Dividing Retirement Into Distinct Segments Can Ease the Planning Process
As people continue to live longer than any generation has seen, the idea of retirement presents new challenges when planning for the future. The greatest of these challenges is the unpredictability driven by 1) the general effects of aging and 2) how long their retirement will last. To help mitigate this unpredictability when planning for retirement, we take a “divide and conquer approach”: we divide the retirement planning into two distinct phases - early retirement and later retirement.
Although retirement age can vary depending on when retirement begins, for this paper we will assume an age 65 at retirement. We propose that the early phase is finite, encompassing the first 20 years, which may be dominated by relative certainty and the likelihood of more precise planning. The later phase comprises the post-20 years into retirement and can be expected to present more of the unknowns.
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