Money doesn’t buy happiness – – except when disability strikes

Financial ’buffer’ appears to help preserve well-being after health setbacks

The old saying that ’money doesn’t buy happiness’ may hold true most of the time. But when a serious health problem comes along, financial resources may really cushion the blow to a person’s psyche, a new study suggests.

The finding, made by researchers at the University of Michigan Health System and the VA Ann Arbor Healthcare System, stands in contrast to previous research that showed no major differences in self-reported happiness and well-being between wealthy people and those with modest financial assets.

Instead, the study finds that people with relatively large financial assets before they became disabled reported substantially better well-being, and less sadness and loneliness, after they were disabled than was reported by people with fewer financial resources who also became disabled.

Although the difference eased a few years after disability set in, the researchers say the finding has important implications for such things as personal savings, retirement planning and “safety net” government programs for the seriously ill and disabled.

The study will be published in an upcoming issue of Psychological Science, the flagship journal of the American Psychological Society. It’s based on an analysis of data from 478 older Americans who were interviewed regularly and in depth for as long as nine years, before and after they suffered a health problem that left them disabled. The data are from the Health and Retirement Study, conducted by the U-M Institute for Social Research with funding from the National Institute on Aging.

“Happiness and well-being may not depend on a person’s financial state in times of health, but when that health fails, as it will eventually for most of us, money matters,” says senior author Peter Ubel, M.D., a U-M professor of internal medicine and psychology, and a staff physician at the VA Ann Arbor Healthcare System.

“Money may not buy happiness, but it does seem to buy people out of some of the misery that’s associated with a decline in health status,” says lead author Dylan Smith, Ph.D., a research specialist at the VA Health Services Research & Development Center and a U-M psychologist and internal medicine research investigator.

Ubel directs, and Smith is a member of, the U-M Center for Behavioral and Decision Sciences in Medicine. They note that research has already shown that psychological well-being, or lack of it, can affect people’s response to medical treatment, and their ability to work or care for themselves and their family. Other research has shown that half of personal bankruptcies are linked to health care costs. The federal bankruptcy reforms now under consideration in Congress do not exempt medical costs.

For the new study, the researchers focused on the data from the 478 HRS study participants who became disabled during the years when they were surveyed regularly, starting in 1992, and continuing until 2000. Participants were classified as disabled if they became unable to carry out routine tasks of daily living such as walking, getting out of bed, eating and dressing without help.

The researchers then divided the participants into two income groups: those with financial assets above the median level, and those below the median. Assets in the HRS are measured by adding together home equity, savings, stocks, bonds and other assets, and subtracting debts. The median net worth in the study was $98,400, and 311 of the participants had assets below that level.

The researchers then looked at how the participants had rated their overall psychological well-being on a standardized survey, focusing on happiness, enjoyment of life, sadness and loneliness. They looked at how that self-reported well-being changed over time, from pre-disability to post-disability.

The analysis showed that those whose financial assets had been above the median before they were disabled suffered a much smaller drop in self-reported well-being than those who had been below the median. A second analysis confirmed that there was a relationship between a person’s net worth and the drop in their well-being after disability.

The researchers looked at data from a sub-group of people who had well-being data on record from several years after they suffered their disability. Although the researchers did not assess again whether the disability was still present, or whether it had lessened, they did find that the well-being of those with lower net worth had improved somewhat. The well-being of those with more financial means had actually decreased slightly.

In all, Ubel says, the results should help individuals and policy makers understand the importance of financial security in relationship to a person’s health and well-being. Since disability of some form or another strikes a large percentage of Americans, and increases as people grow older, the issue will only become more important as the baby boom generation ages.

“Our study suggests that it is better to save for a rainy day, than to spend your savings on a house where it doesn’t rain,” he says.

Ubel and Smith also note that their study does not demonstrate directly that having more money and more assets shields a person from a psychological downfall when disability strikes. There could be some psychological factors associated with a person’s ability to accumulate wealth that could also make them more resilient when they become disabled.

But in all, they say, the research is the first time that financial assets have shown to be a possible buffer for a person’s well-being after a decline in health.

In addition to Ubel and Smith, the study team included U-M biostatistician and research associate Mohammed Kabeto, M.S., and Kenneth Langa, M.D., Ph.D., an assistant professor of general medicine at the U-M Medical School, a research investigator at the Ann Arbor VA, and a faculty associate at the Institute for Social Research.