Why happinness diminishes once we grow older?
It all depends on how each person defines happiness, throughout his or her life. If one's happiness is derived from learning Torah, and he has more time for this after he retires, then his elderly years are even happier than before. Similarly, if one's happiness is his family, and he dedicated much of his life, time and effort to his children and grandchildren, then his later years will be especially happy, through enjoying the fruits of his years of labor, but without having to change diapers! On the other hand, the problem you described is common among people whose life and happiness is defined by their physical pleasure and prestige, so when they get older, and enjoy less the taste of food and physical pleasures, and have less prestige- having been "forgotten" by society, then inevitably, they will be less happy. The choice is not a difficult one, but must be made as early as possible.