New Stage or Old Age
Understanding the Different Stages of Retirement
Today you are one day older than you were yesterday. When you think about your financial future do you imagine retirement as a new stage or just old age?
Successfully navigating the various psychological, emotional, and financial issues associated with getting older can be challenging.
There are usually several different phases of retirement ranging from the honeymoon phase to the reality phase and sometimes the disenchantment phase. Over the years I’ve seen clients in each of these phases. You may not stay in each phase very long or you might get stuck in one.
Since your specific retirement is unique, your experiences may vary somewhat from others. There is, however, a broad framework that most retirees move through.
Planning for Spending in the Early Years of Retirement
Particularly in the early years of retirement, it’s common for investors to underestimate their annual lifestyle expenses. When you look at yearly expenses when you approach retirement, don’t automatically assume there will be substantive changes or reductions after you retire. If you and your spouse are both in good health, it’s reasonable to assume your spending could actually increase for a few years.
Generally speaking, since you will have more free time, you may travel more and spend more money on your kids/grandkids. That coincides with the honeymoon phase and might last a few years or even a decade.
Creating a Vision for Your Retirement Years
Thriving in your retirement years isn’t really just the mechanics of investing. It’s more about how to think and imagine this stage of your life. Your particular vision of your later years creates an outline for the reality phase of retirement.
Your financial life is more than just your investment account balances. It’s about what matters most to you and how you feel as you move along the path to your lifetime goals.
Managing Uncertainty in Retirement
One important aspect of navigating retirement successfully is to recognize uncertainty.
Uncertainty is front and center after you retire because there are numerous things you don’t know. You don’t know how long you’ll live, you don’t know what your overall health will be, and you don’t know how the financial markets will perform. All of these tend to amplify uncertainty.
Sometimes, retirees place too much emphasis on trying to harness control of outside variables like the markets and politics. You can only control your emotions, your behavior, and your decisions. The list of things you can’t control is much longer.
Making Financial Decisions During Retirement
The new stage of retirement often brings forth an emphasis on making only “the best” choices.
You shouldn’t burden yourself in that way but instead look to make decisions that are “good enough” for your specific circumstances. This should allow you to decrease the decision anxiety that goes along with trying to maximize every choice.
The overabundance of choices in every area of life can be daunting to everyone, but particularly retirees. You’re in good company if you find that the sheer number of financial choices sometimes generates “analysis paralysis.”
If you find yourself stuck, try thinking about the “best or worst” scenario. What would be the best or worst outcome from a decision? How would these different outcomes impact your goals?
Building Flexibility Into Your Retirement Plan
During your working life you deal with uncertainty every day. Nothing really changes once you retire. Uncertainty is still the common thread.
Building slack or room for error into your finances is one way you can combat the everpresent aspect of uncertainty. Many couples will have multiple decades in retirement. Enjoying this stage of life is as much about perception as it is about money. Start there. Ready for a real conversation?
Disclosure
Apollon Wealth Management, LLC dba J.E. Wilson (Apollon) is an investment advisor registered with the SEC. This document is intended for the exclusive use of clients or prospective clients of Apollon. Any dissemination or distribution is strictly prohibited. Information provided in this document is for informational and/or educational purposes only and is not, in any way, to be considered investment advice nor a recommendation of any investment product or service. Investing involves risk, and while remaining invested can support long-term goals, it does not guarantee a profit or protect against losses. Advice may only be provided after entering into an engagement agreement and providing Apollon with all requested background and account information. Please visit our website https://apollonwealthmanagement.com for other important disclosures.