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Expert Says There Are 4 Stages of Retirement — and All Seniors in the U.S. Need to Prepare for the Ups and Downs
Expert Says There Are 4 Stages of Retirement — and All Seniors in the U.S. Need to Prepare for the Ups and Downs
If you’re close to retirement, you’ve probably been thinking a lot about your finances and whether they’ll last you through your golden years.
And while 401(k)s, IRAs and Social Security benefits should be on your radar, you may not have planned for one of the most important aspects of retirement: the psychological phases you’ll go through during this new phase of your life.
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Based on interviews with more than 150 retirees, Dr. Riley Moynes, author of The Four Stages of Retirement: What to Expect When You’re Retiringidentified four psychological phases of retirement, which he discussed in a recent episode from Parallel Wealth with retirement planning expert Adam Bornn.
The “vacation” phase
When you retire, you suddenly have no routine—and no time on your hands. You now have the freedom to do whatever you want, whether it’s playing golf every day or traveling around Europe. This is what Dr. Moynes calls the “vacation” phase.
But it can be tempting during this phase to make big purchases that you may later regret, such as expensive cars, boats, or luxury vacations. You don’t want to end up financing this phase of retirement. receive your Social Security benefits sooner than necessary or making large withdrawals from their retirement accounts.
Since your retirement could last 35 years or more, consider creating a retirement budget that takes into account how much to withdraw from which accounts at which times. A financial planner can be invaluable in helping you enjoy your newfound freedom while still staying on track financially.
The “feeling lost” phase
Over time, many people become bored with the first phase of retirement and move into a second phase, which Dr. Moyes calls “feeling lost.” During this phase, you begin to feel the loss of routine, relationships, identity, purpose, and power you once had in your professional life.
This can be a difficult time, and it can coincide with the three D’s of retirement: decline, depression, and divorce. At this stage, according to Dr. Moyes, we begin to experience mental and physical decline, have a 40 percent chance of experiencing clinical depression, and may even get divorced.
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At the same time, you may have to manage mounting health care expenses or navigate the financial fallout from divorce. On the other hand, you may be spending less on travel and other splurges, and you’re probably collecting Social Security benefits, since there’s no advantage to delaying them past age 70.
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The ‘trial and error’ phase
The “trial and error” phase is about rehabilitation, according to Dr. Moynes, when you’re searching for new meaning and purpose in your life. It’s a time of trial and error, where you’ll try new things—and fail at many of them. Some people never get beyond this phase, or even fall back into previous phases, but by persisting, they can reach phase four: the sweet spot.
The “reinvent and reconnect” phase
Only 60% to 65% of retirees make it to the final “reinvent and reconnect” phase, according to Dr. Moynes. But those who do find it to be the most meaningful phase of their lives: They’re busy, they’re connected to others, and they’re making important contributions to society. In other words, they’re living life to the fullest.
From a financial perspective, you’ll want to revisit your estate plan during this phase to ensure you’re leaving behind the legacy you want. For example, there may be new causes or charities you want to support. And if your new purpose comes from a part-time job, you may have some additional income, which means you’ll need to update your retirement budget.
For most people, retirement isn’t an “eternal vacation,” says Dr. Moynes. Instead, you need to work—but not at a job—to be good at being retired. That requires introspection and asking yourself some tough questions to find fulfillment.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.