09 Feb 21

Pensions

The three stages of retirement and why you need a plan for each

In the second of our series looking at pensions and retirement planning, Chartered Financial Planner Mark Russel looks at the three stages of retirement and why you need to plan for each. You can read the first instalment here.

I have spent over 20 years of my life helping people to safely navigate their personal retirement journey. Over this period I have built up a wealth of knowledge and experience as to what works, what doesn’t, what to plan for and what to avoid! Whilst everyone’s path will be different, there are many similarities I have noticed over the years.

My main goals with any client are to remove financial anxiety, to promote good financial behaviour and to encourage most of all my clients to live the best life they can with the money they have.

The benchmark I use to measure the success of the financial planning I do for my clients ‘is the return on life their money gives them’.

The majority of us will have a potential three decade retirement journey and when it comes to retirement you need to have a plan which can go the distance. You want your money to outlive you and not for you to outlive your money. What has really resonated over the years in the discussions I have with my clients about retirement is that there are three clear stages of retirement and each needs a different plan.

• Active retirement – good physical and mental health and the pension income/money to do the things you want to do in life. This is the stage of retirement were you want to really be ticking off as much of your ‘to do list’ as possible
• Passive retirement – I cannot tell you when you will move from active retirement to passive retirement but what I can say is that this will happen at some point. Passive retirement is where the energy and desire to travel, play sports, indulge in hobbies or pastimes is still there but it not quite as strong as it once was. The irony of passive retirement is there is still the pension income and money to do these things but the physical or mental desire is slowly diminishing.
• Supported retirement – not all of us reach this stage of retirement but in the future, more of us will. Supported retirement is where you may need to employ the services of a cleaner or gardener. You may look to have your meals delivered or need assistance in the morning and evening in terms of getting in and out of bed. For some it may no longer be possible to live independently and you may look to move in to one of the many retirement villages which are springing up around the country. For others it may be necessary to move into a care home where structured support can be readily provided when it is most needed.

To put it another way, there are the ‘go-go years’, the ‘slow go years’ and the ‘no go years’.

Each of our journeys will be different but having an awareness and understanding of the three stages of retirement is a very good starting point when it comes to retirement planning.