend of happiness, a pattern observed in life satisfaction that shows people tend to be happiest in their youth and later years, with a dip in happiness during midlife, typically in the 40s and early 50s. This phenomenon is backed by extensive research, revealing that many individuals feel unfulfilled during this period due to various pressures and expectations. However, the good news is that happiness tends to rise again as people age, often due to a greater appreciation for relationships and life’s simple pleasures.

Next, we discuss the retirement income smile, a concept that challenges the traditional view of flat retirement spending. Instead of a constant spending level, retirees often experience a spending curve: higher expenses in the early years (the "go-go" years), a decrease during the "slow-go" years, and an increase again in the "no-go" years, primarily due to healthcare costs. Understanding this pattern is crucial for effective retirement planning, as it allows individuals to allocate their resources wisely and enjoy their early retirement without financial strain later on.

I encourage listeners to segment their retirement budgets by phase, consider their health and longevity, and consult with a financial planner to tailor a strategy that aligns with their unique retirement journey. Remember, retirement is not a flat road; it’s a journey filled with peaks and valleys, and with the right planning, you can make the most of your golden years.

Thank you for tuning in, and if you found this episode helpful, please share it with friends and subscribe for more insights on creating a fulfilling retirement.

What is Happiness in Retirement?

The happiness in retirement podcast is a holistic financial planning show that teaches you how to maximize your wealth and your happiness, and its for anyone who wants to squeeze all the juice out of their life - and their money.

Welcome to the Happiness in Retirement podcast, where

we help you turn your retirement dreams into reality. Each

week, we'll dive into smart financial strategies, lifestyle

tips, and expert insights to help you build a fulfilling and

secure retirement. Whether you're planning ahead or

already enjoying retirement, this is your go-to place

for inspiration and practical advice. So sit

back, relax, and let's make your golden years the

Welcome to the Happiness and Retirement Program podcast.

I'm your host, Bill Del Sette, certified financial planner,

registered life planner, and creator of this podcast and

the Happiness and Retirement Program. Thank you for joining

me today. Well, last week we

talked about retirement and happiness, and

we looked at some research by Transamerica and also by

a gentleman By the name of Mo Wang at the University of

Florida, in which he found that only 5% of retirees experience

a significant increase in happiness in retirement. Upon

retiring, I should say, while another 20 to 25% actually

may see a decrease in happiness and

well-being. particularly if they leave a job that

provided them with meaning and identity. Today

we're going to talk about two related concepts. The

first is called the U-bend of happiness. No, the U-bend

is not a plumbing problem, I promise. has

nothing to do with your sink and everything to do with your well-being, especially

as you age. And then secondly, we're going to take a look at something

called the retirement income smile, which if you are a

client of Dell SETI, you may be familiar with. So let's start

with this idea of the U-bend of happiness. What

exactly is it? Well, it's a surprising pattern researchers have

discovered when tracking people's life satisfaction over

time. A lot of that going on now, psychology of happiness. The

basic idea is this, happiness tends to follow a

U-shaped curve throughout our lives. That means we're

generally happiest in our youth and

old age, and least happy, you ready for this? Midlife

crisis in midlife. Usually somewhere around our 40s

and early 50s, in fact, is where our happiness tends

to bottom out, where we are the least happiest. Weird,

right? But let's break it down. Economists and psychologists started

noticing this trend when they looked at massive data sets from around the

world that I'm talking about. Hundreds of thousands of people across

countries, the United States, Europe, Latin America, Asia, it

doesn't matter where people are from, the curve showed up

again and again and again. People in their 20s and early 30s

reported relatively high levels of life satisfaction, but

then things took a dip. By middle age, there

it is again, that midlife Many reported feeling unfulfilled, stressed,

and stuck. And then, somewhat surprisingly, happiness

levels began to rise again. People in their 60s

and 70s, even in their 80s, often reported feeling more content, less

anxious, and more at peace with their lives. Now, I know I

certainly do. No doubt about it. My midlife, I definitely

had a midlife. crisis i'm not afraid to say economist

david blanch flower and journalist jonathan rauch is

his name they're the two often associated with popularizing the

idea. Roach even wrote a book called the

happiness curve which i highly recommend checking out

if you want to do a deep dive on the subject of

the you kind of happiness okay so why does happiness take

a dive in midlife. Well, there are a few theories. One

is that in our 20s and 30s, we're full of energy, ambition, optimism,

you know, all that stuff. We've got big dreams and high expectations.

But as we hit middle age, what happens to a lot

of us, reality sets in. Maybe

the dream career didn't pan out. Maybe the daily grind of

bills, work stress, and raising kids starts to wear on

us. Let's not forget the biological and psychological

factors. Midlife is often a time of self-reflection, sometimes

even regret. We look back and wonder, is this it? It's

that classic midlife crisis, except now it turns out it's not

just a cliche. There's actually data. behind

it, so it wasn't just me or you or anyone else. This is,

again, across countries, this phenomenon of

the midlife crisis, if you will, or the U-bend of happiness. So

here's some good news. Things get better according to

the research. In fact, as people age, they tend to become more accepting,

less focused on material things, and more appreciative of

relationships and small pleasures. It's the zen of

getting older. There's even evidence that our brains change. In fact,

older adults tend to pay more attention to positive experiences and

are better at regulating emotions. Basically, they've

learned what really matters. And I certainly, again, I can attest to

this. I'm in my late fifties, but I can tell you, man,

it's the little things. And I think it, for me, it always

kind of was in one respect, because I didn't grow up

with a lot of money. But I can tell you now, I certainly appreciate the

little things more. Simple things like a walk, walking a dog,

walking with my significant other, just

reading, relaxing, quiet time. Plus, by

the time we reach our later years, a lot of the pressures that weighed us down in

midlife, work, kids, status, begin to ease. That

frees up space for gratitude, reflection, and yes, happiness,

especially if you're financially independent. Isn't that something that

gives people a sense of life satisfaction to know they're not

stuck on the treadmill if they don't want to be. So if you're in

your 40s or 50s and wondering why you feel stuck, discouraged, restless,

you're not broken, you're human, it's part of the plan,

and you're not alone. The UBEN suggests that this slump is not

permanent, it's part of a broader life arc. And knowing that

things tend to improve can be a huge relief. That said, the curve isn't

fate. You can take action steps to boost your well-being at

any age. It's the usual suspects, folks. Building strong

relationships, so important to happiness. Staying curious,

really important. Exercise, moving your body, getting

enough sleep. Finding purpose and meaning in

your everyday life, so, so important as we talked about

in the last podcast. as well. All are scientifically backed

ways to lift your happiness no matter where you are on the curve. So

next time you're feeling down, just remember, happiness is not a

straight line. It's a curve. And if you're in the dip right

now, there's a good chance the best is yet to to come. Okay,

the U-bend of happiness. Next, let's talk about the retirement income smile.

And this concept might just change the way you think about your golden

years. If you've ever wondered how your spending might evolve after you

stop working, or if you are in retirement, you may be experiencing this

now. So let's get into it. So when I started my career,

we thought people spent the same amount in retirement as

they age. You started a certain level of

spending and every year you spend that same amount

and you give yourself a little raise for inflation every year. So you maintain

your purchasing power, but that does not happen at all.

In fact, in my career, it never happened. In

other words, I never gave people a raise for inflation at

the start of every year. No, never happened. In fact, people would

request more money as they needed it, generally for one-time expenses.

So retirement spending isn't that simple. You do

gradually, though, spend less. This is interesting. But

then, even more interesting, spending actually goes up

again. So you start at a higher level of spending, gradually it

decreases, and then it goes back up. First of all,

it makes sense at first glance. You're not commuting, buying

work clothes, or eating lunch out every day, but real life data

tells this more interesting story because while you're

not doing that, you're spending more money on discretionary things. So

that's the idea of the retirement income smile, a concept coined by

financial planner David Blanchett, who also coined the

phrase go-go, slow-go, and no-go years

of retirement. that's based on research that shows how retiree

spending doesn't just decline smoothly, it actually follows

a curve and just like a smile, it dips in the middle and rises again

toward the end. So let's walk through this, okay? Shall we?

Picture your retirement as having three distinct phases. First,

the go-go years. Next, the slow-go years. And finally, the

no-go years. So in the go-go years, the early part

of retirement, again, it depends on when you retire, But it

usually starts in your 60s, maybe your early 70s, you're still

healthy, you're active, you're independent, traveling, dining

out, maybe even spoiling those grandkids a bit. In

short, you're spending money to enjoy your new freedom. Now, how long do

the go-go years last? It's different for everyone. If

you're really healthy, they could last a good long time. But then comes,

inevitably for everyone, the slow-go years when you start to

slow down. Maybe you're still active, but not hopping on

planes as often or hitting every restaurant in town. Spending starts

to decrease, mostly because lifestyle slows down,

not because of income constraints, not at all. And

then finally, the no-go years. In your late 70s, 80s and

beyond, mobility and health may become more limited. Travel

and entertainment spending drops off, but, and here's the

catch, healthcare spending typically goes up. This increase

can offset the savings from lower discretionary spending, hence

the smile. High spending early on, a dip in the middle, and

then rising again at the end, mostly due to medical costs and

long-term care needs. So why does this matter? Well,

it certainly challenges the old idea that your retirement income needs are

flat. If you assume you'll spend the same every year, in fact,

you could be over-saving and missing out on joy in your early retirement. On

the flip side, if you don't prepare for those late-life healthcare costs, you could

come up short when you need it most. That's where long-term care

planning comes in, folks. Understanding a smile helps

you build a more realistic retirement plan. Why? Well, can

help you structure your income to align with your expected spending needs.

Maybe drawing more early on than adjusting in the mid retirement

years and reserving funds for late life care.

It also makes sense, by the way, to use tools like

long-term care insurance or health savings accounts, which can help

cover that late life spending bump. Also very

important to do asset protection planning, a big part of

financial and retirement planning, maybe the biggest asset

protection planning. Here are a few practical things you can do

today with a retirement income smile in mind. First, segment your

retirement budget by phase. Sit down with your spouse, break

down the early, middle, and late retirement years,

and ask yourself what you'll likely spend at each stage,

travel, hobbies, healthcare, and so on. Build some flexibility into

this, okay? Don't assume a flat withdrawal from

your portfolio. Instead, plan for more

discretionary spending early on and rising fixed costs

later. Next, consider your health. If you are

one of those folks who will most likely have a long health

span, meaning you will be healthy, you will have more go-go years

in your retirement because you've been more active, because of genes, genetically,

you got the golden ticket, so to speak, then maybe you're

going to have more go-go years. There's some great longevity calculators

on the internet that can help with this. One is called Living to 100. If

you just Google Living to 100 age of mortality calculator

or longevity calculator, my favorite is from

Project Big Life. Google Project Big Life

mortality calculator. And then Plug in your specific information,

kind of a cool exercise, and it takes a few minutes, but

certainly much more accurate than just guessing that you're gonna

live to the average age of mortality. As I like to

say, a man with his head in the oven and his feet in the freezer may

have an average temperature, but he doesn't feel very well. Averages

can be very deceiving. 50% of people are gonna live longer

than the average. Hopefully you're in that camp,

with good health, by the way, and 50% are not going to live as

long. Some food for thought. Next, review your portfolio.

Are you positioned to draw more early on and still have security later

in life? Are you using income generating assets like

stock dividends effectively? Now, this is where the income guardrail

approach comes in handy that we use at Dell City Capital.

The tool that we use actually, we can front load spending in

the early years and still

hopefully have security later in life. Finally, talk to a

planner, folks. Can't emphasize this enough. A good financial advisor can

help tailor a strategy that fits the actual shape of your retirement

smile, not just a generic model. So there you have

it. The U-bend of happiness and the retirement income smile.

Simple concepts with big implications. If

you're middle-aged, hang in there. It gets better. And if you're in

retirement, front load that spending in a methodical way.

Don't willy nilly it. Retirement isn't one flat road, it's a

journey with peaks and valleys. By planning for the real pattern of

spending, you can live fully in the early years and still protect yourself

later on. Thanks for listening, folks, to the Happiness in Retirement Program

podcast. If you found this helpful, share it with a friend who's planning

for retirement or perhaps already in it. And don't forget to subscribe

so you never miss an episode. either at Spotify or

Apple, or just go to our website, happinessinretirement.com. If

you have any questions for me, shoot me an email, bill at happinessinretirement.com, I'd

be happy to answer. Okay, until next time, I'm Bill

Del Sette, reminding you that the road to retirement should

be an adventure, not a survival strategy. Talk to

All information has been obtained from sources believed to be reliable, but

its accuracy is not guaranteed. There is no representation or

warranty as to the current accuracy, reliability, or

completeness of, nor liability for, decisions based on

such information, and it should not be relied on as such. Del

Ceti Capital Management, LLC. Del Ceti is

a registered investment advisor. Advisory services are only

offered to clients or prospective clients where Del Ceti and its representatives

are properly licensed or exempt from licensure. For additional information,

please visit our website at www.happinessinretirement.com. That's

it for today's episode of the Happiness in Retirement Program podcast.

We hope you found some valuable insights to help you create the retirement

you deserve. If you enjoyed this episode, be sure to

subscribe, leave a review, and share it with someone who's planning

for their future. For more tips and resources, visit happinessinretirement.com

or the Del Ceti Capital Management Facebook page. Until next

time, here's to a happy, healthy, and financially secure