Retirement is a life-altering event that requires major planning. Because of the enormity of the task, planning for this event is an on-going process that takes place throughout an individual’s financial lifecycle.
* Savings Stage – This initial phase should get underway as soon as you begin your career. During this stage, you will have other savings goals in addition to retirement, like buying a car or a home. In spite of the competition for your savings dollars, be sure you keep retirement in mind, no matter how little you are able to save. If you practice sound retirement-savings habits, your money will increase more rapidly than you realize thanks to compound interest.
* Visualization Stage – This is the time when you start focusing in on your retirement savings, and really intensify your preparations. Part of the increased preparation includes contributing more money to retirement savings plans, and possibly paying off your mortgage. At this point, you should be working with your financial advisor to identify the amount you still need to save to bridge the income gap during retirement. The other side of this coin is limiting expenses. You may choose to forgo using raises and bonuses for immediate gratifications like a vacation or new car, and put them into you retirement savings plans instead.
* Decision Stage – This stage is usually predicated on your actually being about to enter into retirement. You may become tired of working, and may consider retiring because the children are now grown and supporting themselves financially. Your advancing age may motivate you to retire, or your failing health.
During the decision stage, you need to decide when to start company pension retirement benefits, how to consolidate savings plans and investments, and how to convert assets into retirement income.
* Transition Stage – You will probably begin this stage by spending more on travel and other recreational activities. However, as you become more settled into retirement, your spending must be altered. As time goes on, you may consider whether or not to move near family members, or to a retirement community. From a financial perspective, your outlook changes to asset rich and income poor, which can create psychological and emotional needs that you may require help in addressing.
* Frailty Stage – This is the stage when you start dealing with health issues, and the loss of mobility. An individual in this stage tends to become lonelier and more dependent on others. Being physically close to medical and community services takes on a real importance during this stage.
Early planning in the beginning stages can help you to create the resources necessary to last throughout the end stages of retirement. It is these resources that you will increasingly depend on to help you get the assistance you need when you lose your physical independence.