Some experts like to talk about the stages of retirement. There are depending on the expert you follow 2 to 5 stages as follow:
1. The Go-Go phase is the active retirement phase.
It is the early retirement phase when we tend to be physically and mentally capable
of living a fairly active lifestyle. In fact, the phase may not be that much
different than pre-retirement except that there may be more time to do things
like travel and hobbies. For some, the Go-Go phase or the active phase will
include work. It may be part-time work or consulting in the same field of their
pre-retirement career, or it may mean self-employment. Whatever the case,
active retirement is really living the stereotypical retirement dream. Many
retirees in this phase, they are busier than they were prior to retirement.
2. The next phase of retirement is the Slow-Go
phase where the body is telling you to slow down a little. Often this happens
between the ages of 70 and 84, life starts falling into patterns and the
excitement of retirement becomes more stable. Sometimes this phase is known as
the stable retirement phase.
a. Many of you know retirees in this phase because
they have very predictable patterns like banking on Mondays, groceries on
Tuesdays, bridge on Fridays, etc. Part of the reason for these patterns is that
energy levels are changing, and patterns help minimize effort and thought
without compromising on the enjoyment of life. The older you get, the more
important it is to find routines and patterns that give you comfort and security.
b. In this phase travel moves from a plane ride
around the world to bus rides within the province.
3. The last phase of retirement is the No-Go phase
or the limited retirement phase. In this phase, time and age play a role in
slowing down activities and abilities. Sometimes this is mental, sometimes
physical and sometimes it can be financial.
a. Often this stage requires some level of support
from family, governments or agencies. Again, this can be physical, emotional or
financial support. Choices become much more limited.
Consumption for the population as a whole declines over
retirement, the Center for Retirement Research reports. Higher-wealth
households that self-report excellent or very good health have a nearly flat
consumption pattern. Wealth and health are important determinants of
consumption paths in retirement. Financial planners and researchers often
assume that retirees prefer steady consumption as they grow older. Social
Security benefits, too, are based on the premise that people want steady
inflation-adjusted benefits. However, several studies focused on new retirees
suggest that retired households actually consume less over time as they go
through the stages or phases of retirement.
Understanding the three phases of retirement can have an
impact on planning in the various lifestyle components of retirement. In terms
of spending, you probably need more income in the Go-Go phase of retirement
because that is the time in your retirement when you tend to be going more. The
Go-Go phase is when you are travelling more, golfing more, walking more, etc.
Statistics show that spending tends to drop the older you get and the further
you get into the Slow-Go phase.
Many people will agree with the thought that spending on
health care may increase as you age and especially when you hit the No-Go
phase. One of the biggest financial fears on the minds of Canadians is the cost
of health care in retirement and what it might cost to go into a care facility.
While the third phase of retirement can be costly due to increases in
healthcare, the question becomes how much does spending drop as a result of
decreases in discretionary lifestyle spending. When you hit No-Go, you are not
travelling at all. You are also not driving, golfing, shopping, etc. You are still
spending money but only on the basic necessities to sustain life – food,
shelter, clothing.
Another example is in terms of housing, the typical trend is
towards downsizing in the second phase and then into care facilities in the
third phase. The key to retirement planning is to recognize that not all
retirement is the same not just with regards to lifestyle but also to spend.
It’s important to know where you are in life today and look ahead into the
future to recognize plans for that future especially through the different
phases of retirement.
Whether households prefer a constant, increasing or
decreasing path of consumption in retirement has important implications for an
understanding of retirement adequacy, according to a report published Tuesday
by the Center for Retirement Research at Boston College on the findings of a
recent study that used data from two longitudinal surveys to examine the
consumption behaviour of retired households. According to the results,
consumption for the population as a whole declined over retirement.
However, health and wealth constraints also matter.
Higher-wealth households that self-report excellent or very good health have a
nearly flat consumption pattern, declining by only 0.3% a year. By comparison,
for those who start retirement with good health, consumption declines by about
1.1%, and for those with fair or poor health, it declines by 3.2%.
