When it comes to retirement, we can actually talk about the FOUR x FOUR stages of retirement. Money, a concept we’re all familiar with, has two distinct aspects: the technical side, which deals with numbers and calculations, and the psychological side, which involves our emotions and attitudes. Retirement, too, can be viewed from these two angles.

I have previously shared the illustration below, but I believe it remains a relevant depiction of the core message. One could easily substitute the word “money” in the heading below with “retirement.”

While both sides of money (and retirement) are equally important, subconsciously, each side impacts the other side. The emotional side of retirement often has the longest and most profound impact on one’s life. Considering that we can easily spend a third of our lives in retirement, the psychological impact of retirement cannot be ignored. We know that emotions drive more than 80% of investment and money decisions. In many cases, we also know that psychological challenges linked to retirement outweigh financial challenges.

Let me delve into the two sides of retirement a bit more. 

We are all familiar with the number-crunching game when it comes to retirement planning. The talk is about setting goals and creating investment portfolios to meet objectives. This is one of the first talks you have when you start your investment strategy, and target versus actual returns are discussed at all future meetings.

Don’t get me wrong, these are important talks. If you don’t meet these targets, you will have to face some tough decisions when retirement arrives and trust me, retirement arrives much quicker than most people anticipate.

Investopedia defines the four technical stages of retirement as follows:

Stage 1: Pre-retirement (Ages 50 to 62ish)

This is the decade or so leading up to retirement. You will still be working, but retirement is approaching, and you have much more retirement-related concerns on your mind. A much clearer picture of your nest egg is starting to form, and you start thinking about retirement income, expenses, and taxes. Some of the concerns, like whether you will have enough money to survive retirement, become top of mind.

Stage 2: Early period of retirement (Ages 62 to 70)

Some significant changes in your budget will occur when you first retire. Budgeting and managing your expenses will become more important, especially if you do not have a pension that provides a regular, consistent income. Buying luxury items or spending money on lavish holidays may become more of a challenge. Often, retirees realise this too late and delve into future reserves to still enjoy these pleasures while they should be more conservative with their spending. 

It may become necessary to downsize a home, move to a more desirable environment, and consider consolidating investments to simplify your reporting and investment structures. A re-look at estate planning is also a good idea.

Stage 3: Middle retirement (Ages 70 to 80)

Adjusting your investment portfolio may be necessary to ensure your asset allocation is suitable for sustainable income with limited volatility. Medical expenses start rising. Moving becomes a consideration if you do not yet live in a retirement home or village. Frail care and the associated costs become part of the present and future budget. Other expenses may come down. Travelling may be reduced and limited to local holidays. Hopefully, children will stop coming to you for money, and your need for life assurance may be less.

If you do not have a pension plan, finding ways to save a little money every month may be a good idea. Make sure that you claim all the tax credits that you qualify for. Letting your property or sub-letting a portion may be a consideration.

Stage 4: Late retirement (beyond 80)

Healthcare costs are likely to escalate since this is the time in life when most is spent on medical bills. Moving to an assisted living or a frail care facility will attract additional costs. Your earlier savings (Stage 3) will come in handy now. Other costs should remain similar to those in Stage 3. If you cannot afford assisted living costs, discussions with family members may be necessary to consider options of living with them.

Investopedia then delves into retirement budget calculators and more money-related planning advice. These are good guidelines, but they do not provide the whole picture.

Let’s now move to the next level.

Dr Riley Moynes has a very relevant presentation about “How to squeeze juice out of retirement”. In his presentation, he defines the four phases of retirement as follows:

Phase1: Vacation phase (also referred to as ‘the honeymoon phase’ elsewhere)

For most people, this is the phase they look forward to the most. This is the life-long holiday where one does nothing but play golf, go for beach walks, travel and visit family and friends. 

But soon, boredom sets in. Then, one starts to miss the structure and discipline of working life.

Phase 2: Feel loss and lost

Once the “honeymoon” phase is over, reality sets in, and often retirees experience a feeling of loss, and they feel lost. We often refer to the “Big Five” losses:

• Loss of routine (work routine and time frames);

• Loss of identity (who am I versus what am I);

• Loss of relationships (no longer interacting with colleagues);

• Loss of purpose (what am I waking up to?); and

• Loss of power (no longer the boss).

These five losses often also lead to the three D’s:

• Divorce (since 1990, the divorce rate has more than tripled for those over 60);

• Depression (one of the biggest challenges in retirement); and

• Decline (emotional and physical health decline).

Before retirees can experience and enjoy Phases 3 and 4, they have to deal with Phase 2 and feel fear, anxiety and depression. No one said retirement was going to be easy, so buckle up!

Many feel that they cannot continue with the trend in Phase 2, which leads to Phase 3.

Phase 3: Trial and error

Identify your interests and what you are good at. This often leads to some soul-searching and delving into the past when you had hobbies and extracurricular interests. Fire up these hobbies and interests again.

Keep on trying until you find something you want to get up to. Even if the first few attempts fail, don’t give up. Try and try again. 

You want to reach a stage where you want to wake up and look forward to the day filled with “stuff”.

Not many people move to Phase 4. If they do, it is the most rewarding experience in retirement.

Phase 4: Re-invent and rewire

Some tough questions must be answered:

• What is my purpose?

• What is my mission?

• What will provide a sense of achievement?

For many, the answer lies in helping others. This can take many forms, such as community work (monetary assistance or physical help/work), teaching people a language or a subject you are good at or have an interest in, mentoring people or tutoring them in special skills, or providing them with general information that they may not have. This can be done as an individual or within a group with a common interest.

Who says getting old and retiring is boring? Be creative, make a difference and feel worthy while having fun.

Have you created your bumper sticker yet? There is no better time than now …

To view Dr. Mosley’s talk, “How to squeeze the juice out of retirement”, visit my retirement community website here and view the video under “Videos” under the Resources tab.