3 stages of retirement — steps you can take to prepare financially for each

August 19, 2026

Your priorities, income needs and spending will likely change as you move through retirement. Here's what you need to plan for.

Volunteering? Traveling? More time with loved ones? You probably have an idea of your perfect retirement. But don't count on it staying the same over what could be a period of more than 30 years.

Retirement typically unfolds in three stages — Exploring, Nesting, and Reflecting — and each stage brings different financial priorities, spending patterns, and lifestyle needs. Early retirement may include higher discretionary spending, while later stages often shift toward stability, healthcare, and legacy considerations. Understanding how your income, expenses, and goals may evolve can help you create a flexible strategy that supports you throughout retirement.

Below, take a look at how your retirement may evolve over time and what you can do to prepare. Click the links within each section for more detailed insights.

Exploring

In the first stage of retirement, you might:

Learn new skills, volunteer, spend more time traveling and take up new hobbies.
Move to a new locale and/or purchase a second home.
Start a new business or work part time.

Questions you can ask yourself to prepare:

Key financial priorities include continuing to invest for growth and future healthcare costs, while also funding increased spending on leisure activities like travel. Consider:

How can I develop a predictable income stream to cover both my essential and discretionary expenses and what are the tax implications of withdrawing from my various accounts according to Go to third-party website IRS retirement plan distribution guidance popup?

When should I consider taking Social Security benefits?

What strategies should I consider to help protect myself against unexpected healthcare expenses as I age? Should I purchase long-term care insurance? How do coverage options and costs work on the Go to third-party website Medicare website popup?

Should I work part time so I can limit my withdrawals and allow my assets to continue growing?

67% of workers hope to travel in retirement — the most frequently cited retirement dream.Footnote ¹

Nesting

In the next stage, you may:

Settle into a routine with a more relaxed pace.
Travel closer to home and/or spend more time with friends and family.
Consider relocating or downsizing.

Questions you can ask yourself to prepare:

As your spending slows a bit, consider using this period to prepare for potentially higher expenses in the next stage when you may face inflation and rising healthcare costs. Consider:

Should I invest more aggressively to increase the odds that I won't outlive my assets?

What do I need to think about when deciding where I want to live in retirement?

Nearly a third of homeowners ages 69 to 77 who recently purchased a new home did so to be close to family or friends.Footnote ²

Reflecting

In this stage, you could:

Encounter more health-related expenses.
Be a widow or widower, or need support from your family or others.
Start thinking more deeply about your estate plan.

Questions you can ask yourself to prepare:

You may want to strike a balance between securing your own financial future and leaving a legacy. Consider:

Can my current asset Go to third-party website withdrawal strategy popup cover the cost of any unexpected expenses or help I may need?

Are my will, power of attorney, healthcare directive and beneficiaries on insurance and retirement accounts all up to date?

Should I consider gifting some of my assets now?

More than one third of Americans say a medical diagnosis would motivate them to begin estate planning.Footnote ³

More for you

Connect with a Merrill advisor for guidance on creating a retirement income strategy you can put into action
Try our Personal Retirement Calculator to see if you're on track for retirement
Use the Bank of America Spending & Budgeting tool to see where your money goes each month

Footnote ¹ Transamerica Center for Retirement Studies, "24th Annual Transamerica Retirement Survey," August 2024.

Footnote ² National Association of Realtors^®, "2024 Home Buyers and Sellers Generational Trends Report."

Footnote ³ Caring.com, "2025 Wills and Estate Planning Study."

Merrill, its affiliates, and financial advisors do not provide legal, tax, or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.

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