Retirement: A Journey of Stages

Mowing my big garden

When we think about retirement, we dream of a time free of work, when we’ll spend our time doing the things we didn’t have time for before. It’s a nice idea, but unfortunately, it’s not quite that simple.

In many ways, life in retirement is similar to your working life. You’ll have more time on your hands, but at the end of the day, life goes on. The grass still needs cutting, and, unfortunately, those windows won’t wash themselves.  Most importantly, bills still need to be paid and you’ll need income for the different stages of retirement. 

Just as we move from study into the workforce, then into adult life with all the opportunities, responsibilities and commitments that brings, retirement too has a set of distinct stages.  

Our ‘The Golden Age of Retirement – does rising pensioner wealth mask future problems?’ report digs deep into the three main stages of retirement, by combining government statistics and our own research.  Our findings highlight the different retirement income challenges faced by retirees during each stage.

The U-shape

Given retirement can now last several decades - the income needs and considerations of a 65-year-old are likely to be very different from someone who is 85.

Retirement income needs are often said to be U-shaped, with high initial spending in active early retirement, a levelling out in the middle phase, followed by a final hike in expenses in later life.

While those in the earlier phase of their retirement might make the most of the new-found freedom from work by travelling and spending, spending levels do than slow down as people move into a less active phase. Unfortunately, this could then be followed by an increase in spending as poor health and/or care costs become more of a consideration.

The stages of retirement

The first stage of retirement occurs for those aged 50-64. Our report classes this group as those who have taken early retirement. All of us approach retirement differently, and while some may panic at the loss of their workplace identity, others might make plans, with varying degrees of success. 

While this age group might be thinking about their retirement, it’s important for them to try and build a realistic picture of their retirement income needs. Our research found that a large percentage (57%) of those people who retired early were concerned about the possibility of running out of money in retirement. Aspirations must be closely matched with saving approaches and seeking advice from a financial adviser can be a helpful way of matching these up.

The second stage could be defined as those aged over 65. In this age group, 94% of those surveyed were either partly or fully retired. While our report showed that weekly household incomes declined to an average of £483, or £450 for those who were fully retired, recreation (£66.50) was the biggest living cost. In this stage, people are making the most of their retirement, and quite rightly so. It’s particularly important in this age group that retirees review all pensions – both private and state pensions – with an adviser and evaluate their basic financial requirements as a whole.

The third and final stage is those aged over 75. Among those surveyed, 98% of people in this group were fully or partly retired. This group showed a marked reduction in household costs. When compared with the earlier stages, two of the most notable reductions were spending on transport (£24.10 per week) and recreation (£32.30), which more than halved when compared against 65-74-year-olds.

In the over 75s, it also becomes increasingly important to consider the cost of long-term care, and the ability to afford it. (The Golden Age of Retirement – does rising pensioner wealth mask future problems? Aegon 2016)

Where is the best place to retire?


View Interactive Version (via Profile Financial).

Help is available

Planning for retirement is difficult enough, without having to try and second guess what you might need during a period that seems so far away. Being aware of these different stages can help you prepare for the journey, but it’s understandable many will not be confident about planning for this stage of life.

There’s a growing need for advice after retirement to account for changing needs during the different stages.  While individuals must be aware of the need for making sure they have enough money for each stage, both providers and advisers have a key role to play.

Do you have a clear picture of what your retirement may hold? If not, now is the time to start thinking about it.