Understanding the Different Stages of Retirement
Planning for retirement is one of the most important aspects of financial planning. When the time comes that you’re no longer working, are you going to be prepared financially? Financial planning for retirement means that you can consider all eventualities, and being aware of the different stages of retirement is an important step for putting financial planning in to perspective.
Newly Retired – The First Phase
Most people will retire between 70 and 80 years of age. Whatever age you are when you retire, the first years of retirement can be some of the most expensive. If you’ve planned things well up to this point then now is the time that you will enjoy yourself, and most retirees take these early stages to travel and do the activities that they couldn’t do while they were working.
From a financial planning perspective, this is the period where you should plan for a high cost of living. During this time you may spend up to 5% more than your average over the previous 10 years due to additional activities.
Relaxation – Middle Retirement
After the initial bliss of retirement, a period of relaxation usually occurs. The unfortunate aspect of this part of retirement is that between the ages of 75 and 85, health deterioration becomes a real issue for many retirees. Because health care expenses could be significant, retirees need to have planned in advance for health insurance, health plans, or other private investments to cover potential issues. One positive during this stage is that more time will be spent at home than ever before, so cost of living can decline when compared to previous years, and will eventually plateau.
It could be hard to imagine in your 30s the kind of lifestyle you might have at 85 and beyond. By that time retirees will find themselves less energetic, with less wants, and with fewer financial burdens. Health care at this stage becomes even more crucial than middle retirement, so those health plans, investments, or insurance plans are going to be needed. Cost of living should have plateaued by this stage and will only be affected by the rate of inflation. Even with a low cost of living, this is a stage of life where any financial strife could cause significant stress and hardship, so an effective financial plan is required well in advance to make your twilight years as comfortable as possible.
Sound Financial Planning Allows For a Comfortable Retirement
Let’s face it, no one wants to enter retirement without a plan, facing financial hardship at a time where generating an income is unrealistic. Taking financial planning seriously from as early as your mid to late 20s will ensure that you are protected when it’s time to enter retirement. Financial planning for retirement means you will see your years out in as much comfort as possible, without the unwanted stress of finding money to meet basic needs and unexpected costs.