Why You Are (Probably) Planning for the Wrong Things in Retirement
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welcome. This day I podcast i'm your host to shuttle, and today we're talking about why we prep for the wrong things in retirement. Specifically, i'm joined by psychologist, behavior finance expert and new york times best selling author doctor Daniel cosby to discuss three important things.

Number one, what our happiness is actually determined by. Number two, why contrary popular research, more money can actually make us happier. Number three, what the perma model is and how we can use IT to improve retirement success. Daniel is the author of a new book, the soul of wealth.

And I mean IT, when I say it's one of the best and most impact for personal finance that i've read in years to show my support and appreciation and help get this good information into the hands of our listeners, I personally purchased ten copies of this beautiful book to give away, to claim your free copy. As always, all I ask is that you leave an honest written review of this show in the apple podcast p take a screen shot and send IT to podcast at you stay wealthy dot com. That's podcast at you stay wealthy dot com.

And if you would like to buy a copy of this book either for yourself or as a gift, i'll be sure to provide a link to purchase IT in todays show notes. Speaking of toyshop notes to view the research and articles reference throughout the episode, just head over to you, stay what the document board sash, two, two, nine. Doctor Daniel cosby, welcome the show.

Taylor gonna with you, man, you coming back and you were on the show a number of years ago. We have a really good excuse to bring you back on him. I wish you were on more often, but a really good excuse to bring you back on with a new book out.

I really excited talk to you today that a lot great concept, you covering a new book. But here's I want to start. There was a very well known study publishing twenty ten about this link between happiness and money, specifically how much annual income is needed to effectively purchase pleasure.

The researchers concluded that money or income does buy happiness, but only up to a certain point, that point being about seventy five thousand dollars per year. In other words, enough for our basic needs to be met. As you know, there's more nuance to the study, but everyone's big take away from this very famous study was that money does not buy happiness beyond seventy five thousand dollars per year. I'd like to actually start this conversation by asking you to share why this blanket statement is not true, why and how can income well above seventy five thousand dollars per year actually make us happier? And maybe a good place to started is by defining what happiness is and how we measure happiness.

The chapter in my book that talks about this is money can kind of, sort of by you happiness sometimes if you spend IT, right? I think the name of the chapter is reflective of the research. So the study in question was done by dani economy, who is the recently deceased, the preeminent granddaddy of behavioral finance and a reviewed researcher and nobel prize winner.

Deeper and conmen with the ones who did this research for context, that seventy five would be about one hundred thousand dollars today. So if we think about this, the way that they were measuring happiness, there's no blood test for happiness. There's no therm etter for happiness.

And so it's always necessarily gonna an abstraction. And so what they did is they gave people pagers beepers and they would page them at random intervals and just say, hey, how you do you think of a set of a oje? The answers from really terrible to really great.

And what they found is that, yes, people who made more money tended to do Better up to about what would today be a hundred thousand dollars a year and then at flat line. But really, what they were measuring there, if we think about IT, was maybe less of what you and I would commonly refer to as happiness, this sort of full, some holistic, joyful feeling, than I was. More of the absence of pain.

What money does extremely well is by you the absence of misery. Because if you make a hundred thousand dollars a year, you're not hearing gunshots at night. You're eating healthy food. Your kids go to a nice school, probably you're comfortable. But there is more recent research into economy credit.

He took the criticisms of his research in a very big way and even collaborated with this further research, and they found that if you measure happiness is in a different way, if you measure IT more subjectively or more quantatitive ly, which candidate is probably a little bit more like how we experience IT. And you ask people to sell for report, send you a sheet paper, and they hate Taylor. Write me two paragraphs on how you're doing.

How's your life? What they found is that happiness was open to the right at every income level, at every increase in income, up to half a million dollars a year, which is where the study stopped. And so they found that basically the more money you made, the happier you were in terms of how you reported your life as being.

And that, in fact, for about a third of people, that happiness dramatically accelerated past one hundred thousand dollars a year because that's when you kind of a got to the goods. P, that first hundred is what you needed for the food in the shelter, in the insurance and the doctor visits, meeting potatoes of a pain free life. But after a hundred, that's when you start to, like, buy some cool clothes and go on some nice trips and go golfing and go on a nice vacation.

For about a third of people, happiness actually accelerated past the level over hundred thousand dollars, not flat line. And then the last piece i'll talk about here is that for about fifteen percent of people, they were in previous to the effects of money on happiness. So fifteen percent of people just were kind of never happy.

And I think we all just had an image of someone pop in our head. We know someone for whom no amount of success and no amount of money is enough. And there's this idea from the meditation and a mindfulness literature that wherever you go, there you are.

I think that's true of all of us broadly, and it's certainly true of this fifteen percent of people who just have a different problem. Maybe they have bad genetics. Genetics are highly implicated in happiness.

Maybe it's bad, not bad genes. Maybe it's tough life stuff. Maybe it's they need therapy. Money is not solving those problem. So that kind of the latest on the research.

Money buys the absence of misery past a certain point for some people at flat lines and for some people, that accelerates and for some people, that just doesn't do much. So kinds sort of help sometimes there's a whole another conversation to be had on how you spend IT. But yeah, that's kind of where we're at these days. It's not quite as cut and dried as money can't buy happiness past one hundred granted year, though.

Appreciate sharing all that. And you certainly go into more depth than the book. Imagine genetics. One thing I was really struck by you made this comment in the book that much of our happiness stems from things outside of wealth, make sense, and also things outside of our control.

And you quote us some research saying that fifty percent of our happiness is determined by our genes. And some research suggests that could be closer to seventy or eighty percent, seventy or eighty percent of our happiness determined by our genes. Tell us more about that.

But it's a tough thing to read. It's a good news, bad news thing. So the genetic component, people have a set point happiness, the way they have a set point for height and weight and the number of other physical characteristics.

And look, i'm five eleven. There is probably a world where I could be six feet tall if I had Better nutrition and exercise at certain period of my life. And there's probably a world in which i'm five nine or five ten if I eat worse, but I was always gna be about five eleven.

And the same thing is true of happiness. Roughly half of your happiness is attributable to your mom and your dad. So warm, warm. But that's the bad news that potentially some of us get a little bit of a radial there genetically.

The good news, and I think the surprising news a lot of people, is the remaining fifty percent isn't allocated the way most people think IT is. Of the remaining fifty percent, forty percent of your happiness is attributable to violation staff, your choices, the decisions you make, your attitudes, your behaviors, your choices. And only ten percent is attributable to your circumstances.

And I think in the popular imagination, those numbers are flipped. Most people think your happiness will be as good or as bad as the circumstances. You find yourselves in the cards that life deals you.

It's profoundly not the case. There's all this research. One of the most famous studies is on people who are in brutal accidents and become parp logic or quite political versus lottery winners. And they find that when someone is in a horrible accident, understandably, there is a dramatic drop and happiness.

Initially you're adJusting to life with limited mobility, your morning, the loss of some dreams, you may have had some notions of what a goodbye laws, but then after about a year or so, you're kind of back to your baseline and you're just kind of where you ever were. And they actually found the opposite thing is true of lottery winners. You win the lottery.

There's a period of celebration and great jumping up and down and joy for having won the lottery. And then, you know, year to later, you're back to where you started, part of that genetic and part of that volitional. The bad news is about half of its out of our control.

The good news is about half of its in our control. And very little of IT has to do with whether it's raining or not, whether or not life is dealing you a lucky hand. A great deal of IT has to do with choices that you make.

As you know, a large percentage of our listeners are retirees or their closer retirement, very focused on retirement planning. So big is to hear from you in general, or even very specific, how listeners might factor in this research into their retirement planning.

How should they be thinking about this link between money and happiness and after the certain threshold, and what pends on? And how to define what should they do with all this information? How should they factor IT into their long term retirement planning?

That's a great segway for me to talk about the happiness and spending money literature, there is a few ways where the way that we decide to deploy our resources has a material impact on our happiness. The first is giving IT away. Being charted, being philanthropic is highly rewarding, and IT does a great deal to bull star happiness.

And i've seen a lot of people in retirement have success when giving away money and pairing those financial contributions with their own service, their own labors, their own sweat of their browse, so to speak. And so I think pairing volunteerism with financial philanthropy is a powerful one two punch for those in retirement. We also see that anything done to bolster relationships is very big, taking trips, spending time with people that we love.

My mom is here as we speak. I just got done talking to my mom who drove four hours to see my kids for grandparents day in the spend too much money on them at the books fair, ghost glasses Carrying grandparents day with the bookstore. Anything that's done to bolster relationships as powerful, there's a great example in the book for people who buy a car, let's say, Taylor, you buy a for ri, that doesn't buy you a lot of happiness in isolation.

We quickly become obituary to IT. IT becomes kind of old news. Maybe your wife hugs you a little tiger. The first mayor, two, but SHE gets used to IT over time. Your neighbors stop and draw the first time or two, but then they just get annoyed by you rapping the v twelve in the front yard. And we get habituated to IT rather fast, and the happiness dividend wears off rather quickly.

But if you buy that ferry to join the exotic car global, Laura, then it's a very different thing because you bought yourself on tray to a relationship and you can hang out with other folks who love cars, and you can drink coffee and open your hoods and. Marvel each each other's engines, and that does buy a lot of happiness. Anything that facilitates or deepens relationships is another one.

Getting out of work we hate. This is one of my favorites. I don't know if you can hear IT, but there's the distant war of a long mower that maybe you can hear right now.

That's a high school kid not in my yard out because i'm not gonna do that ever again. And I mean, this actually buys us a lot of happiness is that we're able to get out of doing work, that we find this tasteful. All of these things in retirement are things that we can do.

We can give IT away. We can buy our time back. We can get out of things we hate. We can deep in relationships. All of this is a fantastic way to spend money.

We have our mutual friend, brian porter, join me on the show in a few weeks here, and we're going to really dig deep into the psychology of spending and spending money in retirement. We all know this is A A big chAllenge, whether you've saved a few hundred thousand dollars for retirement or you've saved millions of dollars for retirement, IT often digitally matter. It's still really chAllenging to go and spend money on these things.

Doesn't need to be a ferri IT could be as simple as taking a trip with your family. This fear of running out of money, i'll dig deep with brand porter noy on the topic, but all these things, I think people are listening. And sure, I understand that charitable giving to make me happy and spending money on things to join community and have more community and relationships in my life, buying my time back.

These things sound great. On paper, they sound great. And the textbooks, but in reality, is not easy for me to write that check to charity or take that big vacation or buy that car. Always wanted, because I saw the fear of running out of money. So any thoughts on how to combat some of those chAllenges? And again, just and that will dive deep with brian here a few weeks, but just any thoughts on overcoming that fear of spending money on these things that we know will likely make us happier?

There's a couple of chapters in the book that deal with this or thought goney. There's a chapter in the book called take the worst case off the table.

And I talk in that chapter about the handy assurance program, which was this brilliant marketing programme by the auto maker during the great financial crisis, where unemployment at nine percent, but one hundred percent of people effectively are scared of losing their jobs, scared of adverse impact of the crisis on their jobs. And so people were paralyzed in fear. And we're not certainly buying new cars.

And so what hunt did is they said, look, if you buy a car for us and you lose your job, we will give you your money back. We'll take the car back use and we will give you full fit. We will give you your money back.

Honey went on to have one of the best quarters in their history. They blew all their competitors out of the water because it's such a powerful thing to take the worst case off the table. And I think that's one of the thing.

People who are having a tough time, they're fearful of drawing down this money that you've spent so much time and effort accumulating. What you want to do is you want to take the worst case off the table sometimes that pay off the house, pay off the cars, get a safety bucket, get however much time you feel is necessary. No, six months to two years for a lot of folks.

But get yourself a safety bucket of assets that helps you sleep well at night, get yourself a number that you're not gonna dip below because this is sort of the low watermark and what you need to get by figuring out what is the bare minimum. What do I need to take the worst case off the table. And now let's start to have a little fun.

Pass that with this, whatever the number is. This is sort of my worst case. That's always gna remain safe. We're gonna touch that. But beyond that, lets have a little more flexibility with IT.

I think there's a couple of other things that are maybe more the shrink in me has to bring this up. I think some people's self worth is too tightly knit with their network, and they have too closely conflated their wealth with their worth. And so when they see that number go down, they feel quite literally diminished in their own eyes or in the eyes of others.

And that's like a bigger, thorny or problem when we've too tightly wrapped those two ideas together. The final thing of steel and badly periphrase Stephen cov, but in his similar work he talked about basically the only way to get past the no of fear is to have a bigger, yes, burning inside of you. If we're going to get past the no that voice in our head, this has no, don't spend this money we've got to be spending.

And on something were so passionate about out that that no sort of melts away. And maybe if the no is not melting away, maybe we would need to fire up that passional little bit more, find a new one, maybe it's the grandkids, or maybe it's leaving a request or some sort of philanthropic legacy could be a hundred things. But when you find that thing, that means more to you, that the yes of that thing, that purpose means more to you than the no of that fear. I think that's another powerful way to begin to approach that.

Some really, really good ideas and concepts and solutions to combat this really chAllenging issue as people transition in a retirements are to lean on their savings and mistake to do all the great and fun things that they want to do in retirement. You're comment about self worth versus network is a really nice segway. In the next topic on to dive into, you've got this really strong quote, this quote in your book that really stuck out to me that says we commit so much effort to trying to get to a special number for retirement, yet we often overlook other elements of life that bring joy. Is that any wonder that retirees are far more depressed then both the population broadly, and same aged non retirees in specific talk is more about this go like you just really stuck out to me, especially this comment about retirees being far more depressed than pretty much everybody .

else at the risk of bombing outer listeners. One of the things that we see in the data is that deaths Spike dramatically couple of months immediately post retirement. If you think about in that chapter, your quoting, I talk about sort of the five facts of human flourishing.

These were pioneers by doctor Martin selig, men whose the pioneering mind behind the world of positive psychology, positive psychology, basically is with the opposite of frodi and or other psychology for dd. And all those other early folks were studying what makes us broken and what makes us sick and what makes us sad. Selectman genius was the foot that on its head and say, well, what makes us estates ally joyful? What makes life worth living? What makes someone a great leader? And he found that there's really these five pillars of a good life.

We're going to give people the secret to existence here on your podcast. And we really only candidly prepare for one in a traditional prepared this for retirement. We really over index on one and ignore the other four.

The models called the perma model, the p and perma is for positive experiences. So this is fun and leisure. This is golfing, going on a vacation, going to the beach, etta, we do a great job as a financial industry of preparing retirees for that.

In all the brochures and the pampas ts and everything are two silver heard folks, sailboats on the beach, correct? Yacking IT up on a beach by a lights. That's positive experiences, and it's nice.

That's part of IT. But the second facet of a good life is engagement, and that is hard work, that is deep, meaningful work. And IT could be a hobby. IT could be an advocated. You don't have to get paid for IT.

But sort of what is the immersive effortful thing that you're gonna spend your days doing in retirement? And there's not a lot of thought or financial preparation for that. The third one is relationships.

This is the most predictive of any of the five of happiness. The forth is meaning, which is religion, spirituality, charity, volunteerism, teamwork, just working for something bigger than yourself or bigger than a dollar in the a is for advancement, which is personal growth. And if you think about our work lives, as much as we may hate certain facets of our work lives.

They do a great job of surrounding us with people. They make us part of a team. They give us natural ways to measure and get rewarded for advancement, and they're deeply engaging. So traditional work does a whole lot of good in the world of lifting these boats. The only thing that IT doesn't do well is the positive experiences. And so then I think we sort of overcorrect when we're preparing for retirement, we go what my time will be my own and you know, i'm just going to have fun, fun, fun and we're really not wired for that. Once you understand this framework, you can start to prepare for retirement more holistically and not make the mistake of overcorrecting on leisure and fun.

Is there any research that suggests that in the early stages of retirement, this honeymoon period, that is this point, like yeah, you're going to enjoy this time due to everyone and be really selfish, but be prepared to transition in the state where we need to be more thoughts of .

how we're spending our time. I think you and I could both use a month of I dream about that pretty much every day. I would be amazing to get two to six weeks and go kick IT.

I would love that, and I really think I would enjoy every minute of IT. But after that, I think it's very natural. And i'm certain that you've seen this in your work for people to go.

Okay, that was fun. But what now that was fun and I needed that. But what's next? And we're really not wired for passivity.

We're really not wired for stagnation. And I think it's a beautiful thing about human kind, a sort of wired for growth and productivity. And we've got to be feeding that part of ourselves in retirement, and we're going to be very sad.

I want robber in your face, but I did test that. I took a month off, completely unplugged from life in everything. This is a few years back.

I felt lost. I didn't enjoy IT, to your point. I felt stagnant. I wanted to contribute to the things I wanted to like. I wanted to do something now as my family, and is great to spend extra time with them and be really present and have the computer put away in all that stuff. But I really craved contributing to this world in some shape performance.

IT was a good exercise to go through, but I game this glimpse into, yeah, what that is like everything being gone and you're going to stuck with own feelings and no obligations and responsibly, ie. S fortunately, my wife and I came back from that experiment, if you want to call that, we love what we live, we love our house, we love our schools, we love all the decisions we made, but we love work. And so I really reinforced a lot of the choices we made so I can to test to how that might feel.

I want to talk a little bit about new year's resolutions. The popular resolutions that people often quote verses regrets when dying. And some research done around this that you allow to in the book and discussing the book. Talk is about these two things, these new year's resolutions verses, these regrets that we haven't were dying .

recording this late in the year. So a couple of months from now, most of us, Better than eighty percent of us, will set goals in, almost univerSally, the center around money and health. Money I slash, work and fitness goals.

And almost univerSally, we fall down and don't reach these goals. But this is sort of where we spend our time. If you can think about how you spend your weeks in your years and your days, and it's very work heavy.

But Bonnie war was this possible? Nurse in australia, and he was sitting with people who are about to pass on. And SHE had the presence of mind to sort of capture their insights.

Because these people have a view of life that I really can't be overstated how valuable IT is, because all of us know intellectually that we're going to die for most of us, that seems pretty remote most of the time intellection. cally. We know we won't always be here, but in this moment I feel pretty good.

And that's not all that real to me for these people. IT is timely, real. They are sitting there in the final days of their lives.

And he asked them, what do you wish you had done differently? And work and money come up once in this conversation and only negatively? And the only way that work and money come up is I wish I had not work so hard and cared so much about money.

And I think we owe IT to ourselves to learn the lessons from these people for whom what matters in life and what doesn't matter in life has come into really sharp relief. I think they have a really powerful lesson to teach those of us for whom debt seems kind of remote that one day we're gonna look back and will probably mourn the hard feelings we had towards people we love. But we probably won't more not working a little overtime or that extra of business trip or, or whatever IT may be. So I think we should let that impact the way we make decisions in the here and now.

I love all that. Appreciate you sharing. And like we've said multiple times now, there's a lot more in the book around all these different topics that are very, very, very relevant to retirees.

And the chAllenges that retirement savers face will be linking to the book. In the shower notes for today's epsom, i'm giving out copies of the book everybody knows i'd love to hear from you actually never asked you this question. Just what prompted you to write this book? This is not your first book.

I know what IT takes to write a book. And often times authors get done of the book and they say, i'm never doing that again. So what prompted you to write this book? And what do you hope people get out of IT?

There were really two things. I'll start with the mro. The mro is we live in the wealthiest time in human history. When the us. Was founded, eighty five percent of the world was living in backbreaking poverty.

Eighty five percent of the world lived on what is today, two dollars or less a day in the late seventeen hundreds. And today that number is nine percent. Because of the miracle of markets and capitalism and the ark of human history bending in the right direction, we have a thriving global middle class, and people are doing Better than they ever have before.

Big picture housing sizes have tripled in the U. S. Post war. war. I like there's just a lot of abundance.

And yet, if we go to sort of the spiritual or the existential or the psychological side of the coin, people are profoundness sad. Mental illness is at all time high. Isolation and loneliness, especially among Young people, is absolutely Bakers.

I mean, it's seventy nine percent of je sees, say they have no friends. We live in this time where there's this weird juxtaposition of incredible abundance and incredible psychological empowerment. We have not figured out how to take our material success and translate IT into happiness and meaningful, joyful living.

And I wanted to put a brick in that bridge to bridge those two concepts simultaneously. At the micro level, I had a health scare quickly. I began to have all these really scary symptoms.

I had this buzzing in my head, and pain and light sensitivity, and migrants and partial blindness. And I went to web M. D.

And I looked IT up, which is a massive mistake. I going to say, that gives you back the scarious possible list of things. It's all like brain tumor stuff. The least scary thing on the list was a tooth problem. And so I went to my dentist and i've never had a cavity like i've had good teeth forever.

And I go to my dentist, and my dentist gives me x race in an exam and the whole nine and says, look, your teeth are fine clearly as something else. And so I set me on nearly a six months journey of psychiatrists, sts and different therapies and oxygen therapy and cats, scans and immunize. And I could not figure out what IT was, and I was just in an excruciating amount of pain.

And one day I was so bad, and my wife was driving me to the emergency room, we were going, going to try this. I'm crying in the front seat of my car and like, i'm gonna die and my children, you're going to be father less. I said to my wife, I would give every dollar.

I have to figure this out. And I mean, I am someone who likes money. I write about money. I think about money. I save aggressively, and I would have given you every penny I had in that moment for answers to my questions and relief from my pain. The story has a happy ending.

Two weeks later, I was eating a sandwich and my tooth just split in half IT had been my tooth a whole time and I had never gone back to the dentist because I felt like I had ruled that out. And I was just my tooth. They pulled my tooth and non fine, not a tumor. So that multiple th process was so visual for me and so vivid for me. I ve just saying, you know, hey, this thing that I have put so much emphasis on just felt so small in that moment.

Now you would have given up all of your money to solve this problem.

But would you have given up diet coke? Will no diet coke that turns out and bruxism or what caused IT. Excessive diet coke and grading my teeth that nighter, what cracked my team. So I love you die cope. But you did hurt me pretty bad there for a minute.

Well, I did see you recently and you look fantastic, by the way, almost didn't recognize you, and I did see you drinking a diet coke. So you haven't completely eliminated IT.

Well, i've lost a lot of weight, but i've lost no love for diet coke. It's true. I really appreciate .

you coming on today. The book is absolutely fantastic and give IT a way to listeners. Please, please, please go and check out this book by Daniels's book.

It's amazing. Holiday season is coming up. It's a great gift for other people. As everybody knows, I don't have a lot of guests on the show. I don't do a lot of interviews.

I don't have a lot of authors on the show I want to have somebody on like Daniel. It's truly because he is an amazing person, making amazing contributions to this profession, to retirement savers all around the country, around the world. So Daniel, thank you very, very much for all of your work or your contributions for joining me here today on the show.

Taylor, it's an honor. Thank you. We're sharing your audience with me. This podcast is for informational and entertain the purposes only and should not be relied upon as a basis for investment decisions. This podcast is not engaged in rendering legal, financial or other professional services.