Retirement is often referred to as a single lifetime event. You know, you work for forty or so years, have your retirement party, or other celebration, and then head off into retirement.

But your whole retirement is not going to be the same.

And, while the retirement you choose will be unique to you – in a general way, all retirements go through three phases or stages.

Understanding these different phases of retirement can help you plan. Instead of assuming that income needs will be the same throughout retirement, know that different stages have different expenses, and those expenses depend on how you choose to spend your time, where you decide to live and how your health holds up. If you take these factors into account and evaluate how they will change, you can budget accordingly.

Three Phases of Retirement

Three Phases Of Retirement

1. The early years

Some of the biggest changes in your budget will occur when you first retire because this is the busiest phase.

In the early years of retirement we tend to be physically capable of living a fairly active lifestyle. There’s a lot of time to indulge in the things you may have been putting off, such as hobbies and travel.

Plan to use a little more of your nest egg in the early retirement years while you’re healthy and mobile and trying all those new things in your new free time. Don’t be stingy but don’t be tempted to go on a spending spree at this early stage. You can quickly blow through your savings if you treat entering retirement like winning the lottery.

You can balance expensive activities you want to spend time on with other inexpensive or free ones.

This phase may include part-time work or self-employment.

For some, now that your job no longer ties you to a certain location, you may want to move to somewhere more desirable.

2. Slowing down

Often, between the ages of 70 and 85, you start slowing down. Spending tends to drop as you get older. Life falls into a steady pattern and a more established schedule is created.

You may want to stay home more, or your travel may be centered around inexpensive trips such as visits to family.

You may want to downsize to a home with no stairs, or no more yard work.

Financial planning becomes easier because most of your expenses are stable and predictable, but ensure you plan for the unexpected like a sudden health issue or major repair bill. Periodically review your spending plan to ensure you’ve captured all your costs, including taxes and the effects of inflation.

3. Winding down

In this phase, people usually slow down their activities due to declining health or finances.

This third phase of retirement can be costly due to increases in health care spending – but this often balances out with the decreases in the discretionary life style spending of phase one. You are likely no longer travelling, golfing, or even driving.

Although Canada’s health care system is very good, there will likely be out-of-pocket medical costs. You’ll also want to be sure to understand all your health care options and choices, especially what would happen if you become chronically or acutely ill.

Often this stage requires some level of support from family or government agencies.

Final thoughts

On Saturday, we will be celebrating my father’s 93rd birthday. He wants pizza, maple walnut ice cream, and a glass (or two) of champagne.

He retired at age 58, so he has spent 35 years in retirement – almost as long as his working years!

On retirement, he and my mother moved from Calgary to the Okanagan. They spent the first several years travelling around the world, getting involved in church activities, swimming and gardening. Later on, he puttered around the house and yard and wandered around Canadian Tire and Home Depot.

A few years ago, they sold their home and moved into a retirement residence. His knees finally gave out and he now bombs around in a motorized chair. He keeps up with current world events by reading his daily newspaper and engages in lively discussions. He can recite all the dialogue from the TV shows Matlock and Murder She Wrote.

Oh, and he also naps a lot.


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