For most of us, there are two times in our lives when we can genuinely do as we wish. The first being when we are young, unmarried adults and the second when we retire. Retirement for many is a long way off; however, with the right planning, it could much closer than you thought.
The general rule of retirement, you build a pot of cash that you can take a set amount of money out each month. You either limit the amount of money to take out to around 4% which hopefully means that you could carry on doing this for the rest of your life, or you pick a date in the future that you think you’ll be dead by and divide the number of month into your pension amount to get a monthly spending figure.
What your pension pot does not take into account, is when you’re going to spend this money. If you’re like me and want to retire at age 55, I hope I will be spending the first fifteen years travelling the world doing all the things on my bucket list.
After the age of 70, life will start to slow down, my travelling will be reduced, and more than likely, the amount of money I’m spending will also be reduced. This all means that I can probably retire a lot earlier than I expected.
The Three Stages of Retirement
Financial Advisers think there are three stages of retirement and depending on when you retire, really depends on how long each stage lasts. In my situation, I want to retire by the time I’m 55. As a result, my retirement stages would look like the following;
- The Go-Go Years – Aged 55-70
- The Slow Go Years – Aged 70-80
- The No-Go Years – Aged 80+
The first stage starts at the point of retirement, often around age 65 (or in my case, hopefully when I’m 55), when most people embrace their newly found freedom. They’ll venture on those ‘once in a lifetime holidays’ to destinations that they have always wanted to explore and enjoy being able to socialise with friends and spend time with their family frequently.
This period could appropriately be labelled the “Golden Years” because these are the times that not only you can do what you want, but you relish in everything that you can do.
As you can imagine, however, these initial years can often be expensive with the majority of your retirement savings most likely going toward ticking off all those items from your bucket list.
The second stage, the slow-go years, occurs in the second or third decade of your retirement, usually around the time you hit age 70. At this point, we tend to begin slowing down, still living a relatively full life but just not at the same pace as our once younger selves.
The day to day activities that we once found easy are now becoming increasingly difficult and thus trips to the Doctor more frequent. As such, you will still be incurring expenses, but not to the same level as in your initial stage of retirement when you were jetting around the world.
The third stage of retirement is referred to as the ‘no go years’. Typically, from 80 years of age onwards, we find that our health can begin to deteriorate.
Unless you are one of the fortunate ones to benefit from continuous good health, most find that they have to spend these years close to home and family, requiring a stable support network.
Some good news, however, is that you will find your expenditure will have reduced substantially with your main expense being food shopping and the few extracurricular activities you can still manage.
What Does This Mean For Your Retirement?
All of this may sound rather depressing to some, but what we’re trying to highlight is the fact that you don’t have to sustain the same initial level of income throughout the various stages of your retirement, despite what many would have you believe.
In fact, if you have saved up a nice little nest egg to retire on, you may want to explore the possibility of early retirement to ensure that you make the most of your productive ‘Go-Go years’ which you have worked and saved tirelessly for.