stable, and believe there are still many things to pursue in life and goals that they want to accomplish.
More often than not, active retirees are individuals or couples who are in their early retirement — from their mid-50s to late 60s. They want to travel and see the world, start a dream business, or get involved with legacy or humanitarian projects such as Habitat for Humanities or Oxfam International.
Semi-active retirement
Still mobile and independent in their communities and remaining relatively healthy, retirees at this phase of their lives are likely to slow down the pace of their activities. They are likely to be in their 70s. They have less energy than they used to have, and in the semi-active retirement years, they want to stay closer to home, family, and friends. They want predictability and stability in their daily living. They are less likely to travel far. They are more likely not to be working or be involved in business. Their health is still relatively good, and their interests have now shifted to more gentle activities such as reading, attending regular religious services, or volunteering at a slower pace and closer to home.
Passive retirement
Passive retirees are at a stage in their lives where they’ve slowed down considerably and may even be experiencing declining health. They’re likely to be in their 80s and beyond. Although some of them are still mobile and living independently, they may now be more dependent on others for certain daily living activities such as cleaning house and cooking meals or bathing and dressing.
These retirees will eventually require more than care and assistance in their activities in daily living; they will also need medical and long-term care and attention.
It is expected that more and more passive retirees are going to live beyond the ripe age of 100.
Each of these three stages may bring you different types and/or different mixes of cash inflows (including income and other sources of cash), and you must consider the different expenses that may come your way as you move from one stage to another.
For example, in your active retirement years, you may be one of those seniors who continues or returns to work part-time, and part of your cash inflow may come from this employment. However, that may not be the case as you progress into your passive retirement years, and you must plan ahead for this change in income. It is the same with expenses. You may have a sizeable travel budget during your active retirement, but may completely eliminate this budget item in your passive retirement years.
You need to determine now what you want to do for the rest of your life and plan now how to fund it. You must also determine how you want to live. Depending on your plan, it may be realistic to budget for additional expenses to invest in a hobby or pursue an interest.
As you move into your semi-active retirement years, you may shift your priority to other activities that are closer to home, such as spending more time with families and friends, volunteering with a favorite charity, or becoming more involved with your church or religious organization. This change in activities requires a corresponding shift in your retirement plan to adjust for the new spending pattern.
As you move toward your passive retirement years, your needs will once again change. Your priority will most likely be to make yourself as comfortable and healthy as possible, and this may include extra costs for in-home assistance, medication, and even long-term care. Even if you continue to live in your own home during this phase, alterations to your home may be necessary to accommodate your changing needs. You must consider all these expenses in your overall retirement plan.
Financial Opportunities and Choices
It’s a little-known fact, but your early retirement years are the best years to make your investment assets grow. Plan to spend less than your assets can earn for you, and allow the excess return to be reinvested and compounded over time. This strategy is truly careful planning, and it’s very wise, too. You will need to draw on these additional resources in your passive retirement years to cover extra care and medical costs.
If you plan to spend less than your income in all your earlier years of retirement, you will be pleasantly surprised by the growth over time by the size of your asset base. Chapter 4 discusses in more detail how you can make your savings grow.
With a little luck and careful planning, your investment assets will have enough time to grow so that they can generate sufficient income to supplement your passive retirement years.
If you find you need additional funds in your passive-retirement years, you may need to convert your non-investment assets into income-generators. If you own your home, here are some options you can consider:
• Add a rental suite for extra income
• Downsize your house to a smaller dwelling to free up cash for investments and paying down debts
• Consider a reverse mortgage to supplement your income stream
• Sell your home outright and rent, and invest the cash from the sale
All phases of retirement require shrewd planning, and it’s incumbent on you to make it work. Knowing you have adequate resources to retire for the rest of your life is important. By putting your goals in writing and getting the numbers down on paper in a budget, you can commit to making your retirement years as carefree as possible. Without a plan, you may be making a leap to financial ruin.
You will find that using this guide to help you budget for all stages of your retirement years can bring you peace of mind about your financial future, and reduce your fear of running out of money in your senior years.
If you are contemplating retirement, take some time to assess your situation. Try the following:
• Complete the necessary worksheets (included online at www.self-counsel.com/updates/after55/bonus.htm) to determine your retirement goals and assess your financial situation. Revise your plan where needed to make sure you have adequate resources to cover your retirement.
• List all the advantages you can think of about retiring (e.g., being able to take advantage of last-minute travel specials in off-season periods, or having time to pursue a hobby).
• List all the disadvantages you can think of about retiring (e.g., loss of status or the boredom of having too much time on your hands).
• Compare the two lists. Decide whether the advantages outweigh the disadvantages, or vice versa.
• Discuss retirement with your spouse (if you are part of a couple) to make sure he or she has input into the process and decision.
• Obtain professional help where needed to help you arrive at a logical decision and timeline.
If, after working through all these steps, your gut feeling tells you that you are ready to retire, follow your instinct and do it.
Your retirement years are just beginning. Confront your fears and start living the best years of your life — now!
2
You Can Do It: Goal Setting
So let’s
