Different phases call for different strategies
If you’re physically healthy and financially prepared, your retirement could last for decades. During that time, it may go through several distinct phases, with changing levels of income and expenses that require different approaches to budgeting. Even with a shorter retirement, you’ll likely experience much the same stages, just in a condensed time frame. While experts give these phases a variety of names and sometimes number them differently, here’s what to expect, based on a four-stage model.
- Retirement can last for decades if you’re physically healthy and financially prepared.
- Retirement isn’t just one phase of life, but a succession of phases with different spending priorities and budgeting needs.
- A four-phase model for retirement consists of pre-retirement (age 50 to 62 or so), the early period of retirement (62 to 70), middle retirement (70 to 80), and late retirement (80 and up).
Pre-Retirement (age 50 to 62 or so)
Pre-retirement (sometimes referred to as “peri-retirement”) is the decade or thereabouts leading up to retirement. You’re still working, but retirement is approaching and you’re finally getting a clear picture of what your nest egg, income, and expenses will look like. You’re also getting closer to figuring out what you’ll do with your days once you’re free to fill them as you please. What seemed merely theoretical earlier in your working life starts to seem real.
We put age 62 as the end of this period because it’s the age when people first qualify for Social Security payments. But some people might retire at 55 or 60 while others keep working well past 70—or never retire at all. (Incidentally, starting to collect Social Security at 62 is usually a bad idea because if you do, your monthly benefits will be permanently reduced.)