How many stages of retirement are you planning for?

According to a report done by Denton, Feaver, and Spencer, in 1996 there were 12.2% of our population living beyond the age of 65. By 2036 this number will more than double with approximately 24.8% of our citizenry living long after the age of 65. Our society is graying rapidly and there needs to be a new paradigm to the understanding of how we can best plan for our retirement.

Most self-employed professionals and business owners in their mid to late 50s begin to concern themselves with providing retirement income during their lifetime. And with a third of their lives still left to live, many are beginning to realize their needs are different as they think about the various stages of life they will transition to, be it semi-retirement, full retirement, or retirement at the end of their lives.

We call these stages “the three retirements”.


The First Retirement encompasses trading “at work time” to “do the other things I want to accomplish in my life time”. At this point, the driving force is no longer money but a sense of satisfaction from having accomplished other goals in one’s life. For many it is the time when taking time for family and leisure pursuits comes to the forefront. Or, some find it is time to commit themselves to “giving back” through some form of community service or philanthropic activity.

Right or wrong, for the most part, our culture defines its members by what they do and have, not by who they are. “Being” rather than “doing” must become the primary focus of our lives in order to enjoy this first stage of retirement. This has been characterized as the transition from success to significance. The thought is, “I have made my money, now I want to do something that will add significance to my life beyond financial success.” First Retirement is all about “values” pursuits rather than the pursuit of economic “value”. This means that the key to the expression of our values is the time!

Pragmatically, this may mean we need to find tax-effective ways in which to bridge the income gap without using those assets required to support a longer-term income stream when full retirement arrives.

This First Retirement Stage involves a transition to a new way of living and requires a period of adjustment. If an individual wish to maximize their options, it is necessary to take control of the future, to the extent that this is possible. What can be controlled should be controlled. Life choices can then become a real possibility with the individual determining the direction of their life, rather than wander�ing aimlessly into the future.

One of the keys to making this transition to semi-retirement is to determine what it is that you UNIQUELY contribute to your business that cannot be delegated; then, delegate everything else.

It is a period that most self-employed individuals will enjoy until their energy levels do not permit them to “keep such a pace”. The natural aging process begins to affect a person’s ability to continuously perform at a high level.


The Second Retirement relates to “slowing down” due to the aging process. The topic of aging is one that many prefer to avoid. Yet, it is a process all of us go through if we just stick around long enough. We can prepare for aging only if we talk about it. While it may be difficult for some people to picture a situation 20 years in the future, it is an essential discussion to ensure that personal plans also address potential needs.

For example, during the First Retirement Period, decisions about where to live may be based on work-related factors. At the Second Retirement Stage, the housing decision becomes part of the individuals’ personal planning choices. Whether individuals remain in their current homes or communities ultimately depends on what they want out of life.

To be old and dependent is perceived as an ugly existence in a culture that values youth, productivity, and functionality. Western culture does not appear to like its elderly, and this may be another reason why many people do not actively plan for this part of the life cycle. Planning for it means we must face its inevitability.

The Second Retirement should allow a smooth transition that takes into consideration the aging process. The Second Retirement should include the ability to cope with life, to maintain emotional well-being, to continue to make valued contributions to all facets of life and to feel worry-free financially.

The objective for the Second Retirement Phase – full retirement – remains unchanged. It is to create wealth for retirement sufficient to maintain a person’s lifestyle for the last 25-30 years of life without having to worry about outliving one’s money. This requires that one quantify “financial independence.” Most successful business persons do not know if they are financially independent or not. The personalized definition of “financial independence” is one of the components of the Family Financial Philosophy, a process of documenting, primarily for estate planning purposes, key financial values like what it really does take for me to be financially independent. When one is financially independent, they have sufficient income and assets to allow them to live their chosen lifestyle without having to be either employed or actively involved in a family business. Full Retirement is more stressful and less enjoyable when one has not reached financial independence. When one has reached financial independence and is no longer attempting to “earn a living”, for a fulfilled life, one must answer the following question: “What, other than work, defines me?”


The Third Retirement represents the stage in which our health may affect our finances. For example, the effects of possible long-term health care needs on an investment portfolio that is designed to provide income to the surviving spouse or the provision of alternative living accommodations to the spouse who can no longer care for themselves on a day-to-day basis are significant lifestyle-related issues that will have significant effects on the capital/income requirements. While this stage may be an uncomfortable subject, we need to get through the reluctance barrier to ensure that we have plans that anticipate real potential situations. A recent RBC Insurance/Ipsos-Reid survey found that 34% of respondents were worried about the cost of care in their old age.


When we know what we want to accomplish, then we can make the appropriate decisions relating to the financial support of our retirement needs. This relates to the earlier discussion of “financial independence”. For some people, financial independence means having a home paid for and a basic old-age pension coming in on a regular basis. However, for most successful professionals or business owners, it will include their home, and maybe a second vacation home, a budget for significant travel, a cash reserve just in case a really good investment opportunity in a new business comes along, and an amount tagged for philanthropic activities along with an appropriate legacy for their heirs. Obviously, the specific definition of financial independence is different for every family. One can take all these “goals” and quantify them down to the present value of providing the lifestyle. That number is your financial independence number. It is the one you build.


In preceding generations, there have been very few in our society that has ever had to consider the real possibility of spending 1/3rd of their lives in retirement however this is no longer the case. Perhaps the best professionals to assist you in planning for the three stages of retirement are individuals who hold the Certified Financial Planner designation (CFP�). The CFP� communities around the world define financial planning as “the process of creating strategies to help clients manage their financial affairs to meet life goals.”

Life is about taking charge and control to accomplish those things that are important to us. It’s only when individuals take responsibility by making a major effort to solve their problems, adapt to changing circumstances and look forward to the future that they can say they have done a total job of retirement planning.

This can best be achieved if our planning incorporates the same process and goal for personal retirement planning as that which we use for business planning: we want to become a successfully retired person.

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