Retirement In Four Stages

Did you read (or see the movie) Lord of the Rings? The Hobbits eat several meals a day: breakfast, second breakfast, elevensies, luncheon, afternoon tea, dinner and supper. I see retirement a little like the Hobbits see their meals… there are stages and if you don’t plan for them you won’t be as happy as if you did.

First Retirement: This is when you leave the job you’ve been dying to leave so you can do what you really, really want. I’m going to skip this stage since I’ve been doing what I really, really want all along. But for many people, the idea of taking off one worker-hat and putting on another is as good as retirement. Having locked in their pensions or paid off their houses, they’re ready for a new adventure. There may be a reduction in income as they follow their bliss. Or First Retirement may open up sources of income they never would have imagined.

Second Retirement: Semi-retirement holds a lot of hope for some folks. Being able to cut back on their work hours, take jobs where they can work-share, or switch to part-time means having more time for family, friends and themselves.  It usually means less money too, and it’s the stage at which you’d be wise to practice living as if you’re fully retired. The more used you are to living on your fixed income, the better the next stage will be. You’ll also want to make sure you’ve got your big expenses – think mortgage, new car, home renovations to accommodate aging – out of the way.

Third Retirement: Full retirement comes next. Now you’re not working at all. You’ve got your pension, some savings, and lots of time on your hands. You’re still relatively healthy, so you want to do stuff. If you’re smart, you used your second retirement to practice what you’d do at this stage and you’re ready for all that time on your hands. You’re also ready to live on the income you now have since you’re no longer working. Stuff’s not as important, but travel may be as you seek to connect with friends and family. You’ll also want to start thinking about things like long-term care and retirement residences for the next stage.

Fourth Retirement:  Your health will likely dictate when you enter this stage. Less able to get around, and more focused on doctor’s appointments than on weeding the garden, you’re less active but more worried about whether the money will last.  You may also wonder about how you’ll manage with your kids focused on their own lives or living far away. In my neighbourhood, there is a bunch of folks who have been living on the same street for the past 15 years. They have all signed up for the same retirement residence. They plan to take their neighbourhood with them to their Fourth Retirement. Smart!

14 Responses to “Retirement In Four Stages”

  1. This is a very astute post. I think many people think that they’re going to just stop working at 65 and live the lives they see in the financial ad commercials, travelling to wineries and riding motorcycles.

    The gradual slowdown seems much more attractive to me because I don’t suddenly end up with nothing to do all day than golf with my wife (love my wife, hate golf).

    In the meantime, there’s no reason we can’t all be in stage one, at any age. In other words, put some emphasis on family and self time now. There has to be some balance, or we waste the first 60 years of our life working for a corporation. As they say, nobody dies saying “I wish I spent more time at the office”.

  2. I am retired, but never stopped working, retired to a farm with horses and chickens.
    Now I find myself finally retired, no horses, no chickens and living with a husband that does not like to travel, not even to see family. I now find myself making plans to do just that, travel ! I have always told myself that it is up to me as to how I want to live my life.
    Being debt free, and no health issues is what one wants as you age. So I say, live your life. Get on with it and don’t look back, Go for it !!

  3. Great post. I’m semi-retired and tend to use the money I still make as “extra” money. I like the advice of living as if fully-retired. One thing though, don’t wait until you retire to travel or you may miss the opportunity. If you want to travel do it throughout your life.

  4. @InsureCan – You made me laugh!

    I’m glad today’s blog is on retirement. At my young-ish age I’m going start thinking about First Retirement but I want all my big expenses out of the way before I hit Second Retirement. I won’t be doing part-time work. I want to work all the years full-time up to age 65. BUT I will try to take Linda and InsureCan’s advice and live and travel (limited to two or three places).

    Also re: Second Retirement – I’m trying to stay afloat and build up my EF, so it’s kind of like I’m living on a fixed income at the moment anyway 😛

    Third Retirement is where, personally, I want to be and Fourth Retirement…..well we all get there eventually.

  5. The sentence “This is when you leave the job you’ve been dying to leave so you can do what you really, really want” breaks my heart a bit. I get that emergencies or fate can push a person here, but First Retirement sounds just terrible… like being trapped in a marriage you can’t wait to leave once “the kids are older”. I like the idea of thinking of retirement in stages because it reminds me that I need to plan while I have an income for a time when I will not be able to earn one. However, I would say that anyone who’s working in a job they can’t wait to leave should seek help, just as anyone who’s in a painful marriage should. Second retirement, when you can volunteer your time or reduce hours makes complete sense to me, but if you’re just working til you can get to first retirement, I’d recommend speaking to someone, because ideally, no one experiences First Retirement.

  6. My first post ever on this website – been reading you for years! Here goes: My husband is lucky enough to have “Freedom 55” 2 years ago – because of our hard work all these years. He collects his pension because he put in 30 years; we’ve lived below our means to pay off the house, socked away money in our RRSP’s, TFSA’s – and in one more year our RESP will be depleted and our university kid will be have finished his undergrad degree. Unfortunately the RESP was the worst investment losing 40% during the first crash and has never regained it’s book value. I couldn’t find a bank to process RESP’s 15 years ago and had invested it in mutual funds.
    Since retirement we’ve taken terrific holidays while we still have our health – my husband’s pals have had serious health issues and some cannot work while his other friends must work. I continue to work part time and will until I die. Unlike my husband, I enjoy my work and volunteer work. Love your books and TV shows, Gail!

  7. I’m eligible for early retirement in 11 years… I promise you that isn’t going to happen! I refuse to retire with a mortgage and debt, so if I have to work f/t until I’m 65, so be it. I’m thinking I would still work p/t when I “retire”; keeps the mind working… it’s something I wish my Dad would’ve considered doing when he retired at 59 (11 years ago); he still goes out every morning, but he’s home by noon, naps for a few hours and watches TV all evening.

    My Mom semi-retired with my Step-Dad a few years ago, and handed over the reigns of the family business to my step-brother. Mom and Step-Dad used to travel frequently; every July, they would close up shop and go away for a month… hop in the convertible and head to New England, travel out West or go to Europe… then my Step-Dad had to have bypass surgery, and now he doesn’t like to venture too far from home. Mom said “retirement isn’t what I thought it would be; I’m really bored”, and took the reigns of the company back from my Step-brother. Mom’s much happier these days; she’s always been very career-oriented.

  8. I’ve been watching my folks move through first-second-third retirement. They seem to have landed back in second retirment. My dad retired at 65 with a minimal company pension and my mom had also planned to leave the workforce at the same time. She had spent the last few years of her professional life in a less-than-pleasant work place so she was jumping for joy when she was free and at home. My dad too was happy for the break from working life and jumped into a life of “leisure” that involved a whole lot of chores maintaining and upgrading their home and cottage.

    Without grandchildren around to occupy them, they found retirement a little boring since they are very active people. And the long list of household chores / projects became expensive and a bit of, well, a chore! So both of them found themselves back at work from time to time doing all sorts of fun jobs – tour guide in the summer, working for my brother’s restaurant, etc. The extra money has helped as they travel south every second winter.

    Now they have two grandchildren courtesy of my brother and babysit the girls two days each week while also pursuing other hobbies. They are busier now than I remember when they worked full time and most importantly, they are very happy people.

    They are finding things tight sometimes for the finances and constantly think of the future. They are young (63 and 72) and fit which is great for their health (no worries for us children) and are likely to live for many more years so it’s about making the money last. They are also planning for where they will live in their final years and I think they find this overwhelming at times since they are so active right now.

    My husband and myself are looking at our own retirement in 12 – 15 years and watching his parents and mine navigate their retirements is a wake-up call for sure. My MIL is 20 years younger than her husband and she is bored silly at home while her husband, although active in the garden, suffers from a litany of physical ailments. We’re really seeing the challenges of them where she’s only 71 and he’s in his early 90s – a very different place health- and mobility-wise. Luckily, they have great pensions and are in a good place financially.

    Thanks for a good wake-up call on this important subject.

  9. I am 32 and can’t wait for first retirement. I hate my job, but I’m in love with the money I get paid. I have a feeling I would hate any job eventually so I’m trying to fast track to an early retirement then volunteer at a credit counselling service or go back to school and be an actual financial advisor that teaches people how to invest, not some dolt selling mutual funds.

  10. I think a lot of people are stuck at 2nd stage. I know quite a few people who are working part time just for the benefits and extra money.

    I think you also need different budgets for each stage of retirement. I would like to think we could do all the traveling in the 1st few years of our retirement, we’d love to see the world. Then we would probably just settle down and only do the regular visits to family, etc. So one budget for the travel years and one budget for the rest of the time.

    What scares me about the retirement budget is if one person dies before the other. We would be on track if both of us retires with some CPP plus our RRSP, TFSA savings, etc. But once one person dies, you would lose one of the CPP income. But, the expenses for 1 person is not much less than for 2 people. So you would need a lot more personal savings.

  11. Timely post for me. Thanks Gail. My situation is almost opposite I will be 61 this month and have worked in a government job for over 35 years. I have a job that I love and people who are really great to work with. I could have retired last year without penalty but have been putting off doing so because I am really afraid to retire. I have worked since I have been 17 years old and really don’t know what it is like not to work. My plan was always to retire at 55 to 60 but my husband died suddenly 3 years ago. I have no family but one sister who I see maybe half dozen times a year. I have a large RRSP, TFSA’s a healthy emergency fund and a little real estate as well. When I retire I’ll have about a $37,000/year pension FULL Canada pension and a $12,000 survivor pension from my husbands employer. I have no health issues so far. So it is not about the money. If you considered everything I am working for next to nothing. I travelled all over the world when my husband was living and I do not have any regrets about putting off things we wanted when he was alive. I wonder if I am doing the right thing by continuing to work. I would appreciate and feedback or suggestions others might offer. Thanks.

  12. avatar S. K. Beaverson Says:
    November 17, 2011 at 11:48 am

    Thank you Gail, this blog post really resonated with me. My husband would love to move into 1st retirement immediately… doing what he wants, for less $$, somewhere other than where we live now. That scares me a lot because he’s behind on retirement savings and also 6 years older than I am. We know that a compromise will mean he’ll have to keep working longer than he’d like but also that we’ll move into a 1st or 2nd retirement stage much sooner than I’m comfortable with… We have a 1-year EF, have no CC debt, and will soon pay off his student loan and start putting the extra $$ towards the mortgage. We also have retirement savings, but I don’t foresee us ever hitting the magic number where retiring at any stage is a no-brainer that doesn’t come with careful planning and sacrifice. Sandy M, it sounds like you have security which means you have an incredible gift of time at your disposal to do what you love.

  13. Very timely post as I enviously attended a retirement party for 3 of my co-workers yesterday. One of them was my supervisor and I’ve been promoted to her position – we are the same age 54 but she had worked at the University since she was 18 years old – grew up on campus and at work. I spent the same amount of time on campus but got my degree and then began working – so I’m 3 years behind in pension time. Last year I reached the magic formula for years of pension service and age = 80 so would be able to retire without penalty, however…
    Most of the time I enjoy my job, with the promotion I’m feeling very challenged and am adding to my future pension with my raise [based on best 4 years]. Over the past few years I’ve changed my goal from “freedom 55” to retiring sometime during the year that I turn 57 [born in 1957 retiring when 57 sounds good]. I’m single, own my townhouse, own my car, have an RRSP [not a huge sum in it since there are contribution restrictions due to the University defined benefits pension plan] max out my TFSA and have savings outside of registered investments. I’m looking forward to a retirement that merges 1st & 2nd retirement – moving on to a part time/ casual job that makes me feel good [health care, animal care, something that gives back] combined with volunteer work [rehab & palliative care volunteering and walking friends dogs for them] while having time to travel – that is my goal for 57-65. Thanks to watching and reading Gail’s wonderful advice, this coming year I will be living on my estimated retirement income – my Alaska cruise for my 55 birthday is already paid for – and I will see if my plans are reality based or not. THANK YOU GAIL – you make alot of sense and help alot of people make their dreams come true

  14. […] annual revenues are bigger than the gross domestic products of half the countries in the world?3. Retirement in 4 stages[Gail Vaz-Oxlade] Gail suggests retirement is like The Lord of the Rings. Not sure I buy that, but I […]

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