If you’re approaching retirement, you’ve probably been thinking a lot about your financial situation and whether your money will last you into retirement.
You may have to think about your 401(k) plan, IRA and Social Security benefits, but you may not have planned for one of the most important aspects of retirement: the psychological phase you’ll experience during this new stage of your life.
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Based on interviews with over 150 retirees, Riley Moines, Ph.D. The four stages of retirement: what to expect when you retireidentified four psychological stages after retirement: Recent Episodes We speak with Adam Bornn, retirement planning expert at Parallel Wealth.
“Vacation” phase
When you retire, you suddenly have no routine and a lot of free time. You have the freedom to play golf every day, travel around Europe, or do whatever you want. Dr. Moines calls this a “vacation” period.
However, during this stage, you may be tempted to make big purchases that you may regret later, such as expensive cars, boats, or luxury trips – things you want to avoid putting your funds into during this stage of retirement. Receive Social Security benefits early This can lead to saving more than you need or taking large withdrawals from your retirement accounts.
Since retirement can last 35 years or more, consider creating a retirement budget that accounts for how much to withdraw from each account and when. A financial planner can be extremely helpful in keeping you on track financially while enjoying your new freedom.
The “Confused” stage
Eventually, many people tire of the first stage of retirement and move into the second stage, which Dr. Moise calls “loss of presence,” where they begin to feel a loss of routine, relationships, identity, purpose, and power that came with their work.
This is a difficult time and can overlap with the three D’s of retirement – decline, depression and divorce. According to Dr Moyes, during this stage you will begin to experience mental and physical decline and there is a 40% chance of experiencing clinical depression, which could lead to divorce.
At the same time, you may have to deal with rising medical costs or the financial fallout from a divorce, but you may have less money to spend on travel and other luxuries, and you may be more likely to receive Social Security benefits because there’s no benefit to postponing them past age 70.
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“Trial and error” phase
According to Dr. Moynes, the “trial and error” stage is the rehabilitation stage where you search for new meaning and purpose in life. It’s a time of trial and error, where you try new things, and often fail. Some people don’t get past this stage, or they fall back into an earlier stage, but if you persevere, you’ll reach the sweet spot, which is stage 4.
The “Reinvent and Rebuild” Phase
Only 60% to 65% of retirees reach the final “reinvent and restructure” stage, according to Dr. Moines. But those who do see it as the most meaningful stage of their lives: They’re busy, they’re connected with others, and they’re making important contributions to society. In other words, they’re enjoying life to the fullest.
From a financial perspective, this is the time to review your estate plan to ensure you are leaving the legacy you want. For example, you may have a new cause or charity you want to support. Or, if you’ve found new purpose from your part-time job, you may have some extra income. This means you’ll need to update your retirement budget.
For most people, retirement isn’t a “permanent vacation,” says Dr. Moines. Rather, thriving in retirement requires working, not working. This requires self-reflection and asking yourself the tough questions to find fulfillment.
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This article is for informational purposes only, should not be construed as advice, and is provided without warranty of any kind.
