Have You Planned for All 3 Phases of Retirement
The key to a fulfilling, happy retirement is being prepared – mentally and financially – for all 3 phases.
Phase 1: The Go-Go Years
For many new retirees, the early years of retirement are the most active as they take advantage of their newfound free time. At this point in their lives, many will choose to travel, make that big “dream” purchase or spend time with the grandkids before they start lives of their own. If left unchecked, though, this uptick in spending can throw your retirement financial plans out of whack – with no employment income fortifying your nest egg, it’s critical that your spending reflect your new financial circumstances.
TIP: When preparing for your retirement, carefully consider what you want your early years in retirement to look like, and budget accordingly. And once you do retire, be sure to track your spending against your budget and make adjustments as necessary.
Phase 2: The Slow-Go Years
After the excitement of the Go-Go years, retirees will often slow down, forgoing taking long trips or keeping up with houses that are bigger than they need. As a result, your retirement budget may contract significantly due to decreased spending or “downsizing” into smaller cars and homes.
TIP: While most people welcome having fewer bills to pay, keep in mind that healthcare spending tends to increase during your Slow-Go years. These expenses tend to grow at a faster rate than other costs, which makes inflation a larger concern when minding your nest egg.
Phase 3: The No-Go Years
While the No-Go years are often characterized by established routines and a quiet lifestyle, spending actually tends to ramp up during this time. Health issues, decreased mobility and the potential need for 24-hour care can bring about a sharp increase in healthcare expenses.
TIP: When budgeting for retirement, planning for the increased costs of care is essential. Long-term care insurance might be a consideration at this point to help soften the blow of the expense. If you’re also thinking about leaving a legacy for the people and causes you care about, be sure you strike a balance between caring for others and securing your own financial future.
When planning for your own retirement, it’s essential you map out not only the pastimes you intend to pursue but also how your lifestyle will evolve over time. Our team can guide you through realistic financial decisions that make the most of this time of life.
The information reflected on this page are Baird expert opinions today and are subject to change. The information provided here has not taken into consideration the investment goals or needs of any specific investor and investors should not make any investment decisions based solely on this information. Past performance is not a guarantee of future results. All investments have some level of risk, and investors have different time horizons, goals and risk tolerances, so speak to your Baird Financial Advisor before taking action.