Retirement: The Four Stages

jkom51June 3, 2010

Even with all the information on the Web available, it's difficult to figure out how much, exactly, one needs to retire. This short article discusses a new approach to how retirement might be considered as different phases. NOTE: This is not a "how to calculate what you need" article! I do believe it is useful as it discusses what I've observed in the elderly people I know - travel expenses are heaviest in the first stage, medical expenses are heaviest in the later stages.

The New Math of Retirement

Financial advice you've gotten in the past may have been misguided and miscalculated. Here's how to make sure you've got enough saved up.

By Linda Stern : Newsweek Web Exclusive, May 3, 2010

(Excerpt) "ThereÂs one key fact of life that most retirement planning advice gets wrong: the way people actually live and spend when they retire. Put simply, most retirement calculators and planners aim for decades of level spending, but most people reduce their spending as they move through retirement. ThatÂs a disconnect that can significantly skew the results of the typical planning exercise, says a recent study from the Society of Actuaries and the Actuarial Foundation. It could lead workers to take greater investment risks, or be overly frugal during their final years of work or their first active years of retirement.

When workers retire, their budget often goes through four phases: (1) early retirement, when travel, home improvement, hobbies, and new wardrobes can raise expenses beyond workday levels; (2) mid-retirement, when people (and their spending) typically slow down; and (3) late retirement, when spending and activity slows even more; and (4) end of life, when spending for health care and personal assistance can use up whatÂs left of a retirement kitty. But the typical retirement calculator calculates first-year spending based on a workerÂs last year of salary, and then simply adjusts that estimate up every year by the inflation rate. "Replacement rates may make sense as an analytical tool when peoples income and expenses are stable over time. However, generally neither is the case," the study says."

Here is a link that might be useful: Newsweek: Full Article

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After retirement a person become the useless part in the house and everybody want to send them either to a nursing home or forced to live in senior homes and given the excuse as their professional care and comfort and company.

Here is a link that might be useful: nursing home compare

    Bookmark   June 17, 2010 at 11:30AM
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Oh, I disagree. Senior housing is not the same as a nursing home. Following my mom's stroke, she came to live with DH and me. My MIL is still pretty independent at 85, lives in senior housing (rent based on income) highrise, with library and recreational facilities. MIL made the choice where to live, she gets weekly help with light housekeeping.

My FIL had a house built when he was 70, (small but wheelchair accessible as he was a quadriplegic from the age of 50) Yes, he required an attendant, but was able to stay out of NH.

Quality of life has a lot to do with attitude.

jkom, retirement calculators can only do so much. Individuals need to assess their own circumstances (lifestyle and health) to determine retirement needs. A little prayer is needed too considering the state of the economy!

    Bookmark   July 4, 2010 at 3:46PM
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Hubby has several relatives in Iowa in senior housing. Most tell us although they did not want to move there it was the best decision of their lives. These are all in housing where the rent depends on income rather than a buy in place which has always seemed risky.

The only problem I have is how did previously wealthy farm people suddenly become poor enough for the housing. My ethics cringe when I think of how they did it. I know farming is risky but turning over everything to a son or daughter just so you can have cheap housing is even more risky.

    Bookmark   July 4, 2010 at 6:28PM
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Maifleur - clearly passing on family assets was important to them. Requirements differ as each organization that creates senior housing has their own guidelines that they follow. I guess we could think of it as good that the family members got their inheritance early, perhaps.

Calirose, I agree that calculators are only one tool needed. I've never found a Web calculator that was able to take into account every aspect of my own financial plnng. The WSJournal one came the closest to being comprehensive. I was able to do a workaround that came out quite accurately.

DH and I have our schedules full in retirement, and the article's statement that early retirement can see a sizable increase in expenditures due to traveling, is totally 'right on target' with us. Sometimes I joke to DH that it's a good thing we live in CA, because if you had to add airfare to the restaurants and hotel expenses of visiting all our wonderful travel attractions, we'd really go broke, LOL.

Our 2-week Wine Country trip cost as much as going to Europe. Our scheduled fall trip to drive up and back to the PNW for an Alaskan cruise, will take over a month and really pack a budget wallop. But both of us have our small health issues, so we want to do this traveling while we still have energy and mobility.

In line with the article, I expect our traveling will drop off as we age - I see this already in our WWII generation friends/family who are in their mid-80's and really starting to slow down, even the ones who loved (and could afford) traveling anywhere they wished.

We did a lot of planning and budgeting for healthcare expenditures. Prayer is good, but planning is what gives me confidence the odds are as much in our favor as we could make them.

    Bookmark   July 8, 2010 at 7:14PM
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jkom, I didnot mean to imply planning was not needed. I just was referring to today's economy not adhering to one's plans.

Towit: my husband's workplace closed last year, early 2009 (jobs shipped to other plants and Mexico), retiring him earlier than expected or wanted. Not complaining, as we know several others are in this boat too. He was fortunate, I suppose, to be able to travel to these other locations to help them absorb the workload/process, which extended his income. However, he caught a bacterial infection in his lung which will require medication for a full year and then some (depending on how well the infection heals, medication must be taken for some months following him being infection free).

In other posts I had commented on our then current status. We did a lot of planning, paid the house off early and frankly had not done so, would be in dire situation with a house payment on top of other expenses. His early retirement, unplanned, meant early withdrawal of SS, therefore a lower amount. The area we live in (several counties around us also) has a 19% unemployment rate. You know as well as I do that rate doesnt include those who have taken a low paying or part time job to try to make ends meet, or those who have just given up looking. And at 63, DH is not likely to find work. Fortunately we are making do, and he is recouperating well. I am glad to find ways to reduce our expenses so he can concentrate on getting well.

Anyway, best of plans can go awry. However, I agree that planning is necessary.

    Bookmark   August 20, 2010 at 3:42PM
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azbob, we quickly went through those phases! My faith in God helped me from the beginning. DH is always concerned that I will outlive him and not have enough to survive. Bless his heart, I have finally convinced him we will do all right! Exactly, we did the best we could at the time, and you are right - worry never helps anything! I'll check out your blog.

    Bookmark   August 26, 2010 at 1:03PM
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Depending on the bacteria, only in that area etc.,your husband may be eligible for workman's comp to at least cover the cost of his treatment. Depending on his wanting to return to the same or similar industry he might want to consult with his doctor. Since many bacteria and fungi are every where there may be no way to recover the cost. I would at least notify the company that he has developed a problem from his trips. I do not suggest going to an attorney but only to protect himself if in the future his lungs become bad enough that he would need to go on disability.

One of the other things he should check on is have any of the other employees that were with him as the sites developed lung problems. Their doctors may not have been as through as your husbands or they may think they just have a cough. Once damaged lungs may not heal themselves or heal with scars. COPD is not just from smoking as my lungs can attest.

    Bookmark   August 27, 2010 at 7:45PM
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Thank you maifleur. I appreciate your comments. We are satisfied with the diagnosis, at first thought to be TB. The bacteria is consumed, not passed by coughing, so it most likely was in something eaten. However, it is in many items including cigarettes. The 3 antibiotics are working, he gives a sputum every month and the bacterial count is lowering. We are on COBRA, so our costs are not high at this point.His company is aware.

I sincerely thank you for the advice! I hope your COPD is under control that you are not in much discomfort.

    Bookmark   August 28, 2010 at 11:09AM
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My COPD involves the muscles that contract in the airways and the cilia that they help control. They do not contract as they should. As most things uncertain cause. Dr thought was asthma until they got a machine that tells how air is used by the lungs. As with most COPD the amount of air blown out is less than what is taken. Something just to be lived with, luckily only minor for now. Only problems are panting when I work and doing little hack hack's when I drink or eat very cold stuff. Thank you for your concern.

Glad to see your husband's count is being lowered. A very good sign. Interesting that it settled in his lung. Makes it sound like he aspirated during the time he was first infected.

    Bookmark   August 28, 2010 at 11:00PM
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Thanks maifleur, we were relieved in the beginning when told it was curable even if long term to do so.

Just read your "my page", I bet you are a great "little old lady"; do you post on the garden forums since you like weird plants?

    Bookmark   August 29, 2010 at 10:31AM
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Mostly peonies but weeds and wildlife. Couple of friends like varigated plants and grasses. They have got me hooked on varigations. But any odd orphan will do.

    Bookmark   August 31, 2010 at 7:57PM
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interesting concept - the natural way of things LOL.

    Bookmark   September 1, 2010 at 10:49AM
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