Various Stages of Retirement to Consider
While you’re formally employed, there would have been various steps of the career ladder that you navigated along the way. Your retirement years will work in much the say way, with various stages to take into consideration. Below is a simple breakdown of what you could expect to encounter during each of them with regards to finances.
Stage One – the Beginning of Retirement
Otherwise known as the honeymoon phase, this is when a lot of retirees tend to be the most active. The initial excitement of now being able to engage in activities that they couldn’t partake in before due to time constraints is experienced during this time. In addition, younger retirees are usually in better health, meaning that they will want to do as much as possible during this time.
As a result of being more active during these first few years, you could find yourself spending more money – especially if you’re traveling more than you did before. However, it’s crucial that your retirement funds be carefully managed during this time. Failure to do so could result in you struggling to make ends meet later on.
Stage Two – Slowing Down
This stage starts taking place approximately ten years after you’ve retired, and you find that you’ve grown tired of traveling and any other leisure-related activities that you were enjoying at first. You may find that you’re also ‘starting to feel your age’ at this point, causing you to slow down a bit.
Age-related health conditions may also start making their appearance during this time, resulting in you having to spend a bit more money on medication and other required treatments. During this time, you could notice an increase of between 3% and 5% on your cost of living each year.
Stage Three – Nearing the End of your Life
This stage of retirement takes place when you’re reaching the end of your life. Although it’s difficult to determine exactly when this stage will arrive, it normally tends to be when individuals become frail and more inactive. During this stage, you might find that you’re no longer interested in activities that you once enjoyed and you may even find yourself staying home a lot more than before.
During this final stage of your retirement years, you will most likely also see a decrease in your regular monthly expenses. However, increasing healthcare expenses or even the cost of relocating into an assisted living facility could cause your living expenses to skyrocket. As a result, you can expect an average cost of living increase of as much as 5% per year if you intend keeping up with your current lifestyle.
It’s important to keep in mind that the information above is merely a basic guideline because no one ever knows how your living conditions or circumstances could change after retiring. As such, now is the right time to start putting a retirement plan into place. If you would like to learn more about compiling an effective financial plan for retirement, speak to our team today.