The ‘Retirement Smile’ is not about grinning from ear to ear; rather, it symbolizes the fluctuating financial needs that you may experience at different stages of your retirement. This concept divides the retirement phase into three distinct stages – the Early Years, the Middle Years, and the Twilight Years. Understanding the Retirement Smile can empower you to make informed decisions that align with your long term lifestyle aspirations.
- Early Years:
The initial stage of retirement, often referred to as the ‘Active Years’ is marked by increased activity: travel, and pursuing long-held passions (ticking off the Bucket List!). During this period, you may find your expenses higher as you indulge in experiences and adventures. Maintaining a healthy lifestyle and enjoying the fruits of your labor after retiring from the workforce are top priorities.
- Middle Years:
As you settle into a more routine lifestyle in retirement, the Middle Years bring a natural reduction in spending. Your travel may decline, and expenses related to leisure and activities could stabilize. This stage often sees retirees enjoying the comforts of home and community, leading to a decrease in overall expenditure.
- Twilight Years:
The final stage may witness a rise in healthcare and aged care/ support related expenses. Whilst you may not engage in extensive travel or leisure activities, the focus shifts towards health and well-being. As health becomes a more significant consideration, expenses related to medical care may increase substantially.
Implications for Pre-Retirees:
Understanding the Retirement Smile is crucial for pre-retirees, as it allows for more defined financial planning. Recognizing varying expenditure needs at different stages of your life enables you to allocate your assets strategically, ensuring a balance between enjoying the early years, managing expenses during the middle years, and preparing for potential healthcare costs in the later years.
Preparing for the Retirement Smile will assist you to navigate the landscape of life after work. Contact us for advice on preparing for your retirement. We recommend periodically reviewing and adjusting your financial plan to ensure it remains aligned with your evolving lifestyle needs. More information: ASFA Retirement Standard
