Most of us are somewhat familiar now with the basic stages of space travel. There is the initial “blast off” and fast acceleration phase, the slowing down phase as the boosters are jettisoned, and finally the sustained orbit around the earth.
Planning for retirement has a similar three stage process: the accumulation stage, the transition stage, and the retirement income stage. The “blast off” stage is the accumulation stage of life. This is where you provide the fuel for a successful retirement through adequate savings and earnings.
In space travel, when adequate height above the earth has been achieved, the engines are throttled down. Otherwise the spacecraft would break apart as it leaves earth’s atmosphere. In retirement planning, the individual generally needs to throttle down from an aggressive investment to a more conservative one. Depending on how one plans to take their retirement income, this transition stage generally extends from about 5 years before retirement until about 5 years after retirement.
In space travel, if the first stages were successful, then orbit is achieved. This orbit stage is analogous to one moving into their retirement years with adequate retirement income on a regular basis that cannot be outlived. Sometimes there are surprises and necessary adjustments, but these can generally be handled if based on adequate early preparation.
In space travel, you cannot reach the orbit stage unless there was a successful blast off and transition. Likewise, the adequate retirement income stage is only achieved if the first two stages are successful. And there can be no transition stage unless there was a successful accumulation stage.
In space travel, if things go wrong in the initial stage or the transition stage, you cannot achieve a successful orbit and cannot go back at that point and successfully “fix it.” In retirement planning, once you reach the time for the transition or the income stage, you cannot go back and successfully fix it. Thus, it is critical that you do everything possible in the early years to achieve a successful “blast off,” which means putting aside an adequate amount for retirement and making sure it is invested appropriately. If you don’t do this adequately in the early stages of life, you’re setting yourself up for catastrophes later in life.