The Honeymoon Phase

In the first edition of our retirement series, I discussed the concept of 8,000 days of retirement and broke down the MIT AgeLab’s four phases of retirement. “The Honeymoon Phase” is the first of the four phases, and arguably the most important, as it sets up the three remaining phases of retirement.

 

Here are four considerations to help you navigate the Honeymoon phase:

 

You may still be working

The traditional idea of retirement was to keep working until reaching the hard stop: age 65. At that point, you would fill the rest of your life with rest, relaxation and leisure activities. However, that notion has changed. Over the last 30 years, the labor force growth rate of older workers (age 65 to 74) has outpaced all other age groups. In fact, the CDC projects that the labor participation rate for older workers will reach 32% by 2022.

 

When planning for your retirement, do not assume that you’ll be forced to make a clean break. Consider working part-time or contract work, which will allow for a phased transition into full retirement.

 

Stay active

For many people, their career provides a sense of identity and purpose. After all, the majority of our time is spent in our career. Shifting to part-time, or staying involved in your industry in some fashion can maintain your relevance, while also freeing up time to pursue the things that you would like to do.

 

If you decide to fully retire, try to stay physically and mentally active by finding a new sense of purpose and maintaining a social circle. This could be achieved by volunteering with an organization that you have always wanted to support, joining a travel group, or pursuing new hobbies. Meeting people with similar interests will help maintain the social net you may have lost when leaving the workforce.

 

Your adult children may be living with you

Retirees have become the “sandwich generation” as they support aging parents and their adult children. According to a Pew Research study, 52% of children age 18-29 are currently living with their parents, higher than in the Great Depression! It turns out that you may not be an empty nester after all. During this first phase of retirement, find a balance between time supporting your children and/or aging parents, and taking the time to pursue your aspirations. Don’t put too much of your life on hold, you may be missing out on once in a lifetime opportunities.

 

Plan for increased expenses

The recurring theme throughout this blog has been to plan ahead. Conventional wisdom has been that you need to replace 70% of your income in retirement. However, we’ve found that many retirees tend to spend more than they did while they were working. When you have more time to travel, try new activities or join clubs, expenses can pile up. Medical expenses tend to naturally rise as we age. It is important to plan not just for insurance premiums and out of pocket expenses, but also the cost of long-term care.

 

As we always say, it’s better to prepare than to repair.

OWM provides financial planning, investment management, and retirement coaching to affluent individuals, business owners, and families.