Embracing the Four Stages of Retirement

Planning is vital to enjoying a happy and peaceful retirement. Not just financial planning, but preparation in a wide range of areas. Our retirement planning practice breaks the planning issues into four distinct stages in order to focus the planning effort and we encourage people to start planning at least ten years before hitting their retirement date.

While successful retirees share the trait of planning for retirement, many people appear to be overwhelmed by the thought of laying the foundation for success in the final season of life. Of the eight traits that we teach people, it’s the most important habit shared by successful retirees and it’s not nearly as difficult as people fear. For those that don’t plan ahead, they increase the amount of anxiety they experience and potentially miss out on time sensitive planning opportunities that could help them improve their financial situation in retirement.

May-Investments breaks the planning process into four discrete stages and then applies complex retirement planning software to give clients a sense of what their financial future may look like. While the planning tool is sophisticated, more than anything else it is going through the process, itself, that makes the big difference. We look at the big picture and we tell people that ‘it’s not about the money, it’s about your life!’

In the first stage of retirement planning, clients are still working and accumulating assets. The primary questions to answer involve, “how much is enough?” (or “what’s my ‘number?’ as the insurance ads used to say). One key question is when the client should file for Social Security benefits, which is an area where poor planning can lead to irreversible mistakes.

In the second stage, prior to taking Social Security benefits, the question is often about whether or not to factor part-time work into the plan. A planned work slowdown can both enable an earlier retirement and increase the total level of satisfaction in retirement. The vocational transition this involves also makes it a great time to consciously develop new social networks that, once in place, will help people throughout the rest of their lives.

The third stage involves full, active retirement. Collecting social security benefits and with a retirement income plan kicking in, these folks are some of the most active people in the community. Days are filled with travel, leisure, and community involvement surrounding each person’s passions and expertise. While this is the stage that most people think about when planning for “retirement,” the prior two stages are even more important in helping people truly enjoy this third stage of maximum activity.

The fourth stage, full retirement, involves handling well the health and other challenges that we face during our final season of life. In this stage, we cement our legacy in both spiritual and financial arenas. Hopefully we are creating memories for others that build them up as we manage a new set of financial risks and health challenges. Drawing down financial resources, it is a time when many retirees face an important decision regarding whether or not to annuitize financial risk (hand that risk off to others). Although it is the time when long-term healthcare plans are put into effect, by the fourth stage it is probably too late to craft a long-term healthcare plan. That issue needs to be addressed much earlier, while there are more options available so the optimal choice can be made.

Starting early, breaking things down into smaller and more manageable stages, and systematically reviewing the retirement plan ensures that the plan is current, flexible, comprehensive and implemented properly. As with most disciplines, it is something that many people will implement easily on their own, but most will need a coach on the side to structure the process and bring the right tools to the table. The only way to “lose” in the planning process, is to fail to start.

Retirement, like life, is a process rather than a destination. There is no single “number” above which your financial wealth will assure you a happy and healthy retirement. Happiness and peace of mind seem to require a concerted planning effort, but planning in the fun sense – preparing for a season of life focused on passions and relationships, should beat the daily office grind, even if you do currently enjoy your job. Embracing these four stages of retirement, in the planning process and beyond, can help you “Retire Right” and enjoy the opportunities that await you beyond the working years.

Douglas B. May is President of May-Investments, LLC and author of Investment Heresies.