3 Common Mistakes Unhappy Retirees Make and How to Avoid Them

Learn the Most Distinct Differences Between Happy and Unhappy Retirees

mistakes of unhappy retirees

Retirement is often portrayed as the payoff for a life of toil and trouble; as the trophy for crossing the finish line. But in reality, retirement is just another phase of life; one that you must prepare for both emotionally and financially, just as you did for starting a family or changing careers.

How well you prepare will determine how much you enjoy your post-work years. This is important because it is indeed possible to have an unhappy retirement. In a quest to find some answers, I conducted a comprehensive study of more than 1,350 retirees across 46 states. The findings became the basis for the book, You Can Retire Sooner Than You Think.

The research identified numerous distinct differences between happy and unhappy retirees. Here are three of the biggest causes of unhappiness in retirement:

1. Failure to Identify the Purpose of Your Money

The happiest retirees understand that the point of saving is to enable them to enjoy the things that they love during retirement. Whether this is traveling or donating to causes closest to their heart, happy retirees have a purpose for their money. They long ago created a vision for their post-career years. They know they want to see the world. Or own a mountain cabin. Or start a foundation. Or just garden and read when they aren’t hanging out with the grandkids.  This vision may change over the years for any number of reasons, but when they hit retirement, happy retirees all have a good sense of how they plan to use the time and money now at their disposal.

2. Having a Rich Ratio Under 1

The Rich Ratio is very simple:​ It is the amount of after-tax money that you have in relation to the amount of money that you need. Anyone can calculate their own Rich Ratio.  Simply take the amount of monthly income you should have or do have in retirement (Social Security + pension + any additional steady income streams), including what your nest egg should produce, and divide it by what you expect to spend each month to live the retirement you want: Have/Need = Rich Ratio.

For example, Jennifer wants to travel in retirement, so she needs $8,000 a month. She has a small pension from her time working with a cable company ($1,000/month), plus Social Security at age 62 of $1,800/month. She has saved $1,000,000 in her 401(k).

  • Jennifer’s Have = $1,000 (pension) + $1,800 (Social Security) + $4,100 (5 percent of her 401(k) on a monthly basis) = $6,900
  • Jennifer’s Need = $8,000
  • Jennifer’s Rich Ratio = $6,900/$8,000 = 0.86
  • Jennifer’s Rich Ratio is below 1, so we can’t consider her to be “rich,” and she falls into our unhappy retiree group.

Now take a look at Aaron. He needs just $4,000 a month to retire comfortably. He has already paid off his house, so he’s living mortgage free. Aaron also has a small pension of $1,300/month. He receives $1,800 from Social Security every month and he has $400,000 in his 401(k).

  • Aaron’s Have = $1,300 + $1,800 + $1,650 (5 percent of his 401(k) on a monthly basis) = $4,750
  • Aaron’s Need = $4,000
  • Aaron’s Rich Ratio = $4,750/$4,000 = 1.18

Despite the fact that Aaron has less money in his retirement account and a smaller net worth than Jennifer, he is actually set up to be a much happier retiree. 

3. Still Paying a Mortgage

 Happy retirees have either paid off their mortgage or they are within five years of having it paid off when they retire. Conversely, a large percentage of unhappy retirees have 10 or more years until their house will be paid off.

So, if you are planning to move in retirement, buy a house that you can pay off completely so you aren’t saddled with extra years of mortgage payments. Remember, buying and moving to a new house often requires moving costs, new furniture, drapes, rugs, cable and TV hook-ups, etc. The costs can quickly add up.

And before you decide that a remodeled kitchen or finished basement will make retirement more enjoyable, remember that every home improvement project has an uncanny way of leading to another project. Before you know it, you are in the middle of a significant remodel and a significant chunk of your retirement nest egg is gone. Avoid this by making major home improvements (and repairs) before you retire.