The five stages of retirement

28 September, 2017

Retirement is a moving target that defies a singular definition because it will be different for every individual. However, planning for this event occurs continuously throughout the one’s financial life-cycle and usually has five stages. Let’s take

Retirement is a moving target that defies a singular definition because it will be different for every individual. However, planning for this event occurs continuously throughout the one’s financial life-cycle and usually has five stages. Let’s take a look at each…

The savings stage – This starts as soon as possible after one’s career begins. During that time, he or she will be preoccupied with other competing savings objectives, such as buying a car, furniture or a home – and dealing with family-building expenses. It is at this early stage in one’s life-cycle that retirement savings, regardless of how meager, should commence. The importance of starting early cannot be overstated. Establishing good retirement-savings habits despite the lure of short-term goals is essential to retirement security because of the miracle of compound interest.

The increased preparation and visualization stage – This stage cannot be identified with a particular age, but it involves an individual kicking his or her retirement planning into high gear. Often, an individual sees his parents’ retirement and realizes he or she wants to emulate the positive and not repeat the negative. In the “increased-preparation” part of this stage, an individual will need to increase RSP contributions, and as well may make paying off the home mortgage before retirement a priority. At this point, the individual’s financial advisor can identify the amount the individual needs to save to fill the income gap during retirement.

In the ‘visualization’ part of this stage, individuals become even more focused. They begin to understand that limiting expenses can be just as important a goal as increasing savings. An individual may elect to save salary increases received in the five or six years prior to retirement, and add these to his retirement savings. By putting those salary increases into an RSP, an individual will not only receive immediate tax savings and enhance retirement savings, he or she will also lock-in positive spending habits and learn not to grow his or her lifestyle and budget – an important lesson for retirement-preparation.

The decision stage – This stage is often characterized by the imminent event of retirement. The year before, the year of and the year after retirement bring many planning choices and challenges. An individual may grow tired of his or her career, and may consider retiring because the children have completed college, for example. On other occasions, age may drive the decision to retire. Individuals must bear in mind, however, that health and money are more accurate – and more meaningful drivers of the retirement decision.

During the decision stage, soon-to-be retirees must consider a variety of issues, such as pension distributions, when to start receiving CPP retirement benefits, how to consolidate various savings plans and investments, and how to convert assets into retirement income.

The retirement transition and lifestyle stage – This stage follows immediately after retirement. It is often accompanied by increased spending on travel and other recreational pursuits and a focus on adapting to a changed environment. Travel, golf, gardening and volunteer work often occupy one’s calendar at this time.

Once an individual has settled into retirement, spending must be adjusted. As time passes, the nature of one’s environment also changes. Friends and family may die or move away. At this point, they may consider whether or not to move near family members or to a continuing-care retirement community. From a financial perspective, individuals become more asset rich and income poor. This oftentimes creates psychological and emotional needs.

The frailty stage – Again, this phase does not depend on any specific age, but is marked by dealing with health issues, care-giving for a spouse and the loss of mobility. An individual in this stage tends to become lonelier and more dependent on others. Proximity to medical services and community services become ever more important.

It is reassuring to know that early planning can help one to create sufficient resources to last throughout retirement, while still having a full and enjoyable lifestyle between commencing one’s career and entering into retirement. Plus, at the late stages of one’s lifecycle, financial independence can soften the loss of physical independence.

As always, please do not hesitate to communicate with the writer if you would like to further discuss this topic. 

Joel Attis

Joel Attis is a Senior Financial Advisor with AttisCorp Wealth Management and IPC Investment Corporation. Comments or questions may be submitted to Joel at, or he may be reached at 855-1155.


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