In retirement, what’s more important – health or wealth?

What matters more, wealth or health? ©Cozine - stock.adobe.com

A report from the Employee Benefit Research Institute found a strong correlation between health, wealth, and overall retirement satisfaction. The report, “Is simply having money enough to ensure a satisfying retirement? The relationship between health and wealth in determining retirement satisfaction,” delves into how physical well-being and financial stability jointly influence retirees' happiness.

The report analyzed data from the 2020 Health and Retirement Study, focusing on retirees aged 55 to 80. It shows that while wealth is a significant driver of satisfaction, health plays an equally—if not more—important role in shaping how content individuals feel in retirement.

Key findings:

Wealth impact: 73% of individuals with assets of $500,000 or more reported high retirement satisfaction, compared to only 33% of those with assets under $25,000.

Health impact: 70% of retirees in "excellent-very good" health reported being highly satisfied with their retirement, while just 28% of those in "fair-poor" health felt the same.

Interplay of health and wealth: Even among wealthier retirees, health was a defining factor. For instance, 78% of individuals with $500,000 or more in assets and excellent health were highly satisfied, compared to 55% of those in poor health with similar assets.

The report also emphasizes the importance of guaranteed income, such as pensions or annuities, and preretirement planning as additional contributors to retirement satisfaction. Retirees with a steady income stream were more likely to feel secure and content.

The study noted demographic variations, with White retirees reporting better health and greater retirement satisfaction compared to their Black and minority counterparts. This highlights potential racial disparities in retirement outcomes.

Samita Thephasit, research associate at EBRI, underscored the importance of a holistic approach to retirement planning, stating: “Health and wealth are interconnected in how satisfied people are with their retirement. Employers should design benefits that encourage regular health checkups and financial planning.”

The full report can be found here.