Income needs in retirement

It’s often said that retirement can seem as big a challenge as starting your first job. To enjoy a comfortable old age means doing some in-depth thinking well in advance, asking yourself what your goals are and how much money you want to have at your disposal when the time comes.

So how should you approach creating a robust financial plan?

A NEW SLANT ON MASLOW’S PYRAMID

Many people find it helpful to think in terms of Abraham Maslow’s famous Hierarchy of Needs. His pyramid diagram contained various levels of need that human motivations generally move through, starting with the physical requirements for human survival, and ending with mankind’s highest aspirations.

Adapting this approach to retirement planning was pioneered by US money guru, Mitch Anthony. Using this hierarchical approach in a personal finance context can be a useful aid in deciding how to work out how much retirement income you need.

SURVIVAL INCOME

This is the base of the pyramid and consists of the income you need to pay all your basic household expenses. In effect, it means drawing up a budget that covers all your likely regular bills and running costs.

SAFETY INCOME

The next layer up, this is the amount you might need to meet life’s unexpected events. Typically, this would include health and later-life care costs, loss of income and any emergency financial help you might want to give your family.

FREEDOM INCOME

This layer is all about assessing the likely cost of doing and enjoying all those things that you never had time to do before you retired. So if you’re planning a trip, a major purchase or want to indulge yourself in other ways, this is the amount you feel you’ll need.

TOPPING OFF THE PYRAMID

Many people add a gift layer representing money they want to pass onto children and grandchildren during their lifetime, and some add a dream layer, their ultimate ‘bucket list’, to the very top.

By viewing your finances in this way, you can gain a clear picture of how much you need to have saved by the time you reach retirement. With these amounts in mind, you can build up a comprehensive financial plan to help ensure that you can enjoy the sort of retirement you’ve always wanted.

Share and Follow us:

Share on linkedin
Share on facebook
Share on twitter
Share on email
Share on print
Share on whatsapp

0 Comments

Other posts you might find useful

Corona Virus and Stockmarkets
Investment

Market Volatility and the virus

Long term investment principles The world is watching with concern the spread of the new coronavirus. The uncertainty is being felt around the globe, and it is unsettling on a human level as well as

Read More »
global investment outlook
Investment commentary

Global Investment Outlook 2020

Our thoughts for 2020 Two thousand and nineteen has overall produced strong returns for investors even though volatility increased in equity and bond markets over the year. We are currently in one of the longest

Read More »
commercial property
Investment

Property Fund Suspension

Not another fund suspension! Earlier this week we had yet again an announcement of a temporary fund suspension from one of the leading property fund managers in the UK. M&G Investments announced the temporary suspension

Read More »

I am text block. Click edit button to change this text. Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper matti pibus leo.

Get Started

  • Tutorials
  • Resources
  • Guides
  • Examples
  • Docs

About

  • Stories
  • Community
  • Blog
  • Careers
  • Brand Assets

Downloads

  • Flex UI Kit
  • Modern UI Kit
  • Framer UI Kit
  • Gradients UI Kit
  • Black & White UI Kit