While there’s nothing wrong with dreaming big about retirement, it’s important to remember that how you think about retirement is likely to change over time. No matter how your circumstances change, you’re likely to have four unique stages of retirement.
The ﬁrst phase is the pre-retirement phase. This phase kicks oﬀ roughly a decade before you punch the time clock for the ﬁnal time. While ﬁnancial services professionals generally urge you to begin saving for retirement as soon as you get your ﬁrst paycheck, that money will typically be set aside and left alone to hopefully grow. However, once you roll into your 50s and your pre-retirement clock begins ticking, it’s time to actively start planning out your preferred retirement.
Perhaps the best first step in the pre-retirement phase is to simply define what your goals are and what you want your post-work lifestyle to be. If you have a spouse or partner, make sure you sit down together to see where your goals line up and how you can compromise on some of the areas where your goals differ.
Phase two is the early years of your retirement. For a lot of folks, this phase tends to be expensive because your health and energy are both likely to be good. And when you combine that with your general excitement at finally being retired, well, that probably means lots of travel and other adventures.
But travel and adventures cost money. And, if you aren’t careful, that pot of saved money you worked so hard for can begin to dwindle faster than you anticipated. To that end, a part-time job after your retirement may be a solution. The extra money you bring in could help you fund some of those adventures, but it’s more than that. It’s getting out of the house and engaging with the world.
And remember, you don’t have to just take any old job. You could work part-time at the local zoo or an arts organization. Phase two is also a good time to consider your current living arrangements. About 40% of retirees move after they stop working. Is it time to downsize? Do you have family you want to be closer to? This is a good point to consider some of those questions.
Phase three is your middle retirement and is often the most expensive phase. This phase begins roughly 10 years into retirement, at which point you’re likely traveling less and spending more time around home. This is also the phase when healthcare expenses begin to tick up as you require more medical appointments and treatment. Many folks in retirement’s third stage also find themselves with medical expenses like equipment and medically necessary upgrades to their homes. Some of those additional medical services and equipment can come with plenty of sticker shock and many of them fall outside the scope of Medicare.
The fourth phase of retirement is your later years. During this stage, it’s very possible that healthcare will be your most significant expense. In phase four, long-term care insurance may help you — and your money — withstand the financial tidal wave that comes with things like nursing homes, assisted living, and home healthcare services. And again, you shouldn’t plan to use Medicare for these types of services. In some cases, Medicare may help modestly with some of those services and in other cases Medicare won’t help at all.