The Three Stages of Retirement Preparation

What to expect when you’re expecting to retire: A new government report outlines the three stages of retirement common for older Australians.

The government Productivity Commission report released this month, Housing Decisions of Older Australians, covers older people’s attitudes on a range of housing and retirement issues including:

• Planning for retirement
• The family home
• Debt and home equity release products
• Downsizing
• Housing preferences

The report analyses a Commission survey of 1,500 senior Australians aged 60 years and older, as well as ABS data from the past decade, creating a strong analysis of how older Aussies really think. The survey was representative of our nation’s population in terms of age, gender, location, and socio-economic background.

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The three stages of retirement

According to the report, you should expect a period of transition into full-time retirement, during which you might continue to do some part-time work while enjoying more time to spend with your loved ones. From that point on, your retirement can be as active or passive as you wish until your health begins to decline.

You should expect that sometime from 75 to 85, declining health will restrict the leisure activities you are able to participate in. This will also require changes to your housing, whether it means modifications to your home, a move to a retirement village, or even residential aged care.

The Commission’s report talked about what you can expect during the three stages of retirement:

Spending habits during retirementFrom the day you retire, it is realistic to expect that your income will decrease gradually from that point onwards. But never fear – you can also expect that your level of expenditure to decrease overall, and the things you spend money on will change during the three stages of your retirement.

• Housing: From your Active retirement years of 60 onwards, people typically spend less on housing.
• Food: From your Active retirement years of 60 onwards, people typically spend less on food – but it will appear to make up a larger proportion of your overall expenses.
• Health: Those aged 65-75 in the Active or Passive group spend more than other age groups on private health costs. Then from 75+ onwards, your private costs decrease but you can expect to spend the majority of your income on public health costs; you have entered the Frail stage.
• Travel and recreation: New retirees in the Active stage still spend almost as much on transport and recreation as workers. From 65 onwards, however, you can expect to spend less on transport and recreation – this can be viewed as the Passive stage.

Cost of housing during retirement
Social services offered during three stages of retirement
The most attractive way to retireIt seems clear from this summary that the ideal place to be when you retire is a healthy home owner. When you look at what you can expect during the three stages of retirement, the cost of housing during retirement, and the social services on offer, home owners come out ahead on every front.For this reason, paying off your home loan before you retire or early into your retirement will be a good move. If the interest rate you’re paying is hurting your ability to retire free of a mortgage, compare home loans on offer across the market on our website.
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