To enjoy a financially secure retirement, it’s important to spend time doing some in-depth thinking well in advance to determine your goals and requirements in order to achieve the lifestyle you dream of. You need a robust financial plan. A solid retirement income strategy is essential to achieving this.
When thinking about the income you’ll need in retirement, many people find it helpful to think in terms of Maslow’s renowned Hierarchy of Needs.
His pyramid has various levels of need that human motivations move through, starting with the physical requirements for human survival, and ending with mankind’s highest aspirations, reaching ‘self-actualisation’ at the apex of the pyramid.
Adapting this approach to personal finance was pioneered in the US. Using this hierarchical approach in a personal finance context can be a useful tool in deciding how to plan your income in retirement. Building an effective retirement income strategy will help you address all layers of financial need, from survival to self-actualisation.
Survival income
This is the base of the pyramid and consists of the income you need to pay all your basic household expenses, your regular bills and running costs. Your retirement income strategy should ensure these essential needs are met consistently.
Safety income
The next layer up is the amount you might need to meet life’s unexpected events, such as 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 all those things that you never had time to do before you retired, including travel expenses, major purchases or indulging yourself in other ways.
Self-actualisation
Many people add a gift layer representing money they want to pass on to children and grandchildren during their lifetime, and some add a dream layer, their ultimate ‘bucket list,’ to the very top.
The apex of ‘self-actualisation’ represents the ultimate in reaching your full potential, being self-fulfilled and enjoying peak experiences. Maslow described this level as the desire to accomplish everything that one can, and “to become everything one is capable of becoming.”
By viewing your retirement finances in this way, you can gain a clear picture of how much money you’ll need to help you enjoy the retirement you’ve always wanted. A carefully crafted Retirement Income Strategy can make all the difference in reaching self-actualisation.
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At Clifford Osborne, we are highly experienced independent financial advisors based in Eastbourne, East Sussex.
We help clients develop tailored retirement income strategies to achieve financial security and self-actualisation in retirement.
We work with clients across the South East, including Uckfield, Lewes, Brighton, Tunbridge Wells, Hastings, Bexhill, Newhaven, Seaford, Crowborough and further afield. Whether you’re just starting to plan for retirement or refining your financial approach, we’re here to help you every step of the way.
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Contact our friendly team to discuss how we can help you achieve the retirement you’ve always envisioned.
The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.
It is important to take professional advice before making any decision relating to your personal finances. Information within this blog is based on our current understanding of taxation and can be subject to change in future.
It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK; please ask for details. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor.
The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.
If you withdraw from an investment in the early years, you may not get back the full amount you invested. Changes in the rates of exchange may have an adverse effect on the value or price of an investment in sterling terms if it is denominated in a foreign currency. Taxation depends on individual circumstances as well as tax law and HMRC practice which can change.
The information contained within the blog is for information purposes only and does not constitute financial advice.
The purpose of the blog is to provide technical and general guidance and should not be interpreted as a personal recommendation or advice.
