Hopefully you have a nest egg for retirement. It should be growing as you save 10 percent of your income for life. With the assets you have set aside for retirement, make sure you lock down some of that income… this is the first and most important way to plan for a great retirement. Second, pay attention to inflation, liquidity and the possible need for long-term care. These are important, but as noted, they are second to creating a guaranteed income for life by locking down some of your income.
Take a look at the following illustration:
If you experience inflation over several years, you have options to reduce this, but without income, you have nothing to work with. You face the same problem with liquidity. We all have emergencies and need some cash for an unforeseen event, so it’s good to have some cash in reserve that is not a part of monthly expenses. But still, needing money quickly is not as important as having a good income you cannot outlive. And what about long-term care? If you have already created an income stream that you cannot outlive, then you can pay for long-term care and it doesn’t have to be a worry, so again, locked down income that will never run out is the most important focus. If you don’t have a guaranteed income and need long-term care in your later years, all your money could be wiped out in a matter of months or a few years.
Because none of us will get out of this life alive, we should also plan what to do with the guaranteed income stream we will leave behind for a our loved ones. There are some simple steps to take to make sure family members will get the most out of what we leave behind. Contact me for no-obligation help: peter@moneymastery.com.
