I had lunch recently with two old university friends. Both are financially comfortable by any reasonable measure. One has decided that he has more than enough money and has taken early retirement. The other, equally well off, made it clear that he would need substantially more money behind him before he would even consider reducing his working hours. Same generation, similar backgrounds, wildly different answers to the same question.

They’re not unusual. For more than a decade, one figure dominated the conversation about money and happiness. In 2010 the psychologist Daniel Kahneman and the economist Angus Deaton published a study suggesting that emotional wellbeing rises with income but stops improving beyond about $75,000 a year (about £46,000 at the time). The finding gave financial planners a tidy benchmark. It also turned out to be incomplete.

The happiness ceiling that wasn’t

Not long before his death in 2024, Kahneman co-authored a paper with the psychologists Matthew Killingsworth and Barbara Mellers that substantially revised his own conclusion. It was more interesting than the original study.

For the unhappiest 20 per cent of the more than 33,000 employed US adults studied, happiness did indeed flatten above a household income of roughly $100,000 a year (the inflation-adjusted equivalent of the earlier threshold — about £80,000). Heartbreak, bereavement, clinical depression: money can’t fix these. So far, so familiar.

But for everyone else, happiness kept rising with income, with no ceiling in sight. And for the happiest 30 per cent, the relationship accelerated above $100,000: more money bought disproportionately more satisfaction. The famous plateau was real, but only for a minority.

A sense of proportion helps, though, before anyone recalculates their private pension target. Across the full range of incomes measured, from $15,000 to $250,000 a year, the difference in average happiness amounted to about five percentage points. Someone who reported having a headache the previous day showed a drop in emotional wellbeing roughly three times larger than the boost associated with quadrupling their income.

A 2024 survey of 3,000 retired people by the pensions firm Legal & General and the Happiness Research Institute think tank found a comparable pattern: the boost in happiness begins to level off above about £2,000 a month after tax (a take-home income of £24,000 a year).

It’s not just about picking a number

The pressing question is what all this means for anyone who has spent time calculating their own “enough” number: the pension pot, the annual income that will keep the lights on and the anxiety at bay. The way we arrive at that number may be flawed at a more fundamental level: the economists Anthony Lepinteur and Nattavudh Powdthavee reported in December that 85 per cent of people underestimated the income others would say they needed to live a contented life. The same respondents, asked about themselves, set a higher figure. That gap isn’t a rounding error. It’s a window into how we construct our sense of “enough” in the first place.

The University of Oxford’s annual World Happiness Report found that people systematically underestimate how kind their fellow citizens are. In a 40-country experiment, intentionally dropped wallets were returned at rates far higher than anyone predicted. It also suggested that believing that your wallet would be returned if you lost it was associated with a life satisfaction boost nearly twice the size of the negative effect of being unemployed, and a bigger boost than doubling your income.

We are not just pessimistic about what others need. We are pessimistic about who they are. And that pessimism shapes the assumptions we bring to our own financial lives.

Find out what you are saving for

These three research programmes converged on the same uncomfortable finding: we misjudge what money buys because we misjudge what contentment requires. We underestimate what others need, underestimate their kindness and overestimate the point at which more income stops mattering. The problem isn’t the spreadsheet. It’s the assumptions that feed it.

If Kahneman, a Nobel laureate, needed what’s known as a formal adversarial collaboration to correct his own thinking on this question, the rest of us might reasonably treat our “enough” number with a little less certainty. The calculation matters, but it answers the narrower question. The broader one is about what you’re planning for: security, freedom, status, time with people you love, or some combination you haven’t yet examined. That’s not a spreadsheet exercise. It’s a conversation, probably an overdue one, and the pocket calculator can wait until you’ve had it.

Robin Powell is a journalist and campaigner for change in investing