The Four Stages of Retirement

Today we’re going to continue our discussion on a Edward D. Jones, Age Wave, and The Harris Poll new study covering habits and opinions of older Americans, their lifestyles, what they think about retirement, and so on.

It’s been awhile since we discussed this report, so in case you missed or don’t remember the first two posts in this series and want to catch up, go back and read Longevity and the New Journey of Retirement and Retirement Health, Changing Definition, Work, and Worries.

As usual, I’ll be sharing some highlights of the study and then giving my thoughts on their findings.

Let’s get started…

Four Stages of Retirement

The study says it has been able to “describe the overall [retirement] journey, including how people’s experiences, priorities, and attitudes tend to sequence and evolve.” As a result they claim that the retirement journey has four distinct stages as follows:

• Anticipation — 10-0 Years Before Retirement
• Liberation/Disorientation — 0-2 Years After Retirement
• Reinvention — 3-14 Years After Retirement
• Reflection/Resolution — 15+ Years After Retirement

Over the next several pages of the study they then cover details of what happens in each stage, what people’s concerns are, and so on.

We’ll cover the highlights of each, then you can read the study for more specifics if you like.

BTW, it’s worth mentioning that the four stages of retirement in this study are different than the four stages of retirement in the book The Retirement Maze.

So apparently there’s just not one set of “four stages.” I may have to create my own set of stages one day. Hahahaha.

Stage 1: Anticipation of Retirement

Here’s a summary of the first stage:

The first stage is the pre-retirement period when people are still primarily focused on their careers, raising a family, and perhaps caregiving aging parents. However, they are beginning to imagine and prepare for their coming life in retirement. Although they’re not retired yet, we consider this the first stage of the retirement journey because actions taken here form the foundation and set the trajectory for retirement.

It’s interesting that this period is ten to zero years before retirement and yet “actions taken here form the foundation and set the trajectory for retirement.”

Of course, things you do leading up to retirement impact it, but I was taking steps that “formed the foundation and set the trajectory for retirement” when I was in my 20’s (i.e. saving for retirement).

Funny I should mention saving as the study asked these pre-retirees how prepared they feel for retirement. The results:

Looking across the four pillars of family, health, purpose, and finances, the large majority do not feel very prepared at all, especially when it comes to finances (only 29% feel very prepared) and health (only 25%). Overall, they are most confident in preparations connected to family.

FWIW, these are pre-retirees aged 45+.

What a shocker. Americans aren’t prepared for retirement? Wow, who would have guessed. Hahaha.

Here are the exact results for how well pre-retirees feel about being prepared for retirement by what the study lists as the “Four Pillars of Retirement” (the percentages are the percent who say they are “very prepared”):

• Family: 45%
• Purpose: 32%
• Finances: 29%
• Health: 25%

Some of this is understandable. If you’re 45 and want to retire at 65, you don’t need to be super prepared on any of these measures yet as you have time.

But if you are 10 to 0 years away from retirement and such a small percentage is ready, a lot of people have a lot of work to do rather quickly.

Stage 2: Liberation/Disorientation

Here’s how the study describes this stage:

Stage 2 is a transition period, a time for getting used to retirement and figuring out what it really means, typically lasting a couple of years. This stage has two names because for most it is a complicated double-edged sword. While they often give a big sigh of relief at having crossed the threshold, many new retirees also feel disoriented, uncertain, and anxious about what the future holds, how well they’ll adjust to being retired, how they’ll spend their time without the routine of work lending structure and purpose to their lives, and how they’re going to afford the potential decades of life in front of them.

Most new retirees are still getting a handle on their financial situations. While 72% claim they feel financially prepared for retirement, only 30% say they are very prepared. Nearly half say they often worry about outliving their money.

Several thoughts here:

• I had some retirement anxiety myself. I remember that first day, waking up to nothing when I would have normally been at work. It was STRANGE. It just felt off. After all, I had been working for 28 years, in college/grad school before that, and in grades K-12 before that. I had ALWAYS had something to do, go to, etc. And now I didn’t. So I was unsettled a bit.
• Couple the fact that work was gone with the earnings were gone too. There were no more big paychecks coming in. Would we be ok? Could people survive without a paycheck? LOL!
• Now I knew in my head that all was well, we had enough, and I had things I wanted to do. But it was such a different feeling that the first day was really surreal.
• At the same time, I realized I was FREE! So that was a very welcomed feeling to say the least. But I remained uncertain for the first few days, still wondering if the world was going to collapse around us because I wasn’t working. Hahahaha.
• By the end of the first work week, I realized all was well and I was completely and totally FREE! From there on out, it was pure joy. This is why I got up before 5 am for the first year or two after retirement — I had all my time to do whatever I wanted to and I didn’t want to waste it by sleeping! BTW, I still get up early, but now it’s a more-acceptable 6 am. 😉
• Maybe the average retiree goes through a two-year transition period to “figure out what it really means,” but I went through a five-day transition and that was it. for me it was more just getting settled as I already had a general idea of what I was going to do with my time, so I didn’t need to figure that out.
• “Many new retirees also feel disoriented, uncertain, and anxious about…how well they’ll adjust to being retired [and] how they’ll spend their time without the routine of work lending structure and purpose to their lives.” The issues of how you’ll adjust center around how you’ll spend your time, so these two are related. This is why I emphasize having a plan for the life side of retirement going in. You should have several activities that you’ve tried and tested (before retirement) to keep you busy in retirement. That way, you hit the ground running and don’t have to worry how you’ll spend your time or be concerned with becoming bored. As for the structure work provides, retirees simply need to create their own structure. They did it when they were working, planning their lives around this and that. So suddenly they can’t plan any longer because they don’t have to go to work? Huh?
• “Many new retirees also feel disoriented, uncertain, and anxious about…how they’re going to afford the potential decades of life in front of them.” There is NO WAY I would retire unless I was pretty sure that I had enough money to last the rest of my life. Otherwise you’re trading work stress for money stress. I would be worried all the time and who wants to spend retirement that way? Not me.
• “While 72% claim they feel financially prepared for retirement, only 30% say they are very prepared. Nearly half say they often worry about outliving their money.” Again, 1) I am not surprised and 2) I would not put myself in this position if I could avoid it. Sure, some people are forced to retire and have to play the cards they are dealt. But 50% to 70% being concerned and/or not fully prepared for retirement means a lot of people who could work longer are retiring with a less than certain financial future ahead of them. This is crazy IMO.

Stage 3: Reinvention

Here’s how the study describes this stage:

This is the heart of retirement, where retirees hit their stride while actively shaping their new post-work identities and lifestyles. They continue to explore what retirement means for them, who they want to be, and what they’d like to be doing in this new chapter of their lives. This is the stage where we see the greatest variety of activity and experience.

So what do retirees do in this stage? Here’s a list of their favorite activities in stage 3:

• Spending more quality time with family and friends: 65%
• Taking steps to improve my health: 59%
• Traveling/taking vacations: 43%
• Engaging in creative projects or hobbies: 32%
• Working: 10%

Thoughts from me:

• I must have entered this stage on day 6 of my retirement. Hahaha. Then again, I went in with a general plan of what I was going to do, then made adjustments over time to make it even better.
• “Spending more quality time with family and friends.” I retired while my kids were still in the house and this is one reason I took the leap when I did. I knew time with them was fading fast and I wanted to spend as much time together as possible.
• “Taking steps to improve my health.” I ramped up my exercising schedule, added extra steps-per-day goals, and discovered pickleball. So this was a big one for me.
• “Traveling/taking vacations.” We did this one too, going to Grand Cayman twice (with my mom and dad), taking a trip (and cruise) to Hawaii, and making several trips within the US. Of course every day is a “vacation” in retirement and we live in Colorado where many people come to take their vacations, so I feel in a way that I’ve been on vacation for over six years now. Sometimes it feels like I’m getting away with murder — it just has to be wrong to be this good! Hahahaha.
• “Engaging in creative projects or hobbies. Working.” These are the same for me — I engage in creative projects that are also work. They are “side” hustles that are now my “only” hustles. There have been a few through the years but ESI Money and the Millionaire Money Mentors remain and I love them both.

Of course we have other activities as well and I’m regularly trying out new/different hobbies, so how we spend our time in retirement will likely change over time.

Stage 4: Reflection/Resolution

Here’s how the study describes this stage:

In this stage, established retirees have learned how to make the most of life in retirement. They have the wisdom, experience, and hindsight to appreciate this chapter in their life. Most feel relatively secure in their lives and their finances and have learned how to live within their means.

Despite the greater risk COVID-19 presents to older people, Stage 4 retirees report that their lives, finances, and mental health have been least disrupted by the pandemic, compared to both younger retirees and younger generations.

Half of our Stage 4 survey respondents are members of the Silent Generation, born in the shadow of the Great Depression or World War II, and have always been a more frugal and financially cautious generation than the Boomers who followed. These retirees accept that they are in a later chapter of life, but they aren’t just waiting to reach the end of the road.

On the contrary, Stage 4 retirees continue to lead active, enjoyable, and satisfying lives. Half in this stage say they travel regularly, nearly one-third are engaged in creative projects or hobbies, and nearly one-quarter are volunteering. But they eventually downshift in favor of more rest and relaxation, and especially spending more time with family and friends. They also give increasing time to reflection and resolution, coming to terms with their lives and preparing the legacies they’d like to leave behind, including what life lessons they want to pass along to their loved ones.

My thoughts:

• I’m not at this stage yet and if it is 15+ years into retirement, I still have a ways to go to get there.
• That said, I do feel that after six+ years of retirement I have learned several things that I didn’t know. Not sure if that’s “wisdom” or just life experience, but there are many things you just don’t know until you experience them, and retirement can be like that in some areas. This is funny because most retirement books, articles, courses, etc. are created by people who are NOT retired (and never have been).
• Covid did not disrupt our lives much. We stayed at home like everyone else. But unlike everyone else, staying at home was normal for us. Our greatest disruption was that our gym was closed so we had to do YouTube workouts in our basement to keep fitness levels up.
• “Stage 4 retirees continue to lead active, enjoyable, and satisfying lives. Half in this stage say they travel regularly, nearly one-third are engaged in creative projects or hobbies, and nearly one-quarter are volunteering.” This accurately describes most of the people living in The Villages. They are not there to sit at home. They go, go, go and keep engaged in clubs, activities, travel, music, and on and on.

To wrap up this section, the study asked what percentage of each retirement stage had all three essential legacy items (will, power of attorney, healthcare directive) completed. The results:

• Stage 1 — 13%
• Stage 2 — 19%
• Stage 3 — 27%
• Stage 4 — 32%

Ugh. I don’t need to say how much of a disaster waiting to happen this is — either before death (POA and healthcare directive) or after it (will).

Do yourself and your loved ones a favor and if you don’t have any of the legacy items completed, get them done asap — no matter what your age, but especially if you’re entering or in retirement.

That’s it for today. To read the last post in this series, see The Four Retirement Groups.