Retirement Financial Journey
You may have retired but your money has not. It’s important to continue to manage it. Retirement financial planning is “a thing” because retirement takes financial planning.
Some refer to this time as “post-retirement” signifying the time after your act of leaving your last employment. We mean the same thing. All of the years you are partially or fully living on retirement-oriented income are deemed your “Retirement Years”.
Your retirement may last 20-25-30 years or more. Greater life expectancy is one of the biggest human achievements of the 20th Century but presents one of the biggest financial planning challenges in the 21st Century: how to not outlive your income.
A well thought strategy that includes secure retirement income, risk-managed investment returns, and general retirement preparedness can help you avoid mistakes, save money, and keep you comfortable.
How financially literate are you compared to the average American? You can take one of the shortest of those financial literacy quizzes here (it’s only 6 questions) to get a taste of the questions asked.
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The 3 Stages of Retirement
The Go-Go Years
We’ve all heard the saying: “You’ll never be in as good of shape as you are today because you’re just going to get older.”
Well, that’s true in retirement, too.
There’s a reason the first few years of retirement are called the “Go-Go Years” because we’re generally in good health, have a full pool of retirement resources, a list of things we’d like to do, and the ability to do them. That makes these years the “Go-Go Years”.
If you are going to pursue a hobby, to volunteer somewhere close to your heart, spend time you didn’t have before with your grandkids, travel, or do whatever–now is the time to do those things. A financially well-planned retirement can be some of your best years.
The Slow-Go Years
You’ve settled into retirement–whatever you’ve made that to mean–and you’ve probably developed some habits, a routine.
The more ambitious, nonroutine activities that you pursued upon entering your retirement years are checked off your bucket list. Financially speaking, the Slow-Go Years are the most predictable. Income is received routinely and monthly expenses are paid routinely. Not too many surprises on either end.
The nonroutine activities you pursued in your Go-Go Years may have stretched your monthly budget but you would have regretted not doing those so you did them. Also, you may be in excellent health so your medical needs are routine and you’re independent. Slow-Go doesn’t have to mean boring. This is a stable, comfortable time of your retirement.
The No-Go Years
With age catching up to you, you may start to need a little assistance doing things you normally would have done yourself. This is called long term care. It could be due to cognitive impairment or physical limitations but you may need someone (a spouse or a health aide) to help you.
You might also encounter some medical needs. Despite insurance, you may have some extra expenses to help you maintain your health, such as investing in your home to make it more user-friendly. You likely may want to “age-in-place” (i.e. in their home and not in a facility) and that might require a walk-in bath, some grab bars, ramps instead of stairs, etc.
Both of these scenarios require resources. That may increase your monthly expenses.
Smile at Retirement Finances
As far as national average financial experience goes, retirement comes with a smile.
In the chart below, you can see how expenses change by age. The curve is similar to a smile, higher on the ends, lower in the middle. Retirement financial planning can help you navigate this smile with a smile.
Takeaways
- The lesson here is that retirement is more than a cessation of work.
- Retirement has three phases, different expense experiences, and can last decades. That’s why greater life expectancy also means a greater financial challenge. We’re around longer and will likely experience more of what “retirement” has to offer: the good and the not-as-good.
- If you’ve planned your financial life up to retirement, don’t stop. Continue your retirement financial planning because you’ll likely use it.
- Not sure how to plan? Interview financial advisors and find one which offers retirement financial planning services.
