The Four Phases of Retirement

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Retirement planning has become increasingly difficult as the cost of living continues to rise. Many retirees can no longer rely solely on social security benefits and personal savings accounts to fund their retirement and instead must develop financial strategies to meet their goals. While it may be challenging to plan for your retirement in its entirety, looking at this phase of life in parts can make the process feel smoother. To help you better prepare for the future, discover the four phases of retirement below.

What are the Stages of Retirement?

No two retirement experiences are exactly alike since individuals retire at different ages and everyone has unique financial goals and circumstances. Some individuals imagine a luxurious retirement with travel opportunities, while others strive to spend more time at home. Despite these differences, there are four general stages of retirement, each of which comes with distinct financial implications:

1.) Pre-Retirement

This phase occurs while you are still working but nearing retirement age. It involves creating your retirement goals and determining how much money you need to achieve those aspirations. If you are unsure where to start, consider drafting a budget of your projected expenses. Comparing these estimated costs with your current investments and savings will help establish how much money you will need in retirement.

2.) Early Retirement

People usually pursue passions when they first retire, such as traveling, playing sports, or participating in non-profit work. Since these activities cost money, having a consistent cash flow during this time is crucial. This step can be challenging, as ample funds are needed to pay for necessities and insurance as well as leisure. Some retirees seek out part-time jobs to pay for additional expenses. However, it’s important to keep in mind that these positions usually do not come with benefits.

3.) Full Retirement

When individuals reach full retirement, they typically replace more ambitious goals with less strenuous activities. For example, you may begin to devote more time toward hobbies or join a local club. Although your expenses may significantly decrease during this phase, it’s still a good idea to be cautious about withdrawing from your retirement accounts. Low-interest rates may lead you to deplete resources if you take out too much at this point.

4.) Final Retirement

The last few years of retirement can be the most challenging, especially for those who develop physical or mental health conditions associated with aging. Depending on the severity of your health situation, you may need to move into a nursing home or assisted care facility. Given these realities, medical costs are often the biggest concern for retirees during this stage. Even if you do not need assisted living services, you may still need sufficient funds to cover medical bills and prescriptions.

What Factors Can Impact Retirement Planning?

Even if you have spent ample time preparing for retirement, numerous aspects can affect your goals. Consider the following factors as you plan for each stage of retirement:

  • The amount of money you can withdraw from your retirement plan yearly
  • The amount of wealth you’ve designated for retirement
  • How many minimum distributions you must take from your retirement plan
  • Possible financial benefits of delaying retirement
  • Outstanding debts, mortgage payments, and bills
  • Long-term healthcare expenses
  • Longer life expectancies
  • Funeral costs/life insurance
  • Inflation

Begin Retirement Planning Today

Planning for retirement can be overwhelming, but a certified financial planner (CFP) can provide the assurance you need about this life transition. At Park Place Financial, our CFPs work collaboratively to craft customized retirement plans for all our clients. We collect each client’s financial information to determine their lifestyle spending habits and guaranteed sources of income. Then, we help our clients make the best investments for their individual situations.

As fiduciaries, our goal is to provide personalized financial advice with absolute honesty and transparency. Although we conduct retirement planning in Houston, TX, our knowledgeable CFPs serve clients across the United States. Schedule a free assessment today or contact us to learn more about our retirement planning services.


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