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What Actually Defines a Recession, and the Four Phases of Retirement

As July 2022 drew to a close, the three major stock indexes saw their best month since November 2020. The S&P 500 grew 9.1%, the Dow Jones Industrial Average increased 6.7%, and the tech-heavy Nasdaq-Composite grew 12% for its best month since April 2020. 


Investors are hopeful that signs of slowing economic growth could encourage the Federal Reserve to be more measured with upcoming rate increases. The Fed’s Personal Consumption Expenditures (PCE) index has slowed each month since peaking in February, and the University of Michigan’s long-run consumer inflation expectations measure also recently declined. Both data points are encouraging signs that the Fed’s interest rate hikes are working, giving investors hope that the Federal Reserve’s continued actions will tame inflation. 


Despite these gains and positive signs, the major stock indexes are still in negative territory for 2022 – with the S&P 500 ending July down around 13% year-to-date – and U.S. Gross Domestic Product (GDP) fell 0.9% in the second quarter of 2022, following a 1.6% decline in the first quarter. (GDP is a broad measure of overall domestic production, that functions as a scorecard of a country’s economic health). 


While some would define two consecutive quarters of falling GDP as a recession, the National Bureau of Economic Research (NBER) – the official recession “referee” – defines a recession as, “a significant decline in economic activity that is spread across the economy and that lasts more than a few months.” Hardly scientific, we know, but importantly the official determination of a recession is based on a holistic look at data that includes the labor market, consumer and business spending, industrial production, and incomes. 


And all four of the NBER’s indicators have exhibited strong growth since the start of the pandemic, continuing to expand through the first half of 2022. In fact, 1.1 million jobs were created in the second quarter of 2022, more than three times more jobs created than in any three-month period leading up to a recession, and the unemployment rate has remained low. 


Thus, we are living through interesting times with unique dynamics, where a very strong labor market is co-existing with a weaker economic environment. We at Charter Oak are hopeful that market conditions will continue to improve in the second half of 2022, given the mix of positive signs above, and the strong history of U.S. economic expansion through many market cycles. 


TEDxSurrey, The 4 Phases of Retirement
by Dr. Riley Moynes


We recently came across and highly recommend watching this entertaining and informative 13-minute TEDx presentation by Dr. Riley Moynes titled The 4 Phases of Retirement. The presentation shares an excellent framework for getting ready to retire psychologically and “squeeze all of the juice you can out of retirement,” because, as Dr. Moynes says, “there is a very good chance you’ll live one-third of your life in retirement.”


In a nutshell, the 4 Phases are: 

1. The Vacation Phase: wake up when you want, do what you want all day, no set routine – freedom baby! We begin missing a routine and asking ourselves, “is that all there is?” 

2. The Loss and Lost Phase: we lose routine, sense of identity, relationships, purpose and power. We may come face-to-face with divorce, depression, decline. We may feel fear, anxiety and depression. 

3. The Trial and Error Phase: we search for meaning and contribution, can deliver disappointment and failure. 

4. The Reinvent and Rewire Phase: not everyone breaks through to this phase, but those who do are some of the happiest people. Here, you answer tough questions about purpose and mission, find meaning and a sense of accomplishment, which almost always involves service to others. 


Charter Oak advisors recognize that psychological readiness to retire may be even more important than financial readiness to retire, and these conversations are an important part of nearly every client interaction as we seek to increase our client’s return on life. 


We hope you enjoy the video and share it with others. Notably, Dr. Moynes said that people who transition to the final phase are “some of the happiest people he has ever met.” It is a privilege to serve as your trusted advisor, and we wish you an August for the memory books.