Until recently, I tended to base retirement planning strategies for clients on a book from the late 90s titled The Prosperous Retirement: Guide to the New Reality by Michael Stein.
Stein divided retirement into 3 stages. Each of these stages affected spending patterns differently, so we could plan for clients’ needs at each stage.
Under the accepted system, the first stage is the Active stage — those first early retirement years when most people are looking to see the world (or at least Australia) and/or engage in other active pursuits. They’ve suddenly got 50-60 more hours per week of free time and are still healthy enough to get out there and make the most of life and opportunities.
The second is the Passive stage — a time when they still look forward to some travel and active pursuits but, with the onset of age-related injuries and illnesses, just not as often as when they first retired. Maybe they’d take shorter trips around parts of Australia rather than long overseas trips through three countries at a time.
Then, eventually retirees move into the last stage, the Sedentary stage, when physical or mental limitations — or setbacks like the death of a spouse or close friends — lead to a much more sedentary, home-based lifestyle. It may also involve losing independence and increasing dependency on others.
The new stage of retirement
In my experience, I’m seeing a new stage of retirement forming, that can have a major effect on people. This new stage has to be managed carefully.
It happens between just retired and the first stage, the Active stage. I call it the Family Support stage.
This is a stage where more and more newly retired people are finding themselves as almost full-time carers for their grandchildren, meaning they cannot plan to travel, undertake volunteering or pursue personal activities due to commitments they make to help struggling children.
This is not the traditional, one-day-a-week “day with nanny and pop,” but a full on five, sometimes six-days-a-week commitment. Often this commitment comes the added cost of taking care of the grandchildren. The costs may not be recovered from their parents, who are often battling a huge mortgage and/or an expensive lifestyle, so the grandparents pick up the tab and deplete their own savings in doing so. You just need to plan for these expenses that can blow out a retirement budget.
I am not saying this is a major negative, as many people cherish time with their grandchildren and would not swap it for the world. However, as a result, they need to be aware that too much time spent in the initial Family Support stage may mean they miss out completely on the most active years of retirement. Some of us may move into the Passive and Sedentary stages much sooner than expected due to illness, and in reality, some of us may not live to reach the later stages.
I usually urge clients to put limits on the commitment to family and put aside “me time” throughout the year for some personal travel and other activities. This does not mean going on holidays with the family to be the babysitters while parents relax. I often recommend that you ensure that Fridays and Mondays are free so you can go away for long weekends so make sure your children know this upfront so they can plan what days they need alternative arrangements.
It is important to put these limits in place at the outset, as kids may come to rely on the arrangements and so they are hard to reverse later. If people do not plan, then they can end up at the wrong end of their 70s with no energy left to embark on their dream retirement.
What do you think? What are your arrangements like in the family? Are child care costs bringing you down? You can comment if you scroll down further.
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Liam Shorte B.Bus SSA™ AFP
Financial Planner & SMSF Specialist Advisor™
Tel: 02 98941844, Mobile: 0413 936 299
PO Box 6002 BHBC, Baulkham Hills NSW 2153
5/15 Terminus St. Castle Hill NSW 2154
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Peter Kelly
/ March 6, 2016Liam,
Congratulations on a great article that explores the four stages of retirement. I have spoken on this topic to audiences on many occassions however I tend to describe the Family Support Stage as the “carers of the young and the old”.
Many retirees today still have parents living, courtesy of an improving life expectancy. As such, many retirees are now not only caring for their grandchildren a couple of days a week (or longer!) but they may be doing the daily visit to Mum or Dad who is either stilll living in their own home, or is in residential aged care.
These are very interesting social dynamics that could result in a retiree foregoing their own active retirement as a result of a sense of responsibility to their wider family.
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SMSF Coach - Liam Shorte
/ March 6, 2016Great point Peter and I should have picked up on that especially as we have my mother-in-law living with us and I see the time and effort my wife puts in taking care of her. As a result she only works part time which reduces our own retirement savings. Again I reinforce that we love her and are happy to care for her but we must also be realistic and understand it reduces our retirement funds and leisure time.
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