Mastering the three stages of retirement planning

When clients think of retirement, they often imagine a single moment: the last day of work. But as experts Mike DiJoseph and Lauren Martinelli emphasize, retirement is not a one-time event—it’s a decades-long journey that demands evolving strategies. For advisors, understanding and guiding clients through the three distinct stages of retirement planning—short-term, medium-term, and long-term—is essential to delivering lasting value.

Stage 1: Short-term planning (Years 1–3)

This phase of retirement is all about cash flow clarity and lifestyle continuity. You should help clients:

• Differentiate discretionary versus non-discretionary spending: Think essentials like housing and insurance versus travel and leisure.
• Assess liquidity needs: Determine how much to keep in cash or cash equivalents to cover near-term expenses.
• Balance comfort and opportunity: Clients may need to trade off potential investment returns for the peace of mind that comes with accessible funds.

Stage 2: Medium-term planning (Years 3–15)

This is where sequence of return risk becomes a critical concern. Key strategies for this stage include:

• Dynamic spending: Adjust withdrawals based on market performance. For example, a modest 2.5% spending cut in down years can increase portfolio success rates by over 30%.¹
• Risk tolerance calibration: Help clients understand their emotional responses to volatility and build portfolios that reflect both their financial and psychological comfort zones.
• Permission to spend: Many retirees struggle to shift from saving to spending. You play a vital role in helping clients enjoy the fruits of their labor without worry.

Stage 3: Long-term planning (15+ Years)

The final phase focuses on legacy, health, and dignity. You should guide clients through:

• Healthcare and insurance planning: Ensure coverage for potential long-term care and medical needs.
• Estate and legacy conversations: Move beyond tax efficiency to explore how clients want to be remembered. Whether it’s funding education, supporting charities, or creating family traditions, legacy is both financial and emotional.
• Family dynamics: Address spousal considerations and intergenerational wealth transfer with sensitivity and foresight.

Ready to elevate your retirement planning strategies?
Visit our retirement planning hub to learn more and empower your clients to retire with confidence.

For more insights straight from the experts themselves, check out the video below.

1 Source: Colleen M Jaconetti, Michael DiJoseph, Francis M. Kinniry Jr., Chris Tidmore, and Ted Dinucci, October 2023. From Assets to Income: Vanguard’s Advisor’s Alpha™ guide to retirement income. Valley Forge, Pa.: The Vanguard Group.