What do the happiest retirements look like – and how much do they cost?

So first of all, what does a happy retirement look like? Well, it turns out that the happiest retirees enjoy good health and satisfying close relationships. They value their independence and enjoy filling their time with meaningful activities. 

One consistently key factor to financial wellbeing is financial status. Lorna Shah, Legal & General’s Retail Retirement MD, noted that: 

"The study shows having a predictable income is key to unlocking the other elements of life that make us happy."

Our research showed that, in practice, that means having a stable after-tax monthly income of £1,700 (at current cost-of-living levels). It’s for individual retirees, not couples.

We also found that the boost higher incomes bring begins to level off once you’ve got more than about £2,000 a month.

All that’s based on responses from 3,000 retirees, specially chosen to represent the UK’s later life population. 

Why does financial stability matter so much?

Retirement looks different for everyone. Some people are full-time retirees, living entirely off their retirement income. Others still work part or even full time, but enjoy top ups from their pensions. And of course, what they all choose to do with their time varies hugely.

But over the past three years, there are two experiences that every single retiree has shared. They’ve all had to deal with:  

• High inflation levels
• The cost-of-living crisis

As a result, many retirees are concerned about their financial security. Our research showed that more than one in four of them (27%) say their finances are often or sometimes unpredictable and difficult to keep track of. 

One in five (22%) live on less than £1,000 a month. That’s not just well below the ideal income levels we identified. It’s also less than the Pensions & Lifetime Savings Association's recommended minimum monthly income of £1,200.

And some positive developments are causing unintended negative consequences. For example, we’re all living longer. That’s great! But it also means that retirement incomes need to stretch further to cover those longer lifespans.

In short, money’s a key factor in later life happiness. As Meik Wiking commented: 

“The study shows that money does indeed matter for happiness. In fact, money plays a crucial role. Being without sufficient resources to make ends meet causes worry and stress and a lower quality of life for people in the UK. That is especially the case for people in retirement. The good news is that there are ways we can improve happiness levels by planning and saving for retirement.”

So, the best way of supporting your clients’ happiness is securing the highest possible, longest-lasting retirement incomes for them. The planning conversations and calculations you have with your clients need to address that.

What sort of pension portfolio best supports happiness?

A blended retirement portfolio can help solve many of these challenges. It combines:

• The security of a guaranteed annuity income
• The flexibility of other sources of retirement income

The guaranteed annuity income takes away uncertainty. Supporting it with effective, ongoing retirement planning will help manage risks like:

• Poor pension investment returns
• Taking out too much pension cash too soon
• Periods of high inflation

With your help, your clients can build their later life on a robust retirement strategy. They’ll be confident that their income will cover their essential expenses for the rest of their lives. And that boosts happiness regardless of their income level. 

Less affluent clients will be reassured that they’ll always be able to cover their basic expenses. More affluents ones won’t really worry about that, but they’ll still appreciate having that guaranteed income to plan around. They’ll enjoy knowing that they’ll always be able to afford life’s little luxuries, and perhaps some larger ones too.

At this point we should mention our own annuity products, carefully designed to meet your clients’ needs. They can choose between a guaranteed income that lasts:

• for life, with our Pension Annuity
• for between three and forty years, with our Fixed Term Retirement Plan and Cash-Out Retirement Plan (our fixed-term annuities)

They’re a foundation for happiness in retirement.

So now it’s over to you to help your clients achieve that in a secure, stable way. It’ll be great for them – and of course, few things help a business thrive more than truly happy clients!