3 stages of retirement — steps you can take to prepare financially for each

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Your priorities, income needs and spending will likely change as you move through retirement. Here's what you need to plan for.
Volunteering? Traveling? More time with loved ones? You probably have an idea of your perfect retirement. But don't count on it staying the same over what could be a period of more than 30 years.
Most people go through three stages of retirement. In the first — let's call it the Exploring stage — you're likely going to try new things and pursue your passions and hobbies. You might later transition to the Nesting stage, with more predictable routines and a greater focus on home and family. And later comes a Reflecting stage, where health issues and your legacy assume prime importance.
It's critical to understand how your income needs and spending habits will change. That way you can create a flexible plan for each of these stages. Below, take a look at how your retirement may evolve over time and what you can do to prepare. Click the links within each section for more detailed insights.


In the first stage of retirement, you might:
  • Learn new skills, volunteer, spend more time traveling and take up new hobbies
  • Move to a new locale and/or purchase a second home
  • Start a new business or work part time

Steps you can take to prepare:

Key financial priorities include continuing to invest for growth and future healthcare costs, while also funding increased spending on leisure activities like travel. Consider:
How can I develop a predictable income stream to cover both my essential and discretionary expenses and what are the tax implications of withdrawing from my various accounts?
When should I consider taking Social Security benefits?
What strategies should I consider to help protect myself against unexpected healthcare expenses as I age? Should I purchase long-term care insurance?
Should I work part time so I can limit my withdrawals and allow my assets to continue growing?
65% of workers hope to travel in retirement — the most frequently cited retirement dream.Footnote 1


In the next stage, you may:

Steps you can take to prepare:

As your spending slows a bit, consider using this period to prepare for potentially higher expenses in the next stage when you may face inflation and rising healthcare costs. Strategies to consider include:
Should I invest more aggressively to increase the odds that I won't outlive my assets?
What do I need to think about when renovating my home or relocating?
A third of homeowners between ages 77 and 97 who recently purchased a new home did so to be close to family or friends.Footnote 2


In this stage, you could:

Steps you can take to prepare:

You may want to strike a balance between securing your own financial future and leaving a legacy. Consider:
Can my current asset withdrawal strategy cover the cost of any unexpected expenses or help I may need?
Are my will, power of attorney, healthcare directive and beneficiaries on insurance and retirement accounts all up to date?
Should I consider gifting some of my assets now?
One-fourth of Americans say inflation has caused them to see a greater need for estate planning.Footnote 3

Next steps

Footnote 1 23rd Annual Transamerica Retirement Survey, Transamerica Center for Retirement Studies, 2023

Footnote 2 Home Buyers and Sellers Generational Trends Report, National Association of Realtors®, 2023

Footnote 3 Wills and Estate Planning Study, Caring.com, 2023

Merrill, its affiliates, and financial advisors do not provide legal, tax, or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.