Your Pension Already Solved the Hardest Part of Retirement Happiness

​The examples and case studies in this article are hypothetical but represent real situations I have encountered in my practice working with Washington State public employees.

I keep running into the same conversation.

Someone sits down across from me. They’ve got a PERS 2 pension, a healthy DCP balance, maybe some savings in a Roth IRA. On paper, they’re in great shape.

But when I ask what they’re looking forward to in retirement, there’s this long pause. And then they start talking about what they’re afraid of. Running out of money. Spending too much. What happens if the market drops right after they retire.

They’ve spent 25 or 30 years accumulating. And now the idea of actually using that money feels almost impossible.

I think about this a lot. Because there’s a growing body of research suggesting that the hardest part of retirement isn’t saving enough. It’s giving yourself permission to spend.

What the research actually says about money and happiness

You’ve probably heard some version of the idea that money only buys happiness up to about $75,000 a year. That number comes from a well-known 2010 study by Daniel Kahneman and Angus Deaton, who analyzed over 450,000 survey responses and found that day-to-day emotional well-being stopped improving beyond that income level¹.

The finding went everywhere. And most people took it to mean that once your basic needs are covered, more money doesn’t matter.

But that’s not quite right.

A 2023 follow-up study, published in the same journal, told a more nuanced story. Researchers Killingsworth, Kahneman, and Mellers found that the original flattening pattern only applied to the least happy 15 to 20 percent of the population. For everyone else, happiness continued to rise steadily with income well beyond that threshold². For the happiest 30 percent of people, it actually accelerated past $100,000.

So what does this mean for someone approaching retirement with a pension and a portfolio?

It means the question isn’t just “do I have enough?” It means the question is also “am I going to use it in a way that actually makes my life better?”

The spending problem nobody talks about

Here’s what I’ve observed working with Washington State public employees. Most people approaching retirement have been in saving mode their entire careers. Paycheck deductions into DCP. Steady pension contribution. Maybe some extra going into a Roth or a taxable account.

That discipline is what got them here. But it also created a deeply ingrained habit that’s really hard to reverse.
Consider a hypothetical couple. Let’s call them David and Karen. David is 57, retiring from a county job with 28 years of PERS 2 service. Karen still works part-time. Between his pension, their DCP savings, and Social Security down the road, they have more than enough income to maintain their lifestyle.

But David can’t bring himself to book the trip to Portugal they’ve been talking about for years. He keeps looking at their account balances and thinking, “Maybe next year.”

The truth is, David’s pension already does something incredibly powerful. It takes the worst-case scenario off the table.

Why your pension changes everything

Behavioral finance research points to a concept called “taking the worst case off the table.” The idea is simple. When people feel like their basic needs are permanently secured, they’re far more willing to spend on the things that actually bring them joy.

For most retirees, this means building a safety bucket of cash or conservative investments. A cushion they can point to and say, “No matter what happens, I’m okay.”

But Washington State public employees start with something most private-sector retirees don’t have. A guaranteed monthly pension check for life.

That pension is your foundation. It covers your baseline. And when you combine it with a war chest of 3 to 5 years of portfolio withdrawals held in high-quality short-duration bonds, you’ve created a level of security that should genuinely free you up.

Not to be reckless. But to be intentional.

What actually makes retirement fulfilling

The research on well-being in retirement consistently points to a few key areas where spending money makes a meaningful difference¹.

Deepening relationships. Trips with family. Dinners with friends. Visiting grandkids. The research is clear that spending on shared experiences with people you love has a lasting impact on happiness.

Buying back your time. Hiring someone to do the things you don’t enjoy. Yard work. House cleaning. Tax prep (though I might be biased on that one). Eliminating tasks you dislike is one of the most effective ways to use money in retirement.

Giving it away. Charitable giving, especially when paired with volunteering, is one of the strongest predictors of well-being in retirement. This doesn’t have to be a large dollar amount. It just has to be meaningful to you.

Staying engaged. One of the biggest risks in retirement isn’t financial. It’s losing your sense of purpose. People who retire without a plan for how they’ll stay challenged, connected, and growing tend to struggle. Research on human flourishing identifies engagement, relationships, meaning, and personal growth as essential, not just leisure.

The common thread is that none of these things happen by accident. They require you to actually deploy the resources you’ve built.

Giving yourself permission

From a tax perspective, this is where planning really matters. If David and Karen want to take that Portugal trip, we can look at the most tax-efficient way to fund it. Maybe we pull from DCP in a year when their income is lower. Maybe we use Roth funds that come out tax-free. Maybe we harvest some capital gains in the 0% bracket.

The point is that smart spending isn’t the opposite of smart planning. It’s part of it.

I think about something I’ve heard attributed to people reflecting on their lives near the end. They rarely wish they had worked more hours or saved a little more aggressively. They wish they had spent more time with the people they loved. And worried a little less about things that, looking back, didn’t matter as much as they thought.

Your pension, your DCP, your Social Security. These aren’t just numbers on a statement. They’re tools. And the best use of a tool is to build something that matters to you.

If you’ve done the hard work of saving, the next step isn’t to keep saving. It’s to figure out what kind of life you actually want to live.

And then go live it.

Sources
​
1. Kahneman, D. and Deaton, A. “High income improves evaluation of life but not emotional well-being.” Proceedings of the National Academy of Sciences. September 21, 2010. https://www.pnas.org/doi/full/10.1073/pnas.1011492107
2. Killingsworth, M.A., Kahneman, D., and Mellers, B. “Income and emotional well-being: A conflict resolved.” Proceedings of the National Academy of Sciences. March 1, 2023. https://www.pnas.org/doi/10.1073/pnas.2208661120

-Seth Deal