What does a successful retirement look like? Jeremy Keil explores how financial independence, spending, lifestyle, and personal priorities can shape what it means to win at retirement.
https://youtu.be/FVbs7kVxOzw
When you picture someone who has “won” at retirement, what do you see?
Maybe it’s someone taking beach vacations, belonging to a golf club, buying the boat they’ve always wanted, or finally moving into the house they’ve spent years dreaming about. Those can all be wonderful ways to enjoy the money you’ve worked hard to accumulate.
But after working with hundreds of retirees, I’ve started wondering whether those things are really what determine who feels successful in retirement.
Consider two very different retirees.
One never earned more than $80,000 in a year. The other consistently earned around $300,000.
If I told you nothing else about them, which one would you expect to enjoy retirement more?
The answer isn’t nearly as obvious as the difference in their incomes might suggest.
Two Very Different Paths Into Retirement
To illustrate the difference, I’m using two composite stories based on situations I’ve encountered over the years. The names, numbers, ages, and other details have been changed, but the contrasting approaches to money are ones I’ve seen many times.
The first retiree never earned more than about $80,000 in a year. They saved consistently, paid off their mortgage, accumulated some rental real estate, and eventually built an investment portfolio worth roughly 10 times their annual income.
The second earned around $300,000 a year. Their job frequently produced bonuses, and those bonuses often became opportunities to enjoy the money—a new car, a boat, or a different kind of vacation. They retired in a very nice neighborhood, still have a mortgage, and accumulated investments worth roughly five times their final salary.
Both retired. Both accumulated meaningful financial resources. Neither person’s retirement should be judged simply by looking at a balance sheet.
But their retirement priorities look very different.
With the first retiree, a good portion of our time might be spent talking about grandkids and cruises. With the second, the financial question might be whether moving from an already nice neighborhood into an even nicer one is possible without cutting other expenses they don’t want to give up.
Neither set of priorities is inherently right or wrong. What interests me is what those differences tell us about the relationship between wealth and retirement satisfaction.
Income and Wealth Aren’t the Same Thing
One reason I find these contrasting stories so interesting is that they remind me of The Millionaire Next Door.
I’m a big fan of the book, and its authors identified several lifestyle characteristics that they found were conducive to accumulating wealth. Among them were living well below your means, allocating your time, energy, and money in ways that help build wealth, and believing financial independence is more important than displaying high social status.
Those principles help explain why someone’s salary doesn’t necessarily tell you very much about their financial independence.
A person earning $80,000 who consistently spends less than they earn and accumulates assets can ultimately have greater financial flexibility than someone earning $300,000 whose lifestyle rises along with their income.
That’s an important distinction as you approach retirement because your paycheck eventually stops.
The lifestyle you’ve built doesn’t.
If maintaining your lifestyle requires most of the income you earn while you’re working, replacing that lifestyle in retirement may require substantial resources. If you’ve spent decades living comfortably below your means, the transition can look very different.
Financial Independence Can Look Surprisingly Ordinary
It’s easy to associate wealth with visible signs of success. A bigger house, a newer vehicle, expensive hobbies, and elaborate vacations are things we can see.
Financial independence is harder to see.
You can’t necessarily tell whether someone’s mortgage is paid off by driving past their house. You don’t know how much they’ve saved by looking at their car. You certainly can’t determine how financially comfortable they feel in retirement based on what they earned during their career.
That’s one reason I think the idea of “winning” at retirement deserves more thought.
If your definition of success is primarily based on what other people can see, there’s always another level available. There’s another neighborhood, another car, another vacation, another upgrade.
Financial independence offers a different measuring stick. Instead of asking how your lifestyle compares with someone else’s, you can ask whether your resources allow you to spend your time, energy, and money on the things that matter to you.
Define the Win Before You Retire
I don’t have a universal definition of winning at retirement.
In fact, I don’t think there should be one.
For one person, winning might mean traveling frequently. For someone else, it might mean spending more time with grandchildren. The transcript examples include cruises, real estate, nicer neighborhoods, cars, boats, and vacations because those are all ways people may choose to use their resources.
The important question isn’t which choice looks most impressive.
It’s whether the retirement you’ve built matches what you actually value.
That’s why I think this is a useful question to consider before you retire:
What would have to be true for you to feel like you’ve won at retirement?
If you’re approaching retirement, think about what you’re genuinely looking forward to. If you’re already retired, look back and consider what has actually made retirement feel successful.
Your answer may have something to do with money. Financial independence certainly matters.
But after working with hundreds of retirees, I’m increasingly interested in what happens after we’ve answered the financial questions.
Once you know you have enough, what are you hoping that money allows you to do?
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About the Author:
Jeremy Keil, CFP®, CFA is a retirement financial advisor with Keil Financial Partners, author of Retire Today: Create Your Retirement Income Plan in 5 Simple Steps, and host of the Retirement Today blog and podcast, as well as the Mr. Retirement YouTube channel.
Jeremy is a contributor to Kiplinger and is frequently cited in publications like the Wall Street Journal and New York Times.
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