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Education Center » 3 stages of retirement - and how to plan for your income needs in each

3 stages of retirement - and how to plan for your income needs in each


Your priorities — and spending — will likely change as you move through retirement. Here’s how to prepare.

Travel? Volunteering? 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 work with your advisor to create a flexible plan for each of these stages,” says Debra Greenberg, director, Personal Retirement, Investment Solutions Group at Bank of America. Below, take a look at how your retirement may evolve over time and what you can do to prepare.


In the first stage of retirement, you might:

  • Travel the world, learn new skills, volunteer and take up new hobbies.
  • Move to a new locale and/or purchase a second home.
  • Start a new business or work part-time.

A family smiling, unpacking their car to go camping.

Steps you can take to prepare

Key financial priorities include continuing to invest for growth and future health care costs while also funding increased spending on leisure activities like travel. Ask an advisor:

  • How can I develop a predictable income stream to cover both my essential and discretionary expenses?
  • When should I consider taking Social Security benefits?
  • How can I make tax-efficient withdrawals on my retirement accounts?
  • What strategies should I consider to help protect myself against increased medical costs as I age?


In the next stage, you may:

  • Settle into a routine with a more relaxed pace.
  • Travel closer to home or to see friends and family.
  • Consider relocating or downsizing.

A young boy and girl hugging an older adult, presumably their father or grandfather.

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 health care costs. Strategies to ask your advisor about 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?
  • Will I be ready to cover the cost of long-term care services if I need them later on?


In this stage, you could:

  • Encounter more health-related expenses.
  • Be a widow or widower, or need support from your family or others.
  • Start thinking more deeply about your estate plan.

Profile of an older woman.

Steps you can take to prepare

You may want to strike a balance between securing your own financial future and leaving a legacy. Discuss the following with your advisor:

  • Can my current withdrawal strategy cover the cost of any additional help I may need?
  • Are my will, power of attorney, health care directive and beneficiaries on insurance and retirement accounts all up to date?
  • Should I consider gifting some of my assets now?

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