The Four Stages of Retirement - Retirement Net by Suzanne Wolfson, MBA, CFP

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The Four Stages of Retirement

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When planning for retirement, it helps to understand the distinct phases.

Posted July 1, 2009

As a financial planner, I view retirement on a spectrum basis, and tend to divide the retirement cycle into four distinctive phases. As one evolves through retirement, the financial issues are best understood when compartmentalized into separate stages, each carrying with it changing issues, demands, and expectations on the part of the retiree and their family.

The Four Stages of Retirement are as follows:

1. Pre-Retirement
This phase is usually bracketed by a five- to ten-year period, prior to expected retirement. The three key signifiers of this phase are financial assessment, preparation and evaluation of options. "Can I retire?" is the primary question, only to be followed by the "how" and the preliminary development of an income replacement plan. There is also a certain amount of action and timely cost-savings recommended in this phase, as well as financial commitments (i.e. considering different avenues to assume future risk—such as the exorbitant costs of long-term care). Commonly, an inheritance may arrive during this period which will significantly facilitate alternatives. Anticipating what your financial needs will be in the successive phases of retirement—and planning for the economic impact of those—will inevitably help to sustain future resources, reduce concerns and assist in achieving retirement goals.

2. The Active Phase
Phase two is about the pursuit of long-held retirement dreams—whether that be overseas travel, engaging in hobbies and recreation, or exploring new ventures and passions. It's generally marked by activity, energy, relaxation and a sense of purpose and fulfillment. Expenses are usually equal to pre-retirement, though sometimes more, given retired individuals or couples are no longer working and now have time to spend. Depending on the age, pension benefits, and financial resources available; the income may decrease. This discrepancy can be compensated for by realigning expense choices. Time-appropriate and cost-efficient financial strategies can be carried out to ensure that present and future needs are met.

3. Slowing Down
Frequently in this stage, expenses tend to drop slightly, although medical expenses may rise. Activities tend to be home-based, community- and family-oriented. Simplicity, routine and comfort become more of the general focus. Commonly, in phase three, spousal considerations need to be addressed, as the condition of one partner may drag the other into their next phase of retirement. Residential changes, such as moving into a condo, downsizing, or moving closer to the children, give rise to new income and expense sources. This is an important time to speak with an objective financial planner (with legal fiduciary responsibility) who will incorporate your desires into their financial recommendations. As the reality of the aging process and its potential economic impact becomes clear, it is necessary to make sure you plan for the future while you can.

4. Limited/Letting go
This phase can be identified with a letting-go of expectations, physical abilities, freedoms, and properties, being forced to relinquish control, and possibly dependency. There may be fears to face, as well as losses to process and possibly grieve over; yet on the other side of the spectrum is relief, acceptance and liberation. Many elders in this phase will experience an increased sense of enlightenment, recognizing with a newfound appreciation all that is truly significant. I call this evolved clarity "letting go."

Financially speaking, this phase is usually the most expensive, far beyond that which is planned for because the need for care and associated services is very costly. This may require undesirable monetary decisions in order to expedite the assistance needed. Professional guidance in making those choices can minimize the impact and hopefully help with the transitions. The aim is to truly benefit the aging individual as well as those that are of utmost importance to them.

With over 24 years experience as a financial planner—with a specialization in retirement—I've assisted in making crucial financial decisions for clients in all four phases of retirement. What I now understand to be true is that retirement should not be approached as a singular block of time. Just as I cater to each of my clients, considering their individual needs and set of requirements; each of the Four Phases of Retirement requires different attentions, financial assessments, and recommendations.

Suzanne Wolfson CFP, is the founder of FOR RETIRED ONLY, a fee-based Financial Planning firm specializing in finding the best direction and solutions to pre-retiree's and those already retired, all the way through their remaining years. For over 32 years, Suzanne has provided customized assistant to clients in their important financial decisions, planning and investment management. Her website is

© 2009, Suzanne Wolfson. All rights reserved.


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