Author: Rob Sevilla Agency: Agape Insurance & Financial Group, Tupelo, MS
When most people think about retirement planning, they imagine a single, long vacation. They picture 30 years of golfing, traveling, and exploring new hobbies without interruption. However, real life rarely follows a straight line.
A successful retirement plan recognizes that your energy, health, and spending habits will evolve over time. Financial experts often break this journey into three stages of retirement: the Go-Go years, the Slow-Go years, and the No-Go years.
At Agape Insurance, we help clients in Tupelo understand how retirement spending shifts during these phases. By creating a retirement budget that adapts to these changes, you can ensure your retirement income lasts as long as you do.
The Go-Go Years: Active and Expensive
The first phase of retirement is what we call the Go-Go years. This typically covers ages 65 to 75. You have just left the workforce, your health is generally good, and you have a bucket list to tackle.
During this time, discretionary spending often spikes. You are spending more time traveling, dining out, and enjoying leisure activities. Many retirees find that their spending level is actually higher than it was during their working years because every day is Saturday.
Retirement planning for this phase requires liquidity. You need retirement income that supports new hobbies and travel. However, it is easy to overspend. Without a solid spending plan, you risk depleting your retirement savings too early in retirement.
Key Challenge: Balancing the desire for a perfect retirement lifestyle with the need to preserve assets for later years of retirement.
The Slow-Go Years: Settling Down
As you move into your mid-70s or early 80s, you enter the Slow-Go years. Your health is likely still decent, but your energy levels naturally decline. You may still travel, but the trips are shorter and less frequent.
In this phase of your retirement, spending tends to decrease. You might trade international flights for domestic road trips or spending time with grandkids. Discretionary costs drop as you find joy in simpler routines.
This natural reduction in spending is part of what economists call the โretirement spending smileโโhigh spending at the start, a dip in the middle, and a rise at the end.
During the Slow-Go phase, inflation becomes a bigger concern. While your leisure activities cost less, the price of groceries, utilities, and insurance continues to rise. Your portfolio needs to keep up with these living expenses to ensure a comfortable retirement.
The No-Go Years: Healthcare and Security
The final phase of retirement, often starting in the mid-80s, is known as the No-Go years. This is where spending shifts dramatically from “fun” to “health.”
While discretionary spending hits rock bottom, healthcare costs often skyrocket. You may face mobility issues or cognitive decline that require assisted living, home health care, or a move to a retirement community.
This is the most critical time for retirement planning. Many retirees are unprepared for the cost of long-term care. Whether you rely on Medicare (which has limits) or long-term care insurance, having a plan is essential.
Financial decisions in this stage often involve family. Having an updated estate plan and Power of Attorney ensures your wishes are respected.
Budgeting for the 3 Stages of Retirement
To build a prosperous retirement, you cannot use a flat budget for 30 years. Your spending model must account for these spending changes.
- Go-Go Budget: Front-load some discretionary spending. If you want to travel, do it while you are healthy.
- Slow-Go Adjustments: Revisit your withdrawal rates. As spending habits slow, you might need to take less from your retirement accounts, allowing them to grow again.
- No-Go Safety Net: Prepare for potentially higher expenses related to health. We often suggest reserving a specific asset or annuity to cover long-term care needs.
How Your Spending Will Likely Change
Retirement spending is not static. Retiree spending patterns show that while travel costs go down, medical costs go up. This creates a U-shaped curve, or the retirement spending smile.
Inflation affects each age group differently. In late retirement, medical inflation (which is often higher than standard inflation) eats up a larger portion of Social Security benefits.
If you retire early as age 62, you have more years of retirement to fund. You must ensure your sources of retirement incomeโlike Social Security, pensions, and savingsโcan handle spending shifts across potentially 30+ years.
Planning for the Long Haul with Agape
Navigating the different phases of retirement requires more than a calculator; it requires a partner. At Agape Insurance, we help you look at the big picture of wealth management and insurance.
Whether you are close to retirement or already in your Slow-Go years, we can help you review your financial planning strategy. We look at:
- Income Planning: Ensuring you have reliable cash flow for the Go-Go years.
- Legacy Planning: Updating your estate plan and beneficiaries.
- Health Planning: discussing Medicare and long-term care options for the No-Go years.
Retirement without a plan is stressful. Move through retirement with confidence by understanding the stages of retirement.
Call Rob Sevilla today at 662.260.5188 to start creating a retirement spending plan that works for every stage of your life.
Disclaimer: Agape Insurance & Financial Group does not provide tax, legal, or investment advice. Retirement spending models are estimates and individual results will vary based on health, inflation, and market conditions.