Prepping For 3 Stages of Retirement

Sharon Burns

If you don’t think financial fitness is a part of good health, try being poor. Or try planning for retirement without understanding the dynamic changes you could be in for on a fixed income. Sharon Burns tells people to think big picture and long term when planning for their golden years.

Burns, clinical associate professor of consumer sciences and retailing, has written books on such money matters, including Financial Caregiving, a handbook for adults taking care of their aging parents to be rereleased this fall. Passionate about helping seniors manage their money, Burns says people nearing retirement should brace themselves (while simultaneously preparing) for change the years bring.

“Income in retirement will likely come from a third party, such as Social Security or a pension plan,” says Burns (PhD ’88), who has three Purdue degrees and came back to teach at her alma mater in 2009 after working for 12 years as a certified public accountant. “The key is to understand how much income and expenses are going to change.”

Burns says retirement usually involves two to three stages. In the first stage, work-related expenses may diminish, but couples looking to travel sometimes buy some sort of cruiser, giving them a new car payment. In the second stage, from the late 70s to early 80s, travel and social expenses may decrease, but medical expenses start to rise. The octogenarians with many years left end up spending a lot of money for care giving in the third stage.

“A common mistake is that people only think of retirement as that first stage,” Burns says. “Income and expenses vary over the span of retirement. If a husband and wife are both drawing Social Security and one spouse dies, for example, the survivor will see income drop by at least a third, maybe even in half. The widow or widower in this case can’t rely on that money, because it won’t be there.”

Getting an estate plan and legal documents in order, along with attempting to go into retirement debt-free, are also good goals for people of any age planning for a nest egg. For Burns, who graduated as one of Purdue’s first financial planning majors in 1981, the best advice may be to prepare as best you can for life’s curveballs. Far from a static existence, retirement can be a dynamic time of life. And with money in the bank, it can make for some of the best times.

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