They say money can't buy happiness, but when it comes to retirement, a little extra cash never hurts.
Retirement is becoming more and more expensive, and the average U.S. adult is expected to outlive their savings by around eight to 10 years, according to a report from the World Economic Forum. If you run out of money later in life, it can be tough to enjoy your senior years.
While everyone will have different financial needs and goals in retirement, a new study shows there may be a dollar amount tied to happiness. Here's how much it costs to retire happy.
The price of happiness
In a study conducted by Audley Villages, a retirement home community based in the U.K., researchers ranked the happiest cities in the world, and determined how much the average person in those cities needs to retire comfortably.
The results revealed that it costs, on average, $288,240 to retire in the world's happiest cities. The city scoring highest on the "happiness index" was Helsinki, Finland, where it costs approximately $252,599 to retire. The least expensive city on the list was Wellington, New Zealand, with retirement costing $206,228.
Among U.S. cities, Honolulu was revealed to be the happiest. Researchers found that it costs around $304,591 to retire there.
What does it really take to be happy in retirement?
While there's nothing wrong with seeing how much retirement costs on average, it's important not to base your retirement plan around these numbers alone.
Everyone's retirement will look different, and each retiree will also have a different definition of "happiness." Some retirees will be perfectly happy staying home and spending very little outside of their basic necessities. Others, though, may want to travel the world or take on expensive new hobbies in order to be happy in retirement.
As you're saving for retirement, it's important to think about your expectations for your senior years. Ask yourself what type of retirement lifestyle will make you happy, and consider how your future costs will compare to what you're spending now. You may find that your expenses will decrease in retirement, but they could just as easily skyrocket. By thinking about these expenses now, you'll have a better idea of how much retirement will cost.
How much should you save?
Because everyone's retirement needs will differ, it's wise to calculate your retirement goals based on your unique situation.
Once you've determined approximately how much it will cost each year for you to enjoy a happy retirement, plug that information into a retirement calculator. Be sure to consider Social Security benefits as well, because although they likely won't cover all your expenses, they can reduce the amount you'll need to save.
As you're inputting your information into the retirement calculator, be honest with yourself about factors such as your retirement age and the amount of time you expect to spend in retirement. If you're battling health issues, for example, it may not be realistic to assume you'll be able to continue working into your 70s or spend several decades in retirement. The more accurate your inputs are, the more accurate your results will be as well.
Enjoying a happy retirement is a goal nearly everyone can strive for, but it takes strategic planning to achieve this target. By calculating your retirement needs and preparing accordingly, it will be easier to enjoy your senior years to the fullest.