What are the 4 Financial Phases of Retirement? How to Budget For Each One?

After retiring, proper budgeting is critical to your happiness. This article will help you in understanding the 4 financial phases of retirement and how to budget for each one.

7,847 Views | Updated on: Apr 08, 2025

Plan Your Retirement

Retirement is one of the crucial life milestones to reach. So naturally, you work hard to save up enough money to retire stress-free. However, the uncertainties continue to hound you even after retirement. As you progress through your retirement years, some of the considerable challenges you may face include living longer than intended, higher-than-expected inflation rates, and unexpected medical bills. And these are only two of the numerous that you might have to deal with.

To mitigate these challenges, it’s critical to have a strategy in place beforehand. It is necessary to plan how much money will be required, how it will be used, etc. This makes budgeting a crucial part of retirement planning.

Starting early, saving consistently, and allowing compounding growth to do the heavy lifting over time is a safe and traditional strategy. However, for individuals who are still in the early stages of their employment, there may not be enough income to save in the first place. Only when income rises do saving behavior become more important.

Impact of Proper Budgeting for Retirement

After retiring, proper budgeting is critical to your happiness. Making a retirement budget and, more importantly, sticking to it can aid your post retirement plan. A retirement budget ensures that you only spend what you need while also assisting you in saving. Budgeting can assist you in achieving the following goals:

1. Help you use your funds carefully.

2. Prevent you from overspending unnecessarily.

3. Allow you to save money for emergencies.

4. Take you a step closer to financial stability.

5. Ensure you pay your bills timely.

6. Prevent you from sinking into debts.

Financial Phases of Retirement

The four stages of retirement include:

Accumulation Stage (Age 30-50)

This is the stage in which you begin to accumulate wealth. You can go for bold investments now because you are young. Set aside a fixed amount for investments and premiums. You can manage post retirement plans successfully by recreating the same income you had at 30 when you retire at 60. As a result, when you turn 30, you must invest 10-12% of your income to achieve your goal income. Remember, the sooner you wish to retire, the more you’ll need to save. Contribute 18-20% of your income to your retirement fund if you want to retire early, say at 55. Similarly, if you desire to retire at 50, the rate rises to 35%.

Savings Stage (Age 50-60)

You work hard to protect the money you’ve collected over the years. You don’t want your portfolio to plummet at a phase so close to retirement. As a result, you should assess your assets, as most of them will begin to mature. This stage is more concerned with maintaining existing growth than achieving new heights. If you have accomplished most of your key goals by this stage, you can contribute even more of your earnings to your retirement fund.

Retiring Stage (Age 60-65)

This is the stage when you are essentially ready to retire. You must choose whether to retire or continue working at this point. If you are content with the corpus you have built, you can retire at 60. On the other hand, continue working if you believe you will require a larger corpus or have some post retirement plans that will necessitate additional funds. Working a little longer can help you save a lot of money because your money will remain untouched for another 4-5 years, allowing you to reap the benefits of compounding. Before making your selection, be sure that all your bills are paid off, and your retirement fund is at least near to, if not at, the desired level.

Distribution Stage (Age 65+)

After you retire, you will enter this phase. Your income has ceased at this point. During the distribution phase, the efforts you’ve put in over the years to build a retirement fund and other investments will finally pay off. This phase assesses the accumulation and savings stage’s success. A retirement budget should be created for a longer period, such as a year rather than monthly, to account for contingencies at this stage.

Each stage can come sooner or later for an individual depending on their requirements, savings, income source, etc. Therefore, the means chosen to create a budget for each stage might also differ from one person to another. It is obvious that one budget will not be sufficient to cover all aspects of your retirement. So, depending on the stages of retirement, adjust your budget. However, to receive the best outcomes before and after retirement, start as early as possible and try sticking to your budget.

Written By :

Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Reviewed By :

Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

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