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How to Plan for the 3 Stages of Retirement

One of the most common misconceptions about retirement is that “retirement is a single event.” Not many people understand that retirement, like work-life, has stages. Although retirement may be unique to each person, it generally passes through three stages or phases: active retirement, slow-down retirement, and inactive retirement.

Understanding the different stages of retirement and removing the assumption that retirement needs are the same throughout retirement can help you plan for your future years effectively. It is important to know that each stage has its own expenses, and those expenses greatly depend on your activities, lifestyle, and health.

Retirement isn’t a single phase or stage. It has different stages, and learning, understanding, and adequately preparing for each stage is imperative for your financial wellness throughout retirement. To help you better plan for retirement today, we're looking at the three different stages of retirement and how you can plan accordingly for each stage. 

retired couple surfing

Active Retirement Stage

This stage occurs in the early years of retirement, usually between the ages of 60 and 75. At this stage, a retiree is still trying to figure out what to do with their newly found free time while enjoying the fruits of employment. Between this age bracket, retirees are still active health-wise and often look forward to vacations and enjoying what life offers. As a result, the cost of living increases, and more money is spent during these earlier retirement years.

To have control in this retirement stage, it is always a good idea to let your money continue growing. Working with a financial planner during this stage can help advise you on the best investments to keep your money growing so that you can remain better prepared for the next two stages of retirement. Considering this retirement stage is exciting and full of adventure, you must have the cash flow to sustain your budget. Plan accordingly before you retire and list what you would like to try at this stage even before retiring.

Slow Down Retirement Stage

The slow-down stage typically occurs between the ages of 75 and 85. In this stage, the retirement hype experienced in the first stage starts to fade away, and you are more into taking it easy with life. Here, you may find yourself spending most of your time visiting family and friends, and you may also start considering downsizing into a smaller home or moving closer to your grandkids and other family members.

Cash flow is equally important in this stage as it was in the active retirement stage. Although not most of it will be going towards travel and leisure, expenses related to healthcare costs may start to rise as you age. At this stage, you still want your money to grow, and therefore, it's important to choose investments that won’t risk losing your money. 

Inactive Retirement Stage

This last stage occurs from the age of 85 and onwards. Here, your life will change in many different ways. At this stage, maybe your energy levels are lower, and you may call on your family for more help moving around or carrying out various personal activities. During this stage, you may see a reduction in your cost of living because you will not be moving around as often as in the previous stages. However, on the other hand your healthcare costs may rise significantly.

During your earlier retirement years, you need to plan well for this stage. It's important to plan how you want to be cared for if your health makes you dependent on others. Inform your family about your savings and delegate authority to someone who can make important financial decisions for you if your cognitive abilities decline. In this stage, deeply focus on yourself and your general well-being in the final years of life.

Invest In a Life You Love,

Donovan Carson - founder of Carson Capital



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