Building Friendships in Retirement—Understanding the Foundations 1

I live on the outskirts of Vancouver and might know the city's reputation for being friendly but reserved. Many newcomers describe it as a place where forming deeper connections can be challenging. It’s a sentiment that resonates across Canada, especially as adults and seniors find themselves in new life stages where making friends doesn’t come as easily as it did in school days.

But why is it harder to make friends as we age? One explanation is the three key pillars of friendship: proximity, shared life experiences, and energy.

The Three Pillars of Friendship

Proximity refers to how physically close you are to others. When you live near someone or see them regularly, such as a neighbour, you're more likely to develop a friendship. For example, college dorm studies show students living across the hall have a 90% chance of becoming friends, while those at opposite ends of the dorm have only a 10% chance.

Shared life experiences, or "life cycle timing," is another essential pillar. Think back to your school years—you and your peers moved through life together. From classrooms to shared milestones like exams, sports, and parties, you were aligned in your life journey.

Finally, energy is the glue that binds these pillars together. It reflects shared enthusiasm for activities or interests, whether it's cheering for a sports team, dancing, or simply enjoying a regular coffee outing.

As young adults, these pillars align naturally. But in our late 20s and beyond, life begins to scatter us. Careers, marriages, children, and moves all challenge the stability of these connections. By retirement, the situation can feel even more fragmented.

Why Seniors Struggle to Form Friendships

For seniors, the barriers to making friends can feel even higher. Proximity might shrink as we become less mobile or live alone. Energy for activities may diminish due to health concerns. Shared life experiences can also feel out of sync—perhaps one senior is managing a chronic illness or caring for a spouse, while another is focused on leisure activities or grandchildren.

This loss of connection isn’t just emotional; it can affect your health, too. Studies have shown that loneliness and social isolation increase the risk of conditions like heart disease, stroke, and even dementia. Seniors with strong social ties, however, often enjoy better physical and mental health, longer lives, and more positive outlooks.

Understanding these pillars and their challenges is the first step toward fostering new friendships in retirement. The good news is that there are many ways to rebuild these connections, and you don’t have to do it alone.

Feeling low, try volunteering to cheer you up.

 Volunteering benefits not just the organizations and people being helped but also the volunteers themselves. Research shows that volunteering can improve social connections, mental well-being, physical health, and overall quality of life. These benefits are particularly strong for older adults, who often experience increased purpose and reduced loneliness through volunteering. Helping others, participating in community programs, or engaging in environmental projects can contribute to better mental and physical health and even a longer life.

For retirees or those considering retirement, volunteering can be an excellent way to stay active, meet new people, and make a meaningful impact. Whether you choose to volunteer regularly or occasionally, the sense of accomplishment and connection that comes from giving back can boost your confidence and bring a sense of fulfillment.

Volunteering is part of what’s known as “social prescribing.” This approach connects people with activities and services in the community that help address social or emotional challenges, such as isolation or a lack of purpose. By engaging in volunteering through social prescribing, individuals can improve their well-being while contributing to their communities.

Volunteering is flexible, so you can choose something that suits your interests and schedule. Whether it's lending a hand in civic projects, environmental conservation, or educational programs, every effort counts. Beyond helping others, volunteering allows you to stay engaged with life, grow personally, and even discover new passions. It’s a win-win for everyone involved.

Should I borrow from my retirement fund to pay down debt?

The question of whether to use your retirement savings to pay off debt is a critical one, especially for those who are retired or approaching retirement. It’s a decision that requires a balance between immediate financial relief and long-term security. Here’s what you need to know to make an informed choice, keeping your financial health and retirement happiness in mind.

The global financial landscape has shifted significantly in recent years, partly due to the lasting impact of the COVID-19 pandemic. Many countries, including Australia, Chile, and South Africa, have introduced policies allowing people to access portions of their retirement savings to ease financial strain. While these measures may provide relief, they also highlight a dilemma faced by many: should you dip into your retirement savings to manage debt?

Except for owning a home our retirement funds are often the largest savings we have, especially for low- to middle-income earners. This can make these funds a tempting option when debt feels overwhelming. In fact, studies show that a significant percentage of people use retirement withdrawals to cover expenses like car payments, home costs, or short-term debt. However, the decision to use retirement savings for debt repayment isn’t one-size-fits-all—it depends on your unique financial situation, goals, and habits.

Debt with high interest rates, especially unsecured loans like credit card debt, can take a toll on your finances. At the beginning of most loan repayment periods, a large portion of your payments goes toward interest rather than reducing the principal amount. This means the longer the debt lingers, the more you pay overall. Using your retirement savings to pay off high-interest debt can potentially save you thousands of dollars in interest and shorten the repayment period.

Short-term loans and unsecured debts are particularly costly because they lack collateral, making them riskier for lenders and more expensive for borrowers. By paying off these types of debt, you can free up cash for other uses and even improve your credit score. However, this strategy is most effective if paired with a clear plan to avoid falling back into debt.

Using retirement savings to settle debt should be part of a broader financial strategy. Once the debt is gone, think about how you can use the freed-up cash to strengthen your financial position. For example, you might focus on rebuilding your savings, investing in assets, or setting aside funds for future needs. On the other hand, if you continue to accumulate debt after withdrawing from your retirement funds, it can lead to a cycle that undermines your financial stability.

Without changes in borrowing behaviour, tapping into retirement savings to pay off debt can leave you worse off. You not only miss potential growth from your retirement investments but also risk needing to work longer or reduce your standard of living in retirement.

Consider the long-term consequences carefully. If you withdraw $30,000 from your retirement savings at age 35, that amount could grow to over $200,000 by age 55, assuming a 10% annual return. Frequent withdrawals can significantly erode your nest egg, forcing you to work beyond your planned retirement age or make other financial sacrifices.

Additionally, remember that withdrawals from retirement savings are typically subject to taxes, which can further reduce the amount available for debt repayment.

Before using your retirement savings, it’s crucial to reflect on the habits that led to the debt. Are you paying only the minimum due on loans while continuing to borrow? Are you using one form of debt to service another? Addressing these patterns is essential to prevent future financial stress. Otherwise, dipping into your retirement funds may become a temporary fix rather than a sustainable solution.

The decision to use retirement savings to pay off debt is not just about numbers—it’s about your overall financial well-being. It requires careful consideration, planning, and, ideally, guidance from a financial advisor. By weighing the immediate benefits against the long-term consequences, you can make a choice that aligns with both your current needs and your retirement goals.

Retirement savings represent years of hard work and planning. Treat them with the care they deserve, and ensure that any decision to access them is made with your future self in mind if you are not sure, talk to your financial advisor.

How Much Money Will Actually Make You Happy in Retirement?

As the New Year gets underway, you’ve taken some time to review your financial situation. You’ve felt that familiar pinch—credit card bills from the holidays, reminders of overspending on gifts and celebrations, or even a nagging sense of needing to prioritize your health with some exercise and better eating. It's understandable if the thought of your financial future feels overwhelming right now, especially if retirement is looming or already here.

The truth is, that financial reviews can be sobering. Many people assume they’ll need a retirement income close to what they were earning full-time, and the realization that this might not be feasible can feel unsettling. However, here’s the good news: you may be overestimating the role money plays in your retirement happiness.

While it’s natural to equate earnings with self-worth, retirement offers an opportunity to reframe that mindset. For many, certain financial burdens, like mortgage payments, may be behind them, leaving more room for flexibility. Studies show that for middle-income earners, a paid-off mortgage can reduce financial needs by up to 50%.

Additionally, the notion that “more money equals more happiness” isn’t as solid as it seems. Behavioral finance teaches us that the well-being we gain from wealth diminishes after meeting basic needs like food, clothing, and housing. Beyond these essentials, additional income may not add significantly to your happiness.

In fact, research has found that the difference in life satisfaction between someone with a modest income and someone earning $500,000 annually is smaller than you might imagine—less than one-fifth of the range of responses in terms of happiness. The takeaway? Serious money isn’t the key to a satisfying retirement.

Happiness in retirement is about more than just dollars and cents. It’s about how you choose to spend your time and align your financial plans with your life goals. Yoga, fly-fishing, nurturing relationships, volunteering—these are just some of the ways to boost your well-being without draining your savings.

Financial advisors and behavioural researchers often recommend reframing how we think about retirement planning. Instead of fixating on rigid savings targets, try these steps:

1.     Recognize that your savings are a means to an end, not the end itself.

2.     Define your broader life goals. For instance, do you dream of a family holiday home where your children and grandchildren can gather?

3.     Identify your emotional needs, like staying connected to loved ones or finding activities that bring purpose and joy.

By focusing on what truly matters to you, financial planning becomes a tool to enhance your quality of life rather than a source of anxiety.

Of course, this doesn’t mean neglecting financial preparation. A solid plan is still essential for covering your needs. But the ultimate goal is to strike a balance where financial planning supports your happiness and freedom, rather than limiting them.

Retirement isn’t about living in deprivation or clinging to your past income level. It’s about finding fulfillment in ways that don’t always come with a price tag. Whether it’s rediscovering old passions, creating new traditions, or simply enjoying the slower pace of life, there are countless ways to find joy that don’t depend on a hefty retirement account.

So, as you plan for retirement—or settle into it—remember happiness is about more than numbers on a spreadsheet. It’s about living a life that feels meaningful and satisfying, whatever your income level may be.