5 Things You Must Have Before You Retire, According to Erin Moriarity
Are you fiscally ready to retire? Here's how you can tell.
Erin Moriarity of the YouTube channel Erin Talks Money said there isn’t just one magic number that everyone needs to hit in order to retire. Instead, she said there are five benchmarks to meet for satisfaction in retirement.
Learn How: Suze Orman Warns This Common 401(k) Mistake Could Cost You Thousands
Hop On: How Middle-Class Earners Are Quietly Becoming Millionaires — and How You Can, Too
In her video "Before You Retire, Make Sure You Have These 5 Things," Moriarity breaks down the “five data-backed pillars of happiness,” and why they’re necessary to retire. “It's not about having the biggest number in the bank account,” Moriarity said. “In fact, if you focus solely on that, you'll likely find that you're optimizing for the wrong thing.”
1. Enough Money To Feel Safe
Obviously, money is necessary for security in retirement. However, Moriarity warned that there is a plateau to this security and ongoing happiness. She referenced a study in which a researcher at a university found that once retirees saved $4 million, their happiness did not increase if they made more money. She laid out several other studies in which more money didn’t necessarily bring more satisfaction.
Instead, the data shows that feeling secure mattered much more. Often, she said, this won’t come until you’ve actually retired and seen your reality. But if you build a strong financial foundation, you can weather the storm.
“Before you retire, everything's uncertain," Moriarity said "What your spending is going to be, what healthcare might look like, what kind of market you retire into. But then once you step away from the workforce and into retirement, you see what it's like. You adapt, you adjust, and for most people, that anxiety fades away.”
2. Increased Reliable Income Streams
Moriarity discussed several studies that showed we view income as more rewarding than withdrawals, even on the same levels of wealth. For example, if someone receives a $3,000 pension, they’ll feel better about their finances on average than a person withdrawing $3,000 a month from their investment portfolio. In fact, the second person will end up withdrawing less because they don’t feel they have as much money to spend.
“My practical takeaway here would be delaying Social Security is one of the most powerful levers you have,” Moriarity said. “Every year you delay past full retirement age, your benefit increases by 8% up to the age of 70. Waiting from 62 to 70 increases your monthly payment by 76%. That's a lot of guaranteed income.”
3. Less Debt
In the video, Moriarity discussed how The Center for Retirement Research found that for every $100,000 of non-mortgage debt a retiree carried, financial satisfaction dropped by a full point on a 10-point scale. Because debt reduces your flexibility and security — not to mention your happiness — Moriarity recommended prioritizing paying it down as soon as possible.
“More than 60% of retirees who said they were much happier in retirement than when they were working had paid off debt before leaving the workforce,” Moriarity said.
4. Strong Relationships
Our bonds with other people count for a huge portion of our happiness. Moriarity talked about a Mass Mutual study that found 76% of retirees said the top activity contributing to their happiness was spending time with loved ones. Other studies found that retirees were happier to spend money on activities like going out to dinner with friends than any other spending category. However, it’s important to nurture challenging relationships, too, so they don’t take away from your happiness in retirement.
“Relationships are like any other investment, and they require regular deposits to make those investments thrive,” Moriarity said.
5. Purpose and Structure
Moriarty cited studies which found that the biggest challenges retirees faced wasn’t a lack of funds, but rather a lack of identity. She said that you can work on this by coming up with a concrete way you’re going to structure your time in retirement.
“You want a written plan on what you're going to do with your time and how you have your sense of purpose in life, not just a written plan for your money,” she said.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
More From MoneyLion: