5 Financial Secrets to a Happy Retirement

Secret No. 2: Less is often more

A curious trend is taking place in communities across the nation: Americans are opting for smaller homes. Apparently, the idea that bigger is better when it comes to buying or building a dream house is being abandoned.

Consequently, many people — including middle-aged adults, empty nesters and retirees — are selling big homes that no longer make personal or economic sense.

"There continues to be a rising number of baby boomers who are now cashing out, even at today's rates, and going to buy smaller or more affordable homes," says Jed Smith, an economist with the National Association of Realtors.

According to Smith, many people 50 and older "are moving to places like Tennessee, North Carolina, Arizona and Florida, where there is lower-cost housing."

Besides the economic benefits, there's a reason so many boomers and preretirees start downsizing as they age. Many people have concluded that having large homes and all the material goods they once thought were so important simply don't make them any more satisfied in life.

Secret No. 3: Experiences, not things, enrich your life

If you look back at your past spending, chances are you'll remember fondly — and perhaps in great detail — experiences you had, as opposed to stuff you bought. In fact, a growing body of research suggests that once you have enough money to meet your basic needs, acquiring a lot more money (or a lot more possessions) doesn't make you any happier.

What does bring immediate and long-term satisfaction, though, is spending that is tied to experiences.

Scholars think one reason that experiences improve your happiness quotient is because you can reminisce about them later. Just recalling that trip to Spain, that wine-tasting event with friends or that summer photography class is far more likely to invoke pleasant memories that you'll later talk about. The same thing likely won't be true for that sofa or new suit you bought three years ago.

Next: Mind your own stuff. >>