The 4 phases of retirement, and how you should plan for them

As a financial planner, I often talk to clients about their post-retirement financial arrangements and the challenges of living without a regular monthly salary. To help them, I will usually divide retirement into three distinct phases:

  1. An active phase when you are likely to be ticking off items on your bucket list, such as overseas travel or buying a new car
  2. A quieter period as you adopt a less energetic lifestyle
  3. A final phase in which the effects of ageing start to take their toll.

However, I recently came across a TEDx Talk produced by a retired adviser, Dr Riley Moynes, who argues quite convincingly that retirement can actually consist of four phases, rather than three.

More pertinent is the underlying and key message he makes, namely that it’s as important to give some serious thought to the other aspects of your retirement as it is just to think about your finances.

For example, you may want to consider your mental attitude towards your retirement years and the state of mind around retirement and how you approach it.

Appreciating the benefits of working

A key starting point Dr Moynes highlights when it comes to planning for your retirement is the importance of understanding what you’ll lose when you finally decide to stop working.

As well as the obvious regular income, some of the things he flags up as no longer being part of your life when you retire include:

  • The regular routine that work provides you with and how you structure your days and weeks
  • The purpose and fulfilment that comes from working, such as hitting targets, launching products, or running your own business
  • The social network that you develop with work colleagues
  • The fact that work can help define who you are and, when you stop working, that definition will no longer be there.

Consequently, a key part of your retirement plan needs to focus on how you will deal with these changes to your life and identity.

Dr Moynes then highlights the four phases of your retirement years.

1. Enjoying an extended holiday period

Your immediate post-retirement period will be a time when you’ll have no alarm clock waking you every morning and you’ll appreciate the novelty of all your time being your own.

In effect, your life could easily become a series of seven-day weekends.

It’s likely you’ll want to spend money and tick off those big bucket list items you read about earlier. However, your lifestyle may well be just as much about doing nothing because there’s nothing you have to do.

Moynes estimates that this extended holiday phase normally lasts a year or 18 months, although it’s important you bear in mind that it could last longer than that if you have planned ahead.

He also contends that it may last longer if you haven’t necessarily defined yourself by the job you do and, as a result, may find the transition from work to a life of leisure easier to adapt to.

Obviously, it’s important to enjoy this time, but he does suggest it’s equally crucial to set aside some time during this period to think about the long-term changes in your routine that a life without work will bring you.

2. The reality of retirement kicks in

In this second phase, you will start to appreciate the reality of retirement and could begin to miss the routines you had when you were working and the other work-related benefits you read about earlier.

Filling your days may well become a chore, rather than the pleasure you usually associate with retirement.

Dr Moynes does point out that not everyone goes through this phase. Yet, it’s important to have an awareness that it might happen because the reality of reaching such a scenario can easily lead to depression and stress.

Effective planning around the possibility of going through a struggle like this, with help from family, friends, and professional experts, can mitigate the effects or help you avoid it completely.

3. Finding new meaning in your retirement years

This third phase is probably the most important, as it’s the time when you start taking steps to ensure your retirement years are meaningful.

Doing this is important to your future wellbeing so planning ahead – maybe from a time well before you stop working – can be hugely beneficial to ensure you live the life you want.

You’ll likely look for new activities and new challenges to set yourself. These could include other items on your bucket list, such as new hobbies that may have been too time-consuming or not feasible to take up while you were working.

Dr Moynes stresses the importance of ensuring that these matter to you, whether they are hobbies, a commitment to your family, or a local charitable activity.

The more they matter, the more likely it is that you’ll get proper fulfilment and a sense of achievement from them.

4. Living a life of purpose

Subject to unforeseen circumstances such as family issues or health concerns, this final phase will take you through the rest of your retirement years.

You’ll likely spend productive time following the activities you identified in phase three. You’ll also have the opportunity to go back and revisit that phase if you need to, if any of your chosen activities are no longer suitable, or you just don’t enjoy them anymore.

In Dr Moynes’s experience, one of the most fulfilling ways to enjoy this stage is to ensure your activities focus on helping other people rather than simply prioritising your own enjoyment.

This could mean helping local community groups, working with those less well-off, or helping maintain and enhance the natural environment around where you live.

It’s important to plan for all aspects of your retirement, not just your finances

The four phases that Dr Moynes set out demonstrate the value of doing as much of your preparation as possible before retirement, from both a financial and a lifestyle perspective.

As you will appreciate, taking whatever steps you can to avoid phase two is certainly worth the effort.

The transition from a life of work to a life of leisure isn’t straightforward. This means that the more you can plan for it, the better your chances of enjoying a rewarding and fulfilling retirement.

Get in touch

If you’d like to talk through your own retirement planning arrangements, then please get in touch.

You can call me on 07769 156 250.

Please note

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Equity investments do not afford the same capital security as deposit accounts.