Retirement Read Time: 10 min

Planning for the Three Stages of Retirement

Most people view retirement as a new stage of life, which, for most people, is only partly true. Your retirement years might actually look like three distinct stages, instead of one. These stages are largely dependent on your health and independence. And as your health changes, so, too, do your spending patterns. Part of planning for retirement involves anticipating these different health-dependent stages.

The timeframe for these three stages of retirement vary from person to person, since they are more related to health and wellness, independence, and activity level as opposed to specific ages. As a general rule, however, the spending pattern throughout retirement is U-shaped. This is often called "the retirement smile." Higher spending occurs during the early and latter years of retirement—although for different reasons. Whereas, spending typically dips in the middle years.

Your retirement plan and drawdown strategies should take into consideration these three retirement stages and their financial implications.

The Go-Go Years

Early retirement is often referred to as the go-go or golden years. At this stage, you probably don’t feel much different from pre-retirement in terms of energy and health. Chances are, your mind and body are still strong. You just have more freedom and flexibility with your time. You might choose to fill up that time with family activities, travel, exploring new areas and experiences, fulfilling lifelong ambitions, or by pursuing hobbies and passion projects. You might even dabble in part-time employment, charitable work, or consulting in areas that still stimulate your interest. In any case, you’re on-the-go, enjoying your time the way you see fit.

Typical Spending Patterns in Early Retirement
The go-go years are characterized by higher spending as you tick off bucket list achievements, as you travel more for pleasure or to visit loved ones, or perhaps as you buy a few luxury items. If you’ve planned for it, that’s okay! Give yourself permission to spend within your means—within your planned income. If it works for your financial landscape, plan to allocate extra funds for your go-go years, since your fixed expenses could remain fixed, but your discretionary spending will likely increase.

The Slow-Go Years

During the slow-go years of retirement, you will likely still be active and mobile. But, overall, you might just begin to slow down a little. You may find that you value ease and simplicity, preferring more routine and regularity in your life. This is usually a good time to focus on maintaining your health, well-being, and interpersonal connections, and to keep learning and setting goals for yourself. You might not travel as far or as frequently, but you can still enjoy quality experiences, local excursions, and home-based activities. Clubs and community activities may be other ideal options that also happen to be relatively inexpensive. It’s also at this stage, however, that you might begin to experience a decline in your health and/or independence.

Typical Spending Patterns in Middle Retirement
If you’re like most people, your discretionary spending will naturally decrease during this stage, as you adjust to a new, slower pace of life. At the same time, you might denote a slight increase in healthcare costs, but your main financial focus will likely be centered on maintaining and savoring a comfortable, enjoyable, and somewhat active lifestyle.

The No-Go Years

The latter stage of retirement is often referred to as the no-go years. These years are still part of the adventure of retirement and of life; they just might look a little different! During these years, you will likely experience the biggest slowdown in terms of your energy levels, as well as increasing health challenges. You might experience further loss of independence or even independent living, as you come to rely more and more on others over time. At this stage, it’s beneficial to stay social, as much as possible. The support and help you receive can also be seen as positive. After all, what's better than being surrounded by family and friends who care?

Typical Spending Patterns in Late Retirement
During this time, overall household spending and the percentage of income spent on discretionary spending and household goods tend to decline. Meanwhile, your spending on healthcare will likely increase significantly. Financial management and foresight are critical as your resources might have to cover specialized care services, prescriptions and pharmaceutical payouts, assisted living facilities, or long-term care expenses. Throughout all of this, you’ll also want to preserve your desired standard of living and quality of life.

Planning for Your Retirement Journey

It’s vital to think about your retirement in these three key stages, so you can adequately plan for each. This planning can help you maximize your lifetime savings for each stage so you can live out your dream retirement. Try allocating funds based on realistic projections for each distinct stage, creating margin for the go-go years, stability for the slow-go years, and an adequate cushion for the no-go years. The more proactively you plan now, the more you can enjoy retirement as an adventure, with the confidence to embrace the best at every stage of these precious years.

Let’s develop a plan and a wealth strategy for your ideal retirement at every stage. Contact the office today to set up a meeting.


This material was developed and prepared by a third party for use by your Registered Representative. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. The content is developed from sources believed to be providing accurate information.

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