Retirement is a significant life transition that typically unfolds in four distinct phases, each marked by its unique characteristics, challenges, and opportunities. These phases provide a framework for individuals to better understand and plan for their retirement journey.
Pre-retirement Phase (Ages 50-60)
The pre-retirement phase is the period leading up to retirement, which could start several years before the actual retirement date. During this phase, individuals often experience a mix of excitement and apprehension. Key characteristics of this phase include:
Financial Planning:
Pre-retirees assess their financial readiness for retirement by evaluating their savings, investments, and retirement income sources. They may work with financial advisers to develop a retirement plan that ensures a comfortable standard of living.
Lifestyle Decisions:
Pre-retirees contemplate how they want to spend their retirement years. They consider factors such as where they want to live, whether they’ll work part-time, or engage in new hobbies and activities.
Health and Wellness:
Taking care of one’s physical and mental health becomes increasingly important in this phase, as individuals prepare for a life without the structure of a job. Many people use this time to establish healthier habits.
Early Retirement Phase (Ages 60-70)
The early retirement phase marks the first few years after retirement. This phase is often characterized by a sense of liberation and newfound freedom. Key features of this phase include:
Pursuing Passions:
Many retirees use this time to explore long-held interests and passions. Whether it’s traveling, starting a new business, or dedicating time to a hobby, early retirees often seek fulfillment outside of traditional work.
Adjusting to New Routine:
Establishing a daily routine that suits one’s preferences and lifestyle is crucial during this phase. Some may choose to work part-time or engage in volunteer activities, while others embrace a more leisurely pace.
Financial Adjustments:
Retirees need to monitor their finances closely and make adjustments as needed to ensure their savings and investments last throughout their retirement years. They will start drawing down on their savings to subsidise New Zealand superannuation and for travel.
Middle Retirement Phase (Ages 70-80)
During the middle retirement phase individuals may encounter some unique challenges:
Health Considerations:
Health issues and aging become more prominent, and retirees may require increased healthcare and long-term care services. Managing health and healthcare costs become critical concerns.
Social Connections:
Maintaining social connections and relationships becomes increasingly important to prevent feelings of isolation. Many retirees focus on their hobbies, on building and nurturing their social network, whether through community involvement or by spending more time with family and friends. Overseas travel is usually scaled back.
Financial Stability:
Retirees must continue to monitor their financial situation, ensuring that their resources remain sufficient to support their chosen lifestyle and cover potential healthcare expenses.
Late Retirement Phase (80+)
The late retirement phase typically occurs in the later stages of retirement when individuals may face further challenges related to aging and financial matters. Key elements of this phase include:
Care and Support:
As retirees age, they may require more assistance with daily activities, healthcare, and possibly long-term care services. Planning for such support, either through family, community services, or retirement facilities, becomes crucial.
Estate Planning:
Late retirees often consider the distribution of their assets and legacy planning, such as wills, trusts, and gifting strategies.
Reflection and Legacy:
This phase is a time of reflection on one’s life and the legacy they wish to leave behind. Many retirees use this period to pass on wisdom, values, and financial resources to future generations or charitable causes.
These four phases of retirement provide a general roadmap, but it’s important to note that everyone’s retirement experience is unique. Effective retirement planning involves adapting to changing circumstances and needs at each stage, ensuring a fulfilling and secure retirement journey.
How can a Financial Adviser help?
By going through retirement income projections we can show you how your retirement savings will provide an income in retirement. We take into account a client’s attitude to the risk and return relationship and their tolerance to risk. The projections provide some assurance that in spite of market fluctuations you will be able to draw down on your investments.