Budget Planning : 4 Phases Of Retirement

A demographic trend of rising ageing population has been observed across the globe associated with medical advancement, progress in healthy lifestyle, lower death rates and higher life expectancy. Be it Japan or China or various other European countries, the need for social security at the time of retirement has been a grave concern. It becomes imperative to plan for life after working/paid life ends.

In many parts of the globe, retirement planning has been taken care of by the government sponsored retirement schemes. However, the burden of providing these benefits to the citizens, are mounting heavy financial obligations on the exchequer of the governments across the world. Also due to the increased life expectancy the working population is decreasing, leading to a reduction in GDP of an economy and thus putting an additional pressure on the economy. These reasons have attributed to the scrapping of various government sponsored pension schemes by several nations.

Hence it is quintessential for an individual to plan for his/her retirement. One must carefully analyse sources of current income, savings and investment in profitable opportunities, investment in health care policies and creating will/appointing attorneys.

In general, there are 4 phases which are critical when it comes to budgeting for the retirement:

  1. Pre-Retirement (50-60 age group):

These are the working years just prior to retirement when one needs to assess their financial position and decide whether they are adequately secure when it comes to the life after retirement. One can consider cutting down on leisure spending and wasteful expenses to save for future and rather invest in individual/family life covers, health insurance as well as long term profitable assets accumulation.

  1. Early Retirement (60-70 age group):

In the early stages of retirement, one realises that the there is no regular pay check coming from the employer and is rather dependent on pensions receipts. Hence now one needs to carefully manage their expenses as one can’t get extravagant at this stage of their life. Also, one needs to consider whether he has adequate health Insurance done for him as well as his dependents and how the healthcare needs will be met going forward.

  1. Middle Retirement (70-80 age group):

At this stage of retirement, most of the expenses tends to decrease as the leisure activities are now a passé. Most of the people have their children grown up and established and thus are not dependent on the them anymore. Moreover, the various term insurance and health insurance expire at the upper end of this stage leading to a saving of the premiums which were payable earlier. This is also the time to update/revise state or the succession plan based on individual preferences and choices considering numerous qualitative factors.

  1. Late Retirement (80 above):

This stage typically leads to higher medical and healthcare costs as one starts suffering from chronic diseases and major illness. If people already have a long-term care insurance, then that will substantially reduce their costs.

To avoid cost burdens at the time of retirement, one must start planning early during working life. One must engage in diligent financial planning, investment diversification, assets accumulation, health covers and expense management to lead a safer retirement life.


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