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Most people will not save as much as they could for retirement, but it turns out that might not actually ruin their lives.
As long as I can remember, the conventional wisdom has been to encourage people to save more. If you want to have a care-free retirement, you need to put something away today.
I imagine that was the case for my parents' generation too. But there were some interesting gaps in that wisdom in a recent CIBC poll that says the majority of Canadian retirees are happy with retirement today.
That poll says that 69 per cent of retirees are enjoying the lifestyle in retirement they had hoped for. That's great news, but it seems unlikely that all 69 per cent of Canadians have saved as much as financial advisors recommend.
I don't doubt that they are content, but it may be that "happiness" is a poor metric for gauging if retirees regret not saving more. Clinical psychologist Tayyab Rashid, an expert in positive psychology, notes that lottery winners and people who become quadriplegic return to a baseline level of happiness after six months. That suggests most people who are happy with retirement were inclined to be so, that they adapt to whatever situation life throws at them.
If someone approaches 65 and thinks that they don't have enough money to retire, they'll just work longer. But another person who earned the same amount of money over their lifetime, had the same number of kids, and same life events, might have managed their money differently and retired earlier than 65. They may have realized a fuller potential of converting their lifetime income into net worth by saving more money, and making better financial choices along the way.
Saving helps you to realize a greater potential. That potential could be to stop work, afford more consumption later, or simply to reduce money stress.
That said, on their own those life choices tell us nothing about who would be happier.
If people aren't feeling much regret as they approach retirement without a big nest egg, it might be due to a combination of being able to make do, and pride.
Then again, I've never heard anyone complain about saving too much money.
Of course we should save more for the future. But maybe just like not brushing three times a day, or always eating our veggies, we can live with an imperfect amount of savings discipline.
READERS: If you deny a little pleasure now to save and invest, will you be happier later? Or will that matter at all?