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  • Writer's pictureBill Savellis

The Three Phases of Retirement: It Pays To Plan Ahead

Elderly couple walking on trail

With the number of Australians living longer, it is important to consider how we will fund all of our retirement years and make sure we are ready for when we require some help.

Before you apply for the Age Pension or Aged Care assistance, it is good to understand what you may be eligible for from Centrelink now, as well as the different scenarios that can affect your cash flow and benefits entering retirement, making sure there is enough money to fund your lifestyle whilst not being too conservative.

We might not like to think about it, but approximately one-quarter of your retirement is expected to be 'care years' where some additional help will be needed with daily living activities.

As life expectancy increases, the care years may also start to increase:

  • In 1974/75, 0.6% of the population was aged 85 years or above

  • In 2020/21, 2.1% of the population is aged 85 years or above

As the average life expectancy improves, the proportion of the population over 85 is predicted to increase dramatically over the next 50 years.

When you are starting to prepare for retirement and apply for the age pension, it is an excellent time to revisit your retirement plan to assess your different cashflow options, and where possible, ensure your age pension entitlements are maximised.

We are all familiar with considering our retirement income and key life changes that can impact retirement income - including no longer receiving a paycheque. Other changes that can affect your income and benefits include any inheritance, change of relationship status or your spouse's eligibility for the age pension.

Since 2004, the Association of Superannuation Funds of Australia (ASFA) has been releasing the 'ASFA Retirement Standard', which benchmarks the minimum annual cost of a comfortable or modest standard of living in retirement. While the ASFA budgets provide a guide or benchmark, they are not final costs. Budget projections can be highly variable and dependent on individual preferences.

However, having a guide for future spending helps us estimate your retirement cash flow. When you look at your options and how different scenarios might affect your cash flow and entitlements through your retirement, your options are based on your income (and assets) and expected spending requirements.

Your retirement strategy or plan should give you certainty about how you can comfortably fund your transition through the phases of retirement.

The reality is that whilst we might not like thinking about a time when we require assistance, future planning helps maintain our independence for longer.

The three phases of retirement

There is no 'one size fits all' approach as your spending habits during retirement will vary based on your ability; however, we can take into account that the average retirement pathway goes through three phases:

The Care Free Years

  • Also known as the honeymoon years or active years. This is the period just after retirement, where typically children have left home, and many consider downsizing and traveling

The Quiet Years

  • This period is more passive and retirement has become routine. It is also a time when you may require some level of support from family, friends, or care providers

The Frailty Years

  • This is the period where you need assistance with managing everyday living tasks, either at home with Home Care support or through an Aged Care facility

Access to government subsidies helps to make care affordable. But adequate savings to fund the increasing cost of care opens up choices and allows better independence and control.

Things to consider before retiring

When reviewing your retirement strategy, it is good to keep in mind what you may need across all three phases of retirement to ensure you are adequately set up for your later years.

You may want to consider:

  • How will you fund your aged care costs?

  • The role your home can play?

  • The impact of relying on family and friends for support

Benefits of a strategy

A strategy aims to give you peace of mind and structure your finances to have a clear plan for what is affordable now and sustainable in the future.

Planning can help to demystify aged care and reduce stress levels. With awareness and pre-planning, you can maintain control and choice, have access to the financial resources to pay for care and minimise the stress on you and your family.

The purpose of your strategy or retirement plan could be:

Forward planning
  • Timely planning enables the transition through stages of home care and aged care with ease and dignity

Creation of a pathway
  • Access the information you need to clearly understand the decisions you make and the actions you need to take to secure the appropriate level of care now or in the future

Look at the big picture
  • Your plan should be based on a complete understanding of your situation and goals so that unwanted consequences can be avoided

Confidence and peace of mind
  • Ensure your estate plans reflect your wishes to minimise the potential for family disputes with a check of estate planning issues

If you have already retired, it is not too late to create a plan. If you are thinking about your future needs for you or a loved one, this transition point might be where you can benefit the most.

Getting the correct information and advice can help you understand your options and the implications for your cash flow, Centrelink or other concession cards, aged care fees, taxation and estate planning. Having a clear pathway forward will allow you to make the best choices for your future care, security and happiness.

Financial advice is about providing clarity and customised options so you have peace of mind about your financial position now and sustainably into the future. Reach out to our friendly team today to start the discussion.

Headshot of Bill Savellis

Bill Savellis

Senior Financial Adviser

Having navigated the Aged Care landscape for both of his parents, Bill understands how challenging it can be to make the right decisions for your future care needs. That's why he believes that everyone should have access to financial advice during this time. Bill has been a Financial Adviser for over 22 years, and is passionate about helping others access the financial advice they need. Drawing from his own experience in the financial sector, Bill develops strategic, personalised plans to support transitions to Aged Care or Home Care.


Disclaimer: Prepared without taking into account your objectives, financial situation or needs. Before acting on any information in this article, Olive Grove Financial Advice recommends that you consider whether it is appropriate for your circumstances. Information in this article was correct and current as of 28 March 2023. Olive Grove Financial Advice is operated by Bill Savellis through The Financial Advisor (Australia) Pty Ltd ABN 72 619 546 431, who is a Corporate Authorised Representative (No. 1278394) of Havana Financial Services Pty Ltd.


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