Stage 5: Age of Tranquillity

After many years of hard work and saving money, you will hopefully be able to retire. Hopefully, your retirement savings plan was funded by more than losing state lottery tickets. Hopefully, your nest egg is big enough to carry you through retirement. Hopefully, you will also have the time and good health to enjoy yourself during retirement.

Hope may spring eternal, but hope alone will not carry you through retirement. Those in the post-retirement stage of the life cycle model of retirement planning cannot afford to stop their retirement planning just because they retire.

You are fortunate, people at this stage can look forward to traveling more, enjoying hobbies or spoiling their grandchildren. Unfortunately, things don't always work out that way.

As with any other life cycle stage, various life events may occur that can cause personal and financial hardship. Health issues may develop. A retiree's children or parents may require financial help. The economy may change drastically and turn a comfortable retirement into a Spartan lifestyle. So, just because you reached your retirement savings goal before you retired, it doesn't mean that you will always have enough to meet your needs.

Tip After retirement, your savings and investments should produce enough income for you to live on. If for any reason the savings or investments themselves are tapped into, this will decrease the amount of income that can be produced for you in the future. With continued review of your plan after retirement, it will become clear how much you have lost and how much you may need to make up.

You may recall from the beginning of our discussion of the life cycle model that the ages for each stage cannot possibly be predicted exactly. This is especially true when trying to pinpoint a general retirement age.

Traditionally, 65 was used as the standard, and in some cases the mandatory, age of retirement. However, there is a lot of statistical evidence over the last 25 years that there no longer is such a thing as a single standard retirement age. Evidence also exists that more changes to the nature of retirement will occur in the future.

For example, the table below indicates that older individuals are working well beyond the age of 65. The table is based on U.S. Labor Department statistics as of the end of 2000. Among those aged 65 or older who are still part of the workforce, 49 percent continue to work full time.

Moreover, the Bureau of Labor Statistics predicts that by 2012 those 55 and older will make up 19.1 percent of the total labor force (up from 14.3 percent in 2002).

For the sake of convenience, the discussions in these materials will continue to use 65 as the age of retirement. You are certainly not bound to use this age in your retirement planning. Pick the age that works best for you.