Planning for the three stages of retirement: Discover, Endeavor and Reflection

Part One: The 'Discovery' stage: 65 – 74 or the Early Years

Retirement doesn’t happen only once. It’s an ongoing process that can easily last 30 years, and so it's important to plan and prepare for every stage. From the early days of retirement, when excitement and spending are high, to the later years of retirement, when you are slowing down and seeing your spending reduced dramatically, you will have to treat yourself and your investments differently, which is why planning for all stages of retirement is so important. So over the next few days, I will look at each stage of retirement you should consider planning for as you consider retirement.

Some retirement specialists talk about the “early years” of retirement, I like the term the Discovery years. This first or early stage of retirement will, for many, be the 'doing' years. The time to have a go at all the things you've said you'd get around to 'someday' and in this time you will begin to discover what is important to you.

Travelling, seeing family, spending more time on those hobbies and interests, and just getting on with it. You might expect to be physically and mentally capable of living a fairly active lifestyle. In fact, this phase may not be that much different than pre-retirement except that there may be more time to do things like travel and hobbies.

This stage could also still include work. It may be part-time work or consulting in the same field of your pre-retirement career, or it may mean self-employment. Whatever the case, active retirement is really living the stereotypical retirement dream. For many retirees in this phase, they are busier than they were prior to retirement.

It is common for your mind and body to be sharp and to be excited to embark on new adventures. As a result, you may find this to be the most expensive phase of retirement. Travel, boats, hobby cars or dining out with friends are often the fun things in life we look forward to in retirement.

However, you’ll have to balance these increased costs to ensure you don’t consume your savings in the first 10 years. That, in turn, means the cost of living increases during the early years of retirement with the extra money going out the door each month. During the early days of retirement, it’s a good idea to have your money continue to grow, which often means you will have to stay invested. You may think you have to get super conservative because you don’t want to lose any money, but it’s important to keep your investments working for you so that you have enough for the second two stages of retirement.

In the early years of retirement, you may spend more on travel, entertainment and hobbies, but other expenses such as commuting to work, eating out for lunch and buying a professional wardrobe will be lower or gone altogether.

Before you retire, it’s a good idea to come up with a list of the things you want to do in the early stage of retirement and plan and budget accordingly. When retirement is new and exciting, you will want to have the cash flow to fulfil your early retirement dream