Living in retirement can be 30+ years for some people.

That’s a long time.

Think back to when you were 30 years younger and everything that’s happened since that time.

When transitioning from saving for retirement to planning for retirement, that length of time can be overwhelming.

So much can happen – not only in the investment market but in life.

To simplify planning, try segmenting your retirement into three stages based on your mobility and health.

As we age, our body will change depending on how well we’ve treated it during our life (the reason “Physical Health” is one of the 5 P’s of Life – a concept I use to help clients determine how much money they will need to achieve the lifestyle they envision).

The three stages of retirement are active, moderately active, and nonactive.

Another way to think of it is the go-go years, the slow-go years, and the no-go years.

Most retirees tend to spend more money in their active retirement years with new hobbies and travel interests.

As they move into the moderately active and nonactive years, money from that spending shifts to health care or long-term care expenses.

Generally, in the moderately active years, one spouse has more health issues than the other.

In the nonactive years, one spouse is the caregiver.

If you’re planning for retirement, pay attention to how much you spend.

Having a good handle on your spending now will help project your spending in retirement.

I use ten broad categories when defining spending for clients – it simplifies the budgeting exercise.

The ten spending categories are home(s), transportation, personal care, entertainment, food, dependent care, health, gifts, miscellaneous, and savings.

A category for savings is included as an expense because it’s money you’ll spend in the future. However, when you’re in retirement, this category goes away.

Some expenses generally overlooked when planning for retirement include:

(1) major home modifications and replacement;

(2) health care expenses not covered by Medicare, specifically dental, vision, and hearing; and

(3) long-term care.

(1) Housing:

Major home expenses include replacing the roof, HVAC, major appliances, etc.  

Modifications are for if your mobility changes. You may need to move your primary bedroom to the main level or install a machine to assist with going upstairs.

Start creating a property maintenance schedule to identify the timeframe and estimated cost for these major expenses.

Also, explore how your housing will change as you move from one stage of retirement to the next stage.

(2) Health Care:

Based on a Fidelity Retirement Health Care study, the average cost for health care in retirement is approximately $6,092 annually.

Your health and genetics will make this cost higher or lower.

Be aware of the income thresholds for Medicare Part B and Part D. There’s a surcharge (called Income Related Monthly Adjustment Amount or IRMAA) that boosts premiums if your income is above a certain amount.

Also, Medicare does not cover most dental care, eye exams, and hearing aids. For these expenses, many purchase supplemental insurance.

(3) Long-term Care:

According to the U.S. Administration on Aging, 70 percent of those aged 65 and older will need some long-term care in their lives.

When care is needed, the average length of time is 2.2 years for men and 3.7 years for women. It may be longer if you want in-home care. 

Genworth has an online tool to estimate the cost of long-term care in your state.

There are a lot of unknowns when planning for 30+ years in retirement.

Segmenting your retirement years into three stages (active, moderately active, and nonactive) produces a more tailored investment approach.

Your spending will change as your mobility and health change throughout retirement.

Assets used for your last stage of retirement (your nonactive years) have more time to grow and smooth out from unexpected market volatility.

Segmenting your retirement years also simplifies thinking about this part of life.

We don’t have a crystal ball to see into the future, but we can take time to plan for this part of life’s journey.

(Update to original post from July 17, 2018)


Niv Persaud, CFP®, CDFA®, RICP®, is a Managing Director at Transition Planning & Guidance, LLC. Life is more than money. It’s about living the lifestyle you want and can afford. For that reason, Niv consults with clients on money, life, and work. Her approach capitalizes on techniques she learned throughout her career, including as a management consultant, executive recruiter, and financial advisor. Her services include developing  comprehensive financial plans, divorce financial reviews, and retirement plans. Niv actively gives back to her community through her volunteer efforts. She believes in living life to the fullest by cherishing friendships, enjoying the beauty of nature and laughing often — even at herself. Her favorite quote is by Erma Bombeck, “When I stand before God at the end of my life, I would hope that I would not have a single bit of talent left and could say ‘I used everything you gave me.’”