The Four Phases of Retirement

My Comments: Phases, paths, Journeys, stages? What’s your preference?

I guess we retirement planners are always looking for a way to simplify what is almost always a complicated and sometimes tortuous phase/path/journey on our trip into the sunset. Let me know if you find any more.

Leon C. LaBrecque, CFP®, CFA, CPA \ May 2, 2017

I had the great pleasure of visiting the MIT AgeLab again.The AgeLab was started in 1999 to invent new ideas and creatively translate technologies into practical solutions that improve people’s health and enable them to “do things” throughout their lifespan. With over 45 PhDs and post docs working on everything from fonts on car displays to a robot seal that responds to your touch, it was quite an experience. I thought it would be interesting to share what I heard and saw.

One of the big takeaways is the idea of disruptive demographics. There are more walkers and wheelchairs than baby carriages in parts of Europe. There are more people over age 60 in China than there are people in Russia. Japan’s (which my host called “a nursing home on an island”) population by mid-century may reduce by half, and nearly a third of those left will be over 65. The Baby Boomers in the U.S. (born between 1946 and 1964) now number 77 million, and a Boomer turns 65 every seven seconds. Many Americans today have more people older than them to take care of than younger.

It’s a new world of aging. Our kids are having fewer kids (heck my kids aren’t having kids yet), and people don’t stay in the same place. We have the benefit of better health care (although expensive), and a wide range of things we can do. Getting old today is not the same as it was with mom and dad. We have smartphones, internet, senior living centers with gyms and lectures, and cars that look behind us. We also have kids who get married later, have a cat instead of a kid, and move 900 miles away (OK, that’s just one of mine).

Changes are starting to happen in a lot of areas. New cars will improve our mobility. Someday, we’ll have driverless cars that will take you to the store, the doctor or golf course. Right now you can get a little thingy for your wrist (I have one) that measures your sleep and your pulse, but in the near future it could also remind you to take your meds and tell your daughter if you didn’t. I heard from some folks that built and owned adult care facilities that the latest question they are getting is on how good the wireless network is and how much connectivity the residents can have. Automation won’t just be to cars either. You may have a “smart fridge” that lets your kids know if you haven’t opened it or thrown out the old cold cuts. In Japan, they already have a robot hotel with no people working there, which sounds creepy to me. We even saw a smart toilet that measures the blood sugar in your urine.

The Four Phases of Retirement

The biggest thing I saw was a re-look at the four phases of retirement, which made me rethink how I do retirement planning. Figure we have our lives broken into 8,000 day periods, which equals 22 years each. So your first 8,000 days goes from being born to getting out of college or the military. Your next 8,000 days gets you to your mid-life crisis. The third 8,000 days gets you to retirement, and the last 8,000 days is retirement. For the first three segments, we have a lot of guidance. When you’re a kid, you have lots of folks telling you what to do, learn, wear and how to act (teachers and parents). For the next two, you still have lots of guidance (spouse, boss). The last 8,000 days don’t come with an instruction manual, but, the AgeLab experts tell me there are four phases of retirement.

Phase One: Managing Ambiguity

This is when you are “sorta” retired. You retirement is like a big vacation. Lots of leisure, maybe a part-time job, still hanging out with your old cronies. Think about how most men approach a conversation: Guy one, “How’s it going?” Guy Two, “Good.” Guy One, “So what do you do?” Men in particular define themselves by their work, so phase one for a lot of guys is a halfway house between working and not working. Here we look at money, taxes and spending.

Phase Two: “Should I Stay or Should I Go?”

(If you don’t know this is a rock song, you’re at least five years older than me). Here you decide whether you are really retired or not. Now you might decide to move (not bothering to think about how far you are from health care and what winter will be like). This is where you need to think about things like how many floors you want in your house and how to get rid of all the junk you have accumulated over 60 years.

Phase Three: The Big Lie

Now you think you are retired and going to have fun, but the ugly truth is your body, mind and money haven’t kept up with your intentions. You spend a lot of time going to medical professionals, maybe helping family in phase four and also feeling the effects of inflation on your retirement income.

Phase Four: Somebody Is Alone

Chapter four is not pleasant—this is where one of the two of you passes and the other forges on with all of the maladies of phase three plus less money usually.

What does this morbid observation mean? To me, it means we need longevity planning. What will you do at those different points? What legal documents do you need? What other folks are you going to need (doctors, dentist, home help, financial planner)? Where should you be? Who will you be with? How much money will you need? For me, the AgeLab was an eye-opener. The world has changed and will keep changing. My life, God-willing, will be long and hopefully fruitful. But I learned that I, as a retirement advisor, have to think more about all phases of my people’s lives.