Reframing Money, Work, and Retirement With Michael Finke


There is a science to retirement, and if we do it with purpose it can turn out very well. Ever wonder how to make the most of your money, work, and time as you age? There is data out there about this and we will dive into it. Today we talk with professor Michael Finke about finding the happy medium between these three, the meaning of money and the impact of work. Michael Finke, PhD, is a professor of wealth management and Frank M. Engle Distinguished Chair in Economic Security at The American College of Financial Services and an expert on all things related to money, retirement satisfaction and the psychology of retirement.

Knowing that various ‘asset classes’ like relationships, health, and intellectual curiosity can provide both immediate and long-term rewards, we explore opportunities to balance finances while still pursuing these other joy-forward assets. We also talk about the struggle of transitioning from a saving to a spending mindset in retirement — and where people often go wrong — which involves the limbic system of the brain and how it conflicts with our pre-frontal cortex. 

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Key Moments:
Now, I have found in my research that having more money is associated with greater life satisfaction. It is, but you know why? If it’s just dots on a computer screen, why does it make you feel good?”

“And in retirement, money facilitates. It’s an avenue towards activities that actually do make you happy.”

“It’s the spending of the money on the right kind of things that make you happy.”

“People feel differently about spending money from savings than they do spending money from income… Well, people spend more when they have $35,000 of income versus having $500,000 in savings. That’s an example of how using your money the right way can actually help you get more satisfaction.”

Get in touch with Michael Finke
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David: 0:18

Welcome to SuperAge. My name is David Stewart. I am the founder of Ageist and your host on the SuperAge show. We talk about how to live healthier, how to live longer and how to be happier and who doesn’t want that? Today’s show is brought to you by InsideTracker, the dashboard to your inner health. Go to insidetrackercom. Slash ageist. Save 20% on all their products. Today’s show is also brought to you by Element LMNT, my favorite electrolyte mix. It’s what I put in my water in the morning and it’s what I put in my water at the gym. Go to drinklmntcom slash ageist and receive a free eight serving sample pack with any purchase. Today’s show is also brought to you by Timeline Nutrition with their breakthrough product, mitopure, the first clinically tested urolithin A supplement which is showing tremendous results for mitochondrial health. Go to timelinenutritioncom. Slash ageist. Use the code AGEIST at checkout and save 10% off your first order of Mitopure. Welcome to episode 148 of the SuperAge podcast. This will be dropping on August, the 23rd 2023. This week we’re coming to you from the shores of Waikiki in Honolulu, in the amazing state of Hawaii, and I could have prerecorded this podcast last week, but I really just wanted to say coming to you from the Haleku lani hotel here in Waikiki, because I don’t know, that’s just like so cool. It’s amazing. Here there is this word healing gets thrown around a lot. To me, there is something absolutely healing about being in Hawaii. I don’t know what it is. I can just feel like every day that I’m here my parasympathic nervous system gets stronger and stronger and I get more and more calm. I happen to be staying at the most amazing hotel here. It’s called the Hale Kalani. It’s on the near end of Waikiki. It’s where Obama stays. I would put it up like top three or four hotels I have ever stayed in in the world Incredible staff. You can sort of tell what sort of experience you’re going to get from a hotel based on the longevity of the people who work there, and what they told me is 50% of the staff here has worked here at least 30 years. So you know they take really good care of their people and it shows. I just could not be happier being here at the Halekul ani this week. On the show we have Michael Finke on, and Michael is one of my favorite financial people. He’s really funny. He’s really funny. He’s super smart. Michael’s a PhD and a professor of wealth management and a Frank M Engels distinguished chair of economic security at the American College of Financial Services, and Michael does a lot of research into the science and the data, the mindset, the psychology of what’s involved with money, like what is the meaning of money, what is the meaning of work, what are the different systems in our brains, our limbic system versus our prefrontal cortex, and how do we see ourselves in the future versus how do we see ourselves now? And you know the need to future cast ourselves. And then we have a fascinating discussion about the difficulty of actually, if you spent your whole life saving money, how do you spend money? What’s the psychology of that? I think this is just a fascinating topic. You know, one of the legs of super aging is financial security. You need to have a certain amount of money in order to make all this stuff work, and Michael is an expert on this. We sort of revisit something that we spoke about a few months ago, about this idea of different asset classes, and I’m not talking about cash and stocks and bonds and all that stuff. I’m talking about the asset classes of your friend group, your curiosity, your knowledge base, your health, your fitness level. All these things are asset classes harder to quantify than how much cash you got in the bank, but super important. So we’re going to get with Michael in just a moment. I’m really excited for this conversation and I think you’re really going to enjoy it. Today’s show is brought to you by Inside Tracker, the dashboard to your inner health. I’m a big believer in getting blood tests taken because it’s simply the only way to get in depth data about your metabolic factors, your hormones and the things that inform your immediate and long term health. There are also excellent DNA tests that can further inform you about your immediate and long term health. The problem is the most blood tests out there is. You get a lot of information back and you get a lot of numbers and they’re not really going to tell you what to do about it. In addition, they can be very confusing. What all the factors are, what they mean? Inside Tracker has a dashboard and a platform that simplifies all of that. I get food first, supplements second, recommendations about how to optimize my inner health. For instance, I just got my test back and I saw that my calcium levels were a little low, which were surprising to me, but I have suggestions now about how to correct that. I would not have known that had I not done an Inside Tracker blood test. Go to insidetrackercom slash ageist. Save 20% on all their products today. The show is also brought to you by lmnt, spelled LMNT, my favorite electrolyte mix. One of the great findings that I learned last year was the importance of electrolytes in my water, especially sodium. Of course, if you have hypertension or you’re prehypertensive, this is something you want to pay attention to. But for most of us, we’re probably lacking electrolytes, and my favorite one is element. And guess what? They just launched grapefruit. I’m actually drinking a element grapefruit right now, and that’s awesome. Go to drinkelementcom slash ageist. Get a free eight serving sample pack. That’s D-R-I-N-K-L-M-N-T dot com slash ageist and get a free eight serving sample pack with your next purchase. Just a quick reminder that, after my conversation with Michael Finke, we’re going to do that little thing that we do during every show called just try this. So stay tuned for that little tip to hopefully help you live a little healthier a little longer. 

Michael: 6:28

And a little happier. 

David: 6:30

Let’s get to my conversation with Michael Finke, and just a quick note this conversation was recorded about three weeks ago, so before I head into Hawaii hey, michael, how are you today? I am great. 

Michael: 6:44

How are you, david? 

David: 6:45

I’m doing, dandy. I just came back from physical therapy which I’ve been doing to improve my essentially stability. And you know what, michael, one can improve one’s stability and balance and all that stuff really dramatically in the course of like a couple of months. So I got like a gold star for my PT this morning. So I love that. 

Michael: 7:03

You’re going to have to teach me how to do that. I could use it a lot. 

David: 7:09

Pro tip do everything on one foot, barefoot, Like, start brushing your teeth and like everything you can Like, just always barefoot. So your foot, you activate the nerves in your foot and then do everything barefoot and it’s. That’s where it starts. 

Michael: 7:20

I’m afraid my wife is going to start videoing me. So the surf dishes like oh, I have on TikTok. 

David: 7:26

True, my wife is. So she’s just like oh God, david’s doing another stupid you and trick, all right, whatever. So you’re an expert on retirement planning and wealth management and the name of this podcast is SuperAge, and you cannot SuperAge unless you have a lot of this stuff sort of figured out. But first I want to ask you the big question so what’s the meaning of money? Why? Sorry, it’s early in the morning. 

Michael: 7:57

Well, I mean, if you think about it, money means nothing by itself. Money is just a green paper that we imagined. We all just collectively agree it has value. Or it’s dots on a computer screen and in and of itself it’s just an idea, it’s a concept, but obviously money is very important because people make big sacrifices for money. Why do they do that? Now, there’s a number of different pathways we can go down. I mean, you know, we as human beings are evolved to compete with each other, especially men. You know, we get a drug that gets released, serotonin, when we feel as if we are doing something that makes us dominant over others. And money is a way of keeping score, and it’s it’s an easy way of keeping score in a modern economic environment. So we can actually derive a certain amount of pleasure from having more of it. Now, I have found in my research that having more money is associated with greater life satisfaction. It is, but you know why? If it’s just dots on a computer screen, why does it make you fear? And in retirement, what money does is it facilitates, it’s an avenue towards activities that actually do make you happy. Now there’s one aspect of money, which is security. So we we feel the feeling of security, we have the feeling of dominance. Those are all positive feelings that money brings us. But money is also an input into things like being able to go on vacation or go out to eat with friends social activities that we know are a big source of life satisfaction in retirement. If you look at the data and you look at the things that you can spend money on, it is these sort of frivolous social activities that are the primary source of life satisfaction among different expenditure categories. So if you spend it right, then you can use money to get more happiness out of retirement. Now where I think it becomes harmful is the serotonin, the dominance thing that gets shot every once in a while, but not consistently. If we just simply have a lot of money in the bank, the assumption is that we’re going to be happy. A lot of people make huge sacrifices to have more money and they’re happy for a while, but after a year or two they’re not necessarily that much happier. It’s the spending of the money on the right kind of things that make you happy. Now, all of our SQL, you and I would prefer to have more money, less money, but let’s have a realistic attitude about why it makes us happy and what we can do with it to make us happy. 

David: 10:38

Okay, before we get to, why does money cause happiness? We’ve talked about the meaning of money. What’s the meaning of work? 

Michael: 10:46

Yeah, so work is also related to all sorts of activities that could be related to happiness. So many of us work in jobs that we’re not working in a coal mine. We are in a job that provides flow, so it’s a challenge, it’s possibly something that we’re good at. It uses the skills that we’ve developed over time. These are all things that provide life satisfaction, and when we retire, we don’t get those from that job anymore, and if we design a life that allows us to continue to experience that flow, that feeling as if we’re doing something that is challenging and using our talents if we don’t get that, then we can actually be less happy. To me, you have to understand what it is that is creating this satisfaction and be able to continue to do those things even after you leave your primary occupation. Now, I’m one of those who believes that there’s going to be there has to be a revolution in the job market among this Baby Boom generation, especially the younger Baby Boomers. 1958 was the peak of the Baby Boom. I’m hoping that they help us reinvent this idea over time, because I do know that from the data, you do change. You change cognitively, people change physically. It’s a struggle to maintain our capabilities over time and it may be that we’re no longer interested in working 40 hours a week. We may want to work at the things that we particularly enjoy, that we’re good at, and I have these ad juncts who work at the American College where I work, and we have some of these who are retired experts. They worked in the industry, they experienced all the pressures of being an executive, they built a lot of knowledge and then they retire, but they still want to do things and they still enjoy working with students and helping them learn concepts. So they work at the college, and my favorite ones are the ones where I say I really need help creating content for this course. Do you have an extra 20 hours this week? And they will tell me no, and I’ll be like, yes, that’s exactly what you should tell them, because what you have when you retire is control over your time, and to me, that’s retiring right. It means I am experiencing a transition into a different stage of my life, but I’m also continuing to do the things that I really enjoy, and just because I get paid for them, that doesn’t mean I’m not retired. Retirement means autonomy, and I think that in the future, what I hope is that people don’t stop work and completely step away from the experiences that gave them joy, that provided that flow, that they will continue to maintain involvement in social activities where they can really contribute to the well-being of society, because these people have spent decades learning that younger people simply don’t know. And we can all benefit by having greater engagement in the workforce of those who are maybe retired from their full-time occupation, but I don’t think the system is set up well enough to be able to allow them to do that. 

David: 14:31

Talk to me about the sense of agency and relevance. So you use the word contribution, I like the word usefulness. I always tell people like whatever you’re doing, just be useful, and that sort of links to this idea of a sense of agency, impact and relevance. 

Michael: 14:47

I think that sometimes people will say volunteer in retirement, but maybe at a low value kind of activity, and they could be doing something where they built up the human capital to be able to provide more value, but they get paid for it. That’s okay. It’s okay If the thing that provides the greatest value to society is something that you get paid for, because that really is the most genuine form of appreciation for contributing value, for being useful, is money. So it’s okay if you do things in retirement that allow you to get paid. 

David: 15:22

Absolutely. I don’t know what kind of brain chemical that’s activated for me, but when I look at my bank account and somebody has sent me some money, I feel validated for what I did. 

Michael: 15:35

You know, it is so true, and it’s actually something that a roommate told me back in college, because I mean, there is this sense in college, like you’re trying to rebel a little bit, but you know he’s had it in capitalist society it is the truest form of appreciation for the contribution that you’re making and I thought, well, that’s a good way of thinking about it. Someone has said thank you for doing a good job, doing something useful. 

David: 15:58

Yeah, that’s the world that we live in and you know some people are like, well, I don’t like that world, but I’m sorry, that’s just the way the world is so. 

Michael: 16:07

And we get a little shot of the dominance chemical too, when your number gets bigger. 

David: 16:12

Tell me about your thinking on the pillars of happiness, what really matters to people. So when? 

Michael: 16:17

we run what’s known as a multivariate analysis, which is we have this data set called the health and retirement study 20,000 retirees I’ll use them over time lots of great questions, modules on all sorts of life characteristics, and if we throw them all into an analysis that controls for everything, so I mean, for example, it may be difficult to parse out how much life satisfaction money is actually contributing, because people who have more money tend to be more positive and they tend to exercise and have more relationships. So is it the relationships or the exercise or the money that is causing the happiness? What you have to do is you have to look for the independent predictors controlling for everything else. That’s a multivariate analysis. When we run a multivariate analysis, what we see is that there’s three areas that clearly are the strongest predictors of life satisfaction. Those are health Now, health is obvious, but boy, health is a big predictor of life satisfaction. Relationships the quality of the relationship that you have with your partner is the number one predictor of life satisfaction positive and negative. So positive relationship it’s great, if you have a negative relationship, it’s fine. And also friends, your closest friends in retirement. That is a resource that you can draw from. That has a big impact on life satisfaction. Kids have no impact on life satisfaction in retirement. Really yes, really, wow. So if you have kids for the purpose of being happier later in life, there is no evidence statistically that they provide any added source. I think one of the biggest mistakes we can make is to move close to our kids in retirement. They can expect that they’re going to be a significant source of life satisfaction. I actually go online. There’s this great Facebook site or a Facebook group called Retired or Near Retirement and there was a discussion about whether or not it’s a good idea to move close to your kids and it had like 160 responses and there was not a single positive one. It was all those people explaining why it is that things didn’t quite work out the way that they’d expected. So things to remember and money, and not just wealth but also income, and that is an important distinction. So in an era where people used to get a pension, many people feel like they can spend all of the money that they get from pension, whereas money and wealth there does seem to be a block. People feel differently about spending money from savings than they do spending money from income. So people who have pensions you know back in the days when people had pensions they tend to be more satisfied than those who have simply the same amount of wealth that it would take to buy that amount of pension income. So let’s say just as an example, let’s say I can go to an insurance company and buy $35,000 of income for $500,000. What’s gonna make you happier? Well, people spend more when they have $35,000 of income versus having $500,000 in savings. That’s an example of how using your money the right way can actually help you get more satisfaction. Now, of these three pillars of happiness relationships, money, health all of them are an investment. What is an investment? An investment is a sacrifice that we make today in order to live better in the future. That’s the economic definition of an investment, and all of them. So when I make an investment in health, I’m doing it so that I can live better in the future. A great example of this is VO2 max. You know, you’re very well versed in the concept of a melody of our bodies to process oxygen and we may think we may save money so that in retirement we can go to Switzerland and take hikes in the mountains, because that’s what we’ve always wanted to do. But if we don’t have a VO2 max above 30, we’re not gonna be able to do it. So we have to make an investment in maintaining our physical health, which takes time and effort. We’ve got to spend, you know, time on exercising and we’ve got to recover and we got to take a shower. You know, all of these are not entirely pleasant, but we do it so that we can use our money in retirement to fly to Switzerland and rent a chalet and go for a hike. That experience is not pleasurable unless I’ve made an investment in health and in money. I have to be able to fly there in the first place. That’s what money can get you. 

David: 21:26

We had Dr Andrew Scott on a few months ago and he contributed a book called the Hundred your Life. One of the things that I love what he talked about were asset classes, similar to what you’re talking about. He’s like well, money, house, all that, that’s an asset class, but there’s like another four or five of them. Those include your friends are an asset class, and your health, and also your curiosity, your knowledge base, your ability to learn new things. These are all asset classes, and what I noticed is a lot of people over index on the easily quantifiable one, which is how much money’s in the back. 

Michael: 22:04

That is such a great way to put it and it’s actually very consistent with traditional economics. So traditional economics says that money is just an input. It’s an input into the production of a commodity, and the commodity is whatever it is that makes us happy. So anything that could be an input into the production of that commodity, it’s valuable. So that means that relationships have value. Because what’s what good is money if we don’t have the ability to share our life with someone? If we’re just sitting alone, you know, on the computer or you know the living, less than a fulfilling lifestyle because we haven’t made that investment. But we have to sacrifice to maintain friendships. It takes time, it takes effort, you have to be deliberate about it. You’ve got to, you know, fly places to visit old friends, to maintain those relationships. But you do it because there’s a payout. I mean there’s an immediate payout and that you get to enjoy spending time with friends, but there’s also a long term payout that you get to draw from those relationships later in life as a source of satisfaction. So I love that idea. I love to think of all these aspects of your life as a asset class. What is an asset class? It is something that we can draw from to provide happiness, to provide utility is what economists call it. But you know it takes multiple asset classes to get the most out of life, and something like intellectual curiosity, I mean, that is an asset class, you know. Maintaining that, you know, even something like communication skills, is an asset class, and being able to maintain those communication skills I still read about this stuff, you know, I think it’s fascinating because there are, for example, salespeople who know more about how to communicate effectively with other human beings than academics do, that’s for sure. And they’ve learned these skills, they’ve made investments. And you know, I get a kick out of learning stuff like that, like something as simple as repeating back to the person that you’re talking with what they’ve just told you, to show that you’ve been listening and you’ve absorbed and processed that piece of information. Now, that’s a skill that nobody teaches in academic, but it is the kind of stuff that they teach salespeople, because it shows empathy, it shows that you’ve you know you’re paying attention, you value them and the skill that you can draw on from the rest of your life. I mean, that’s reason enough to listen to this podcast. If you practice that in the future, for the rest of your life you’re probably. That’s a source of value that you can draw from continually. 

David: 24:53

So what I’m hearing from you is this idea of effort and sacrifice Sounds very Calvinist of me, but it’s an ongoing process. You know, learning something is not necessary. I mean, for some people it’s fun. I think it’s not kind of fun, but it’s also hard, like it requires an effort. Going to the gym requires an effort, especially the whole relationship, friend thing. So as we get older, a lot of times, you know, people move away. We basically have to nourish our new friend circle or it will naturally atrophy, and so that’s can be really hard for people to like go out and like, oh my God, like I’ve got to join this thing. I don’t want to join this thing, I’m such a busy guy and you have to say no, you’re not, come on, get over it. Like just go do this thing. 

Michael: 25:37

Well, you know, we’re all victims of inertia. We just we don’t really want to do anything. How many times have we experienced that? You know? We’ve set up a dinner with friends and they had to cancel at the last minute. We’re just so relieved that we don’t have to go, but if we did go we would have really enjoyed it. It’s just something about the way that human beings are programmed that we don’t naturally want to expend effort unless it’s very obvious what the reward is. 

David: 26:07

And so do you think we all are running this sort of cost benefit analysis in our minds and we’re thinking like, oh, dinner, okay, effort, there’s a cost. I’ve got to drive there. I mean I like them, the food may suck, I’m going to be bored. That’s a possible cost, that’s my benefit. Oh, I don’t know. I mean, what am I going to get out of this? And at the end I total it up and I say I don’t want to go to dinner. I mean, do we do that? 

Michael: 26:32

You know, I think part of it is that and this is you know, you and I have talked about this before part of it is this natural human tendency to value the present version of ourselves more than the future version of all ourselves. And then a lot of studies and economics on this topic. If you think about your life, it is, you know, the film of your life is just a bunch of stills of you today, you a year from now, you 10 years from now, and you have to be sympathetic towards the year old version of yourself, the 10 year older version of yourself, 75 year old version of yourself. In other words, we make decisions today that affect our satisfaction in the future, but there is this just natural human tendency to focus too much on the present, and that’s where we get in trouble is that we overweight the present and we don’t recognize the downstream implications of a lot of the decisions that we make, and we have to be very deliberate about that. We have to force ourselves to be more forward thinking if we want to be able to achieve a lot of those long term goals that we know are associated with the life satisfaction. 

David: 27:48

Why are we like that? I mean, what’s the, what’s the human wiring that causes that to happen? 

Michael: 27:53

It’s because our brains are basically a combination of this ancient part of our brain, the limbic system, and the limbic system has no conception of the future version of ourself. So you know, a lizard has no conception of the future version of itself. Many mammals are barely aware of the future version of ourself. What makes us different is this prefrontal cortex and in many ways, the ability to imagine the future makes us unique and a lot of advanced animals, you know, marine animals and primates. That is, the one thing that makes us different is that we can imagine a future and then we can change our course of action today to live better in the future. But it represents a constant struggle between part of our brain which is more powerful and instantaneous and the other. The other element that needs to be considered is that when we use that prefrontal cortex part of our brain, the part that mediates the older limbic part of our brain, it takes effort, it actually takes calories. You know it’s hard and slow and deliberate to moderate the impulses of the other part of our brain, which means that we oftentimes will end up losing to that part of our brain that is only focused on the present and that is not considering the future. So you know, you really, and you can tell, even in a population there are people who are consistently forward thinking and there are people who are really just slaves to the their, their present impulses. And that has, you know, everybody is familiar with the Walter Michelle marshmallow experiment experiment, where winds are brought in and you know, they’re given a marshmallow and they have to sit there and they’re told that if they can wait five minutes they’ll give them a second marshmallow. So you can actually see the kids struggling with this and some of them struggle more. Some of them are just like you know, no problem, I can wait five minutes. Other ones are like staring at the marshmallow. Some of them just immediately eat the marshmallow. Some of them use techniques where they maybe go in the corner of the room and they stare at the wall so that they are able to resist the temptation. In other words, they recognize that the temptation is exists, they recognize that the limbic part of their brain is powerful, so they will create what’s known as a commitment device to avoid being tempted. That is the one area of behavior where we actually have some hope. That is, we design our lives so that we can create habits which serve as a commitment device or we can take away things that you know. For example, if we spend too much of our lives online, let’s create some sort of constraint where that’s not even possible, so that we have you know we’re forced to go outside and we’re forced to do other things that we know are in our long run best interest. But oftentimes it’s very difficult to counteract that emotional side of the brain. 

David: 31:00

I’m thinking about this. The limbic part of my brain is very powerful. My wife’s prefrontal cortex is more advanced than mine, so she runs the money. I’m thinking in what you said earlier about how having a certain amount of money in the bank can actually be sort of troublesome versus getting the monthly. Here’s the check. Like you have the money in the bank, you’re setting up a limbic prefrontal cortex conflict. 

Michael: 31:30

You are. You know that’s a great way of putting it. I don’t think I’ve actually thought of it that way, but you’re creating a consistent source of pressure. The money is there in the account. It’s saying he’s been me, and that’s another reason why I always recommended that people, when you get a paycheck, automatically a portion of it they should put in some sort of online savings account. At least give them a day buffer where it takes a day to transfer it into your checking account. So you’ve got a little bit of a constraint on the limbic behavior. But I do think that what happens is people who are forward thinking train ourselves to think you can’t spend that money. So we create constraints so that we don’t spend the money, and part of it is rural constraints that we think that it’s good if we don’t spend the money. In fact, I’ve done interviews with retirees where they will be so proud of the fact that they’re not spending any of their money, that they’ve saved or fund a lifestyle. And I’ll ask them well, you must really want to give that money to your kids, and oftentimes it’s the first time they’ve ever thought about it, because the money can only go to places. You can either spend it or you can pass it off. But there’s no third option and life doesn’t last forever. But I think what happens is we have this habit of thrift where we have developed over time people who accumulate wealth. We congratulate ourselves for not touching the money in our savings account. We’re not allowed to spend that money. It’s savings. I can’t touch my savings. And then you get to retirement. You can’t flip that switch. You can’t change that habit and say I can just pull money out of there and spend it, it’s okay. 

David: 33:12

I’m envisioning myself and that would most definitely cause a conflict for me, one that would not be there if there was. Just like a check came every month and I would just like take the check, cash it, and I’ve got an envelope of $100 bills and it’s like, okay, that’s my money for the month. Okay, like, at that I can like get my mind around, but I’ve got this big chunk of money. Now, how do I negotiate that and avoid this, this conflict that I can? That I’d never thought of before until you just mentioned it. 

Michael: 33:46

One of the problems also is when you invest it and you lose money. That creates a negative emotional response, and you said well, what if I could just get the money out regularly every month? If you could create that kind of a habit? What would you do if the balance got smaller? What would happen in 2022 if you went from a million dollars to $800,000 in the bank? Would that change your behavior? Would you go out to eat less? Would you go out to your vacations? That essentially means that, to some extent, your lifestyle is dependent on something that you can’t control, which is the performance of your investments in the market, and that’s another thing that I see is a problem, because, essentially, the satisfaction that you get from the money is, to some extent, dependent on something that you absolutely cannot control. It’s completely random, and for some people it’s going to be better, and for some people it’s going to be worse, which is, how well is the market going to perform over time? Which is why I think we’ve got to develop systems so that, at least with a portion of our savings, we can give ourselves the license to be able to spend that money over time, so that we’re not constantly having to fight these emotions. 

David: 35:05

I have seen this played out so many times, where their consuming behavior is based upon exactly what you’re talking about the market up, market down and it makes a certain amount of sense to me, but it also makes them crazy. So market up, they’re happy. Oh great, let’s go to dinner. We’re going to go to Tuscany? Oh yeah, let’s stay home and buckle down. But really nothing has changed. 

Michael: 35:39

No, and if you were going to do it right, you would be going to Tuscany on the down market years, because nobody else is flying Like that’s the best deals on flights. 

David: 35:48

It really tells. 

Michael: 35:50

How do you create a strategy for yourself? You allow yourself to do that, and that’s another one of these. I study retirement income planning a lot and I give a lot of thought to when you get to retirement. You’ve got this lump sum, as we do in the defined contribution era. What’s the smart way to deal with your money? And I think the smart way to deal with your money is to take part of it and say let’s spend this morning. No matter what happens, I’m going to spend it. I’m going to take care of my legacy goals. I got a certain amount of money for emergencies, but I’ve got part of it that I have to be disciplined. Especially if I’m a saver, I have to be disciplined about spending it down. And then how do I create some sort of a strategy where, no matter what happens, I feel comfortable actually spending it? 

David: 36:33

I would just buy the annuity. 

Michael: 36:36

Well, that’s what economists say in general. I mean, there’s a great article by a guy named Richard Taylor. He’s a Nobel Prize winning economist. He’s got an article in the New York Times called the annuity puzzle and the expensive sounding like an annuity salesman. That’s the way that economists think about it. We don’t know how long we’re going to live, so why not take a chunk of our money and just buy ourselves an income and, no matter what happens in the market, we can continue to spend the money. And because we don’t know how long we’re going to live, we can actually spend more if we pool that with other retirees. Let’s do a geek out on this kind of stuff. It’s called idiosyncratic longevity risk. It means it’s the risk that if we don’t know let’s just give an example If you’re a 65-year-old healthy woman, then on average you’re going to live 25 years. So let’s see if you’ve got $500,000. How do you spread that $500,000 over the next 25 years with interest so you could just spend enough money so that you run out at the age of 90, but then you’ve got a 50% chance of outliving your savings. So maybe you spread it to 95 or maybe you spread it to 100. Even at 100, you’ve got about a 10% chance of still being alive. Or you just pool the money with other retirees. You can spend as if you’re living to the age of 90. So maybe you can spend about $35,000 a year, which is more than if you try to spread it out to the age of 100. And you never have to worry about running out. That’s the value of longevity risk pooling through the use of an income anyway. 

David: 38:10

I’m thinking about myself as someone who’s always I need to feel this sense of agency in the world. That’s sort of like the driving force of my life, like, okay, how I’m going to make impact an agency and I could see myself retire at some point. I get the money in the bank and then my only sense of agency in the world is how am I going to impact that amount of money? Because that’s what makes me feel good. So I’m going to be like, oh well, I should buy some more Apple stock, or I should transfer it into bonds, or I should be doing some kind of BS Right when actually I’d be much better off. Just like, forget about it. Buy the insurance contract. You get a check every month. Forget about all that stuff. 

Michael: 38:49

And I think that’s a case for most people. Some people love just you know dabbling in the market. I have a new research project that I’m doing on crypto investors, and boy they’re a different breed Like they get a huge amount of satisfaction out of telling other people how well they’ve done in the market and these online communities and all that kind of stuff. If it’s your jam, then do it. You know, whatever. Don’t expect to get a higher than expected return from it, but at least it’s a social behavior. For the rest of us, who don’t necessarily want to do that as our primary hobby in retirement, we can just buy an income and then we don’t have to think about it. That seems like a better strategy. 

David: 39:27

In terms of a better sort of hobby or things to do that’s going to increase your well, all three of you players money, health and relationship. Take up fly fishing or something, or bowling. Trading crypto. Oh my God, are you out of your mind? 

Michael: 39:43

I should mention that when researchers have looked at investment performance in brokerage accounts, they do find that older investors do worse than younger investors. So there does seem to be kind of a peak around age 50 and then a little bit of an decline, but by the time you’re in your 80s and 90s you’re not doing such a great job of investing. One of the reasons is because we do tend to invest more emotional. We pick the hot stock. We pull the money out of the market when markets already fall in. We put more money in after the market has already gone up in value. That leads to consistent underperformance and there’s one of the reasons why I’m a little bit skeptical of people trying to manage their investments in retirement into their 80s and 90s on their own, because I’ve seen the data and it doesn’t look that good. Now I mean, this is David, where I have done research on financial literacy in old age, and that’s actually one of the things that first got me interested in this idea of going outside of economics to look a little bit at what happens to people when they get older. In fact, what we found in our study was that financial literacy tends to decline at almost a linear rate between your mid 60s and your mid 90s and beyond, and the question was why is this happening? We actually looked at measures of cognition and it pretty much matched measures of the decline in cognition in old age and I get arguments from some people who say, well, that’s ages to believe that we have these changes in our cognition. but that’s what the data says and it’s pretty obvious for those of us who have parents who are, let’s say, in their 80s or 90s. They experience cognitive changes that make them less able to process highly complex types of decisions like managing your money in old age and then planning for that. I think is a part of retirement investment planning, because you have to recognize that the person you are in your 80s is different than the person you are in your 60s, but your ability to make some of these more complex decisions is going to change over time. 

David: 41:59

Yeah, I mean, I’ve come to realize I have a fixed amount of mental energy every day. I used to think that that was infinite and I could multi-tax and do all these things, and that was just a young person’s delusion. And so now I know people who are just like, oh well, my net worth went up whatever today because of whatever, and I pay no attention to it whatsoever, I don’t really care, it has no impact on my life, this is something that I’m not even going to think about for a long time, so I can’t afford the brain space to think about like, well, apple’s up 1% today, but Facebook’s down Whatever. I have other important things to think about besides that. 

Michael: 42:41

And the good news is there’s no reason to think about it. 

David: 42:44

Right why. 

Michael: 42:45

All the research and finance shows that if you try to pick stocks, it’s a loser’s bet, absolutely, and the more picking you do, the worse your performance. There was a great study that was done in the late 1990s Brad Barber and Terrence O’Dean and they actually, for the first time, got access to these brokerage accounts and that’s exactly what they found that people who traded more ended up doing worse in their investments, and men in particular were going to trading more because we’re competitive. We get that juice of energy from telling people that we did better than them, like, hey, my net worth went up by 21%. That’s what we did for the last year. That makes us happier because we’re competitive. We like this little social dominance thing. It’s not good for our wealth. Let me see. Let’s see Again. It’s a present satisfaction that is compromising our long-term well-being. 

David: 43:42

It’s not only is it not good for our long-term wealth, it’s not good for our present mental health. It’s not really. No. If our present mental health is based upon what Mark Zuckerberg did today, I mean, oh my God, help us. 

Michael: 43:59

Yeah, I mean one of the other traps I think that we can fall into if we recognize that our brains are designed for survival and that’s getting a little bit off topic here. But let’s think about some of the problems that people experience in retirement and why they experience them. We have gotten very good at manipulating human beings, at figuring out what pushes the funds, and if you understand what motivates us as social beings, then it becomes easier to imagine ways of regulating this. And again, we can find ourselves being constantly manipulated by some of these short term pleasures that will negatively impact our long term satisfaction but also get in the way of things like health and relationships. Because this in group, this thing that a lot of social media experts have figured out and that is, everybody likes to be identified with some sort of an in group, and that’s that was consistent with how we survived in, you know, our forebears, who were, who had these tighter social bonds but also excluded those who were outside of the end group. That was part of it. We built a more cohesive unit and our brains throughout these chemicals and retirement. This is another thing that I found from being on the Facebook group. Men get very thrown to negativity, and they are easily manipulated and they fall into this trap, which leads to alienation from other people who matter the most to us our friends and our partner and it means we don’t spend time on the kind of things that actually do produce the greatest amount of long term happiness. 

David: 45:46

Absolutely. I think you’ll push back on this, but I say, like sort of the age that I am anyway, men are, they’re like a problem group, they’re like a special needs group. They really this stuff is really hard for them. 

Michael: 45:56

It is because I think so much of our identity is defined by who we are in the labor market and the other thing that men don’t do as well as women. And this was one of the themes of a great book on retirement relationships that I read recently by a woman named Sarah Yogan, who’s a PhD and studies relationships. What she’s found is that women just do a better job of maintaining friendships outside of the workforce. Men do a terrible job of that, which means that in retirement oftentimes they don’t have those friendships that they can rely on as much and they rely more on their partner, and in an opposite sex couple that means that they’re relying more on their wife or a source of companionship and social interaction, and there may be a little bit of friction there because life may have her own set of friends and they want to go on their own vacations, and that creates a certain amount of stress, and that’s one of the reasons why men, I think, fall into some of these traps. It’s ultimately negatively impact their well-being. 

David: 46:58

For all you guys listening to this, I have a single word for you. It’s the word yes. When someone invites you somewhere, just go and say yes, don’t think about it too much, and be a joiner. It’s okay, it’s not going to hurt you. 

Michael: 47:12

Well and recognize that negativity is a drug and people may think that they’re not drug addicts. But if you get addicted to negativity then you aren’t doing that and you’ve got to find yourself out of it. Find a way out of it, because it will consume your retirement. 

David: 47:27

I want to ask you a little bit about reliving longer. Some of us are anyway. I think there’s been some life expectancy impacts through COVID and opioid and gun violence, but outside of that, a lot of people are living longer and not just longer, but healthier longer and so that’s going to impact as we start to think about that. That’s going to impact how we think about savings, retirement, work, money, all of that, and some people out there are thinking that we’re going to be and I’m talking about not crazy people, like pretty normal, well-informed people are talking about lifespans going 100, 110, 120, something like that. That remains to be seen, but that seems to be the trajectory that a lot of this is on. How do you feel that’s going to affect individuals as they think about money, these things that we’ve talked about, like money, health, relationships do we need to invest even more in these things? 50, 60, 70s assuming that we’re going to have that runway is going to be much longer. 

Michael: 48:40

Well, first of all, let’s have an evidence-based conversation about longevity. We in the United States are gaining about a year every decade in longevity after the age of 65. So that means that longevity is increasing, but it’s not pretty easy. We’re probably not going to live to 120. We are not. We’re not making these amazing advances, these jumps in longevity, despite the fact that we’ve had some pretty significant medical advances in the 20th century. In the United States, the line on improvement in longevity is remarkably stable over time a year every decade. Now that’s slowed in the United States with the COVID era. Now let’s also look at COVID and let’s look at some of the differences in longevity by income, because I think that’s one of the most interesting phenomenon, social phenomenon that I’ve seen over the last 30 or 40 years, and that is that higher income Americans are living much longer than lower income Americans. Now you mentioned some of these problems that are reducing average longevity. Many of them are those differences by social. But it’s not even social class, it’s income basically. So people who make more money live longer. What is it that’s making them live longer? Is it that they have access to medical care? Well, no, actually, if you look at the differences, it’s number one that they smoke less. So I was speaking at a financial planning conference federal financial planning conferences over the weekend. If this was 20 years ago, in between sessions people would have been going outside for a smoke break, but now and these are people who are probably in the top 10th percentile of income everybody just walked from one session to the other. Nobody thought about smoking. That’s been. One of the biggest changes is that higher income Americans simply are smoking less than they have in the Mad Men era and that’s creating this greater disparity in longevity between higher income and lower income Americans. So, for example, if you see data that says the average American is living to age X, you’re not going to live to age X. You’re probably going to live five or six years longer on average than age X because you’re in a higher income group and if you take better care of yourself, you’re going to be. That’s the middle of the high income group. Let’s say, for women is age 90. And if you take better care of yourself, then you’re going to be probably on the right-hand side of that distribution, so your mean will be more like 92 or 93. I think, in terms of bell curves, the longevity is all about a bell curve. And where are you? You’re not the average. You’re above average probably because you’re listening to this podcast, and you’re probably above that because you’re probably. So you’re more about things like health and you exercise and you watch what you eat. So that’s going to put you on that right-hand side of that tail. Being realistic about where you’re probably going to be, how long life is going to last in retirement, it’ll help you do a much better job of planning. A lot of people look to their parents and they say well, your dad only lived to 72, so I’m probably not going to live any longer than that that. They lived in a different time. They exposed to different behaviors. They had different access to health care. Things like survival rates on cancer have risen significantly since the 1990s. So we’re going to live longer, but that means that we have to plan for a much higher likelihood that we’re still going to be alive in our 90s. Now, part of that planning is recognizing that we will decline in our 90s and we have to put together some sort of a plan really in retirement so that when we do reach those latter ages, we’re prepared for that stage of our life. One of the aspects of retirement planning that I think people don’t give enough thought to is where am I going to live when I’m 90?, and I like the idea of planning that out in your 60s. I mean, many of us have had the joy of having to move a parent or a grandparent into some sort of different living environment when they got older, and boy isn’t that fun. They really appreciate all that effort that you put into moving them into one of those places, and you might not do it yourself. Figure out where you want to live, because when we’re in our 80s we’re going to get a lot more joy out of being in a living environment where we can see other people on a regular basis, we’re not as likely to become socially isolated as if we’re being in our own house. So let’s pick out where we want to live, let’s pick out the people we want to be with, and then let’s create a plan for transitioning to that kind of a lifestyle, so that it’s not the burden of someone else to put us in some kind of place that we have no choice over. 

David: 53:44

I love this topic. It’s one of my favorites. People ask me all the time where should I live, where should I retire? And I tell them there are really only two things you want to think about, and I don’t care about the view, I don’t care about the weather, I don’t care about any of that. What’s important is who you’re living next to and what’s the distance between you and the nearest level one trauma center. That’s what you want to know, because if a stroke or a heart attack you got like 30 or 40 minutes to get to a cath lab, that’s it. 

Michael: 54:13

So it’s a great point. 

David: 54:16

It’s going to happen You’re going to fall down. Keep that word in mind. I mean there’s a lot of places in the world that that works out for, but you know out of Mongolia not so much. 

Michael: 54:28

Yeah, and some of the prettiest places maybe don’t have a level one trauma center. 

David: 54:33

I was up in Jackson Hole, which I love. Jackson, oh my gosh, it’s so beautiful and I love the people there and it’s great. The nearest level one trauma center is an hour and a half by helicopter to Salt Lake City. That’s if you can get the helicopter. So if you have a car accident, you have a skiing accident, you have a heart attack, you have anything like that, the number one cause of death in the state of Wyoming are industrial or agricultural accidents. I wonder why that is there you go. 

Michael: 55:09

It’s fascinating. You know, I actually have a friend who is a doctor and she has a house in Taos, New Mexico, and she actually made the decision not to retire and live only in Taos because she recognizes that her resources are limited when it comes to health care. And you know, she’s now in her early 70s, so she’s getting to that point where she’s going to think about that stuff. 

David: 55:34

That’s right. I mean, I think it’s fine. You can go to Africa for like two or three weeks or, you know, go to Peru or whatever you want to do on your vacation, but where you live you want, like the majority of your time, with access to that level of health care, because bad things happen If you don’t have that kind of access, it’s going to be a real problem. 

Michael: 55:54

You know, David, I never really thought about that before, but that is a great way of thinking about where to live because no matter what the disease, the likelihood that you’re going to experience it goes up every year. You know cancer, heart attack, you know a range of different diseases. It’s random, you know. You can’t predict that it’s going to happen to you or not happen to you. It’s just completely random. But the probability does go up every year and that should be part of your retirement plans. 

David: 56:22

The number one cause of death is cardiovascular. Number two is cancer, I think three is I want to get this right. I think three is like diabetes or complications that are from. But number four is guess what? Falls and accidents, yeah, and they’re not necessarily your fault. Yeah, you know, rural Portugal may be nice, but keep that in mind. That is a good point. 

Michael: 56:45

That’s something I need to. I need to bring into my retirement planning discussion is proximity to a level one trauma center. That’s great. 

David: 56:54

We actually made a map like that with circles Do you really? 

Michael: 56:57

I was going to ask you, yeah, yeah. 

David: 57:01

I was. I was actually where we’re in Park City, which is nice, but I thought, oh, jackson Hole, that’s great. And I started like thinking about this. And then I started to do that research because, you know, here we have a lot of tremendous access to like great healthcare, especially that sort of stuff like life flight and all that sort of thing. And I and I investigated it in Jackson Hole and I started calling around to the hospitals and it’s like, well, what do you do with this? And they’re like well, you drive to Salt Lake City. And it’s like, well, that’s five hours, really. 

Michael: 57:36

Okay, not so easy if you’re having an architect. 

David: 57:40

No, that’s not low survivability there. Michael, is there anything you want to leave our people with today? 

Michael: 57:46

The one thing that’s most important thing is being deliberate about how we use our time. That’s so many people when they get to retirement. Again, I think we mentioned before that people are really vulnerable to inertia. So let’s be more deliberate about planning a life in retirement and then, on a regular basis, let’s develop habits that we’re very deliberate about at the beginning of retirement so that we sustain those habits over time. 

David: 58:15

I like to say live on purpose. And I think the older we get, the more purposeful we have to be. And people think, like you know you get older, everything is like loosey goosey. Yeah, bad outcomes. Be purposeful. Yeah, structure is good. Yeah, absolutely, michael. I love the research you do and it’s just wonderful to have you on the program. This is an area that we don’t talk enough about and I think it’s critically important. 

Michael: 58:40

Well, thank you for having me. As always, David, it’s great talking to you. 

David: 58:44

Thank you so much. Take care now. 

Michael: 58:45

All right, take care. 

David: 58:46

That was wonderful. It’s so great to you know. I have this relationship with Michael and I count on him as one of the experts that I look to, for he does a lot of research and actually we’re going to be doing a research project together that I’m really excited about. But next we’re going to get to just try this. In just a moment, after a quick word from our sponsor, the Daily Show is also brought to you by Timeline Nutrition with their breakthrough product, mydopure. Mydopure is the first and only clinically tested highly pure urolithin A postbiotic. There have been over 300 published scientific studies on urolithin A, including human completed and ongoing clinical trials involving over 900 participants. The results are impressive. By energizing cells, mydopure is revolutionizing cellular aging. Urolithin A is the only known substance clinically proven to trigger a crucial recycling process within our cells called mitophagy. I’ve been using Mydopure for several months. The members of our scientific board and their families use it, and many of our friends use it, because we have read the science and we can feel the difference. This is a product I’m going to be taking for as long as I possibly can. Receive 10% off your first purchase at timelinenutritioncom. Use the code AGEST at checkout this week on. Just Try this. What I’m going to suggest might be kind of obvious, but might be kind of difficult for some. People Take vacations. I’m actually here at the Hale Kalani in Amazing Waikiki for a total of nine days, which is amazing. Every day that I’ve been here I can feel my body calm down. I didn’t think I was like that cranked up, but I can literally feel myself. Day to day I get more and more calm. One of the things that we talk about a lot on the SuperAge podcast is stress and the effect of chronic stress. It’s really corrosive to all of our organ systems, our brain, everything. We want to be able to take these breaks. There is a certain sense of Calvinism or wanting to be heroic or something. And oh, I don’t take vacations, or I last took a vacation 10 years ago, or something. No, no, just you’re going to live longer, happier and healthier. You’re going to have better relationships. If you could take regular vacations and if you can only take a weekend, that’s great. If you can take like a little more time to really settle down and not work, probably live longer, but you’re definitely going to live happier. So my plug this week for just try this vacations, plan them, put them into your calendar. You can put them in a year ahead, two years ahead, and just block out the time and go do it. You’re going to be happier for it. Next week we’re going to be back in Park City, Utah, which is another lovely place, to be Not quite as lovely as where I am right now, but hey, it’s still pretty great. So until then, everyone, I want you to have a wonderful week and if you liked this show, please pass it on to someone. I know there’s a lot of people out there that are having some difficulty around the money, mindset, work, all of that sort of stuff around retirement or thinking about retirement or imagining themselves in the future. Maybe pass this on to them and suggest that they subscribe to the SuperAge podcast. If you’d like to leave us a comment, we would love that and you can leave us a rating, hopefully a five star one. If you want to reach out to me directly, David, at superagecom, I would love to hear from you Everyone. Thank you for your time this week, Thank you for your attention and I look forward to seeing you next week. Take care now.

See medical disclaimer below. ↓


  1. I can’t tell you how much this podcast helped me understand behavior in retirement. I see so many people wasting this precious time, being negative, and making choices that don’t serve them, and refuse to change anything. All of this is best avoided. Life is to be enjoyed, not complained about. Thank you, Michael Finke.


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