Navigating the 4 Phases of Retirement

Leo Maheras |

Retirement seems like a long way off, but it arrives faster than you think. The big question is, are you ready? What exactly does retirement entail? Analysts suggest there are four designated phases of retirement that a person often experiences. Individuals may have to modify their strategies throughout the different phases to align with changing incomes and expenses. Being prepared for these phases is key to realizing your retirement goals.

PHASE 1: Pre-retirement (Ages 50 to 62)

The ten years leading up to retirement is the first phase, known as pre-retirement. You are still working, however, retirement is right on the horizon. This period will provide you with a ballpark figure of what your nest egg and expenses may look like.

Have you visualized how you want your retirement to be? Having an idea of what you want and setting goals can make working with a financial professional to create a strategy easier. According to Kiplinger, more than one-third of Americans admit they have “no idea” how much they need to save for retirement. Working toward set goals may make it easier to stay on track with your finances, especially when the money coming in is far less than you had during your working years.

PHASE 2: Early period of retirement (Ages 62 to 70)

This phase is significant because you no longer receive a paycheck unless you have a pension. Expenses are generally the highest during these early years of retirement because of the excitement of having the opportunity to travel and pursue hobbies without the responsibility of a full-time job. Spending can quickly get out of control if you haven’t prepared well. You may also no longer be covered by your employer-sponsored health insurance, so you must plan how you, your spouse, and any dependents will be covered.

Many people find the transition from working full-time jobs to so much free time to be overwhelming, and some may even miss having something to wake up to and work towards. In this case, some individuals take on part-time jobs, which helps with doing something meaningful to pass the time and may provide you with a financial cushion. This is also a time when people begin to review their living situation. An estimated 40% of retirees move after they stop working. There are a variety of reasons for this, including downsizing, relocating for more preferable weather, or being closer to family.

PHASE 3: Mid-retirement (Ages 70 to 80)

This is when you will most likely receive Social Security benefits as there is no longer any financial benefit to delaying past 70. At the age of 73, you must begin taking required minimum distributions (RMDs) from various accounts that you may have, including 401(k)s, Roth 401(k)s, 403(b)s, 457(b)s, most types of IRAs (not including Roth IRAs), and profit sharing.

Also, at this age, you can revise your life insurance plan to save money, and it is also a good time to review your estate plan and decide whether any modifications need to be made. Families are constantly changing with births, deaths, divorces, and unpredictable situations, and having an up-to-date estate plan can help to keep complications that might arise to a minimum. A financial professional can help you prepare bill payments and RMD withdrawal schedules to ease the financial burden and stress of this life transition.

PHASE 4: Late retirement (Ages 80 and Up)

In this phase of retirement, individuals are often subject to increased healthcare costs because, at this period in their life, medical expenses tend to be higher. According to Fidelity, the average retired couple should spend $300,000 on health care throughout their retirement. Thankfully Medicare will cover a significant amount of your expenses. However, you may still have out-of-pocket costs like deductibles and co-pays.

Being prepared decades earlier for these years can save you and your family tremendous stress and financial strain. You may have previously purchased long-term care insurance that can cover high-cost expenses, including nursing homes, assisted living facilities, or home health care needs. Retired individuals should regularly monitor their finances and their strategy.

The years leading up to retirement and the phases you experience while going through it can be financially complex. The market is constantly changing, and our lives are always evolving. It can be highly beneficial to enlist the help of a financial professional who can help assess your financial situation. They can help create or modify strategies, recognize expenses to eliminate or point out other ways to save that you may not have noticed, and help you make decisions without being emotionally involved. Take the time to schedule a meeting with a financial professional to help you review your finances and work towards financially preparing for your retirement journey.

Important Disclosures

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This information is not intended to be a substitute for individualized legal advice. Please consult your legal advisor regarding your specific situation.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by LPL Marketing Solutions

Sources: Phases of Retirement: Meaning and Overview ( The 4 Phases of Retirement | Kiplinger How to plan for rising health care costs | Fidelity


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