We are all living longer and retirement can last for 25 years and more. Your needs, desires and income requirements will vary throughout those years.

Transition

The move from working to being retired does not need to happen overnight. Demand for skilled workers and the acceptance of more flexible working arrangements means a pre-retirement period can last for many years with a mix of paid work and increased leisure. There is also significant flexibility in the way retirement savings can be accessed or preserved until they are required.

Example: Geoff was tired of the corporate scene (especially the politics) but he did not want to play golf five days a week. Throughout his working life he had built a reasonable network of contacts and he wanted to explore the option of working 3 to 4 days a week as a consultant. During the first couple of years he accessed his accumulated retirement savings as he built his business (and worked on his golf game).  As the consulting income grew he drew less and less on his retirement savings. In fact he reached the stage where superannuation contributions were once again being made to increase his retirement savings.

Active

The early years of retirement are a time to look forward to. At last, freedom with the time and money to do the things that you have been wanting to do – new hobbies, more time to pursue established activities, volunteer work, travel, getting fit, a new car or caravan. The list goes on. This stage is where it is easy to spend lots of money and retirement income needs will most likely be high.

Example: David and Robyn wanted to see “the rest of Australia” and bought a camper-trailer and 4WD to pursue their passion. When they are home they see their grandkids, catch up with friends and do a bit of volunteer work. Life is very busy.

Passive

There comes a time to slow down, watch the world go by and reflect.  Many things can trigger this stage – an accident, an illness, loss of a partner or just a gradual decline in energy levels. The passive stage can also be the outcome of having no money to choose anything different. Living expense should be cheaper pursuing the simple things of life, though medical expenses may increase. 

Example: After her husband died. Kay got tired of her big house and garden and sold up to move to a retirement village where she lives in a small villa. She still plays bridge and goes line dancing but she likes having a small garden plot and no big house to maintain.

Frail

Australians are living longer and many need support to live comfortably, to eat properly and stay clean and safe. This stage often starts with an accident or illness and may mean moving to aged care. Age care is expensive and has the capacity to absorb your remaining assets and/or income.

Example: It was only when Vera had a fall that her family realised that she could not look after herself.  She was becoming increasingly forgetful and they were worried for her safety. They found a wonderful aged care centre but had to sell Vera’s home to pay the bond and the ongoing fees absorbed virtually all of her income.

Planning for retirement (or planning in retirement) is rarely an exact science.  And to add a bit of spice life has a habit of throwing in a few unexpected curve balls. Reviewing and adjusting our retirement plans to fit in with changing circumstances is by necessity an ongoing process.

January 2011