Three Stages of Retirement:
In his book "The Prosperous Retirement, Guide to the
New Reality", Michael Stein, CFP, describes three stages
1. Active retirement — the 'Go-Go' stage
"These activities also may result in expenditures that
are well above the budget on which the retiree lived before
retirement. If this seems surprising, reflect on how much
you spend while traveling on vacation versus what you spend
when you are at home in a more normal routine. After a while,
reality generally takes over, things settle down to a less
frenetic pace, and an active, satisfying, and thoroughly enjoyable
stage of retirement begins. The budget during this active
stage of retirement generally is equal to the pre-retirement
budget; in fact, that is:
Stein's First Rule of Retirement - The
active-stage retirement budget tends to equal the pre-retirement
budget, if the retiree can afford it.
People generally want to continue the same life-style after
retirement that they enjoyed before retirement. This lifestyle
will cost about the same amount during retirement that it
did before retirement. I know that this flies in the face
of conventional wisdom, but it is true. There will be more
discussion of why this is true in Chapter 3. During the years
of the active stage, inflation will continue to act on the
budget and drive it just as it did before retirement, but
then a change begins to happen.
2. Passive retirement — the 'Slow-Go'
The "go-go" stage of retirement gives way to the
"slow-go" stage. After some years of active retirement,
people begin to grow weary of long vacations, feel less than
enthusiastic about running through airports and train stations,
grow tired of living out of suitcases on trips, and, in general,
decide to let the pace of their lives slow down. This is the
beginning of the passive stage of retirement.
The transition from active retirement to passive retirement
generally begins when retirees reach the mid-70s and it lasts
for about 10 years. There is no social science study to verify
this observation, but watching hundreds of retirements has
led me to this conclusion. Sometimes people feel like traveling
and being active well into their 80s. Sometimes deteriorating
health causes people to slow down before they reach their
Typically most people are able to be about as active as they
want until their 70s, then, inexorably, old age creeps up
on us and we slip quietly, without trauma, into the passive
retirement stage. These older people take fewer and fewer
trips and then, ultimately, no trips. They buy no new cars,
no new houses. In fact, this may be the time that people downsize
their homes, purchase fewer new clothes, and allow a quieter
and less expensive lifestyle to take over. During the years
of the passive stage, the budget typically declines by 20
to 30%, but the decline may be masked by the upward push of
3. Final retirement — the 'No-Go' stage
Finally, the quiet pleasures give way to the unpleasant realities
of the third stage of retirement, the final stage. The "slow-go"
stage gives way to the "no-go" stage. Failing health
makes medical treatment and nursing care the defining characteristics.
This stage may be prolonged or it may be blessedly brief.
Managing this uncertainty is one of the principal challenges
of The Prosperous Retirement and is discussed in more detail
in Chapter 9."