Recently I was sitting in a retirement income training class and the four C’s of retirement planning were presented that just made good sense. I have changed the details a little so that they fit the Money Mastery Principles and philosophy, but here you go:
First C: Clarity of thought and action is the first strategy to begin building a predictable retirement income. I ask these questions of the clients I coach and would like you to answer them as well:
- How much income will you need in retirement?
- How many years might you live in retirement?
- What resources do you have to fund your retirement?
- What is your risk tolerance?
- Do you plan to leave any assets to your beneficiary?
Second C: Comfort during retirement is a big concern. Imagine for one minute that you are retired and that Monday arrives and you act like it is Saturday. Tuesday is tomorrow and you act like it is Saturday, and so forth. When you are retired everyday is like Saturday and we spend like we do on Saturday. That is why we tend to spend more money in retirement than when we are working. It is important to consider what kind of comfort you want in retirement so you are more cautious now during working years and not spend everything we make.
Third C: Cost of living is another big strategy to plan for and manage. Health care costs will be the largest expense in retirement that you must prepare for. These expenses will be well beyond what you spend for food, transportation or living expenses. In addition, inflation can slowly sneak into your pocket book and erode 20 to 30% of you purchasing power. Be aware and make sure you are doing something to manage this creepy crawler.
Fourth C: Certainty of income at a time we can not afford to run out of money. Though you worked for 40 years, it is entirely possible that you will live 20 and 30 years more in retirement. Market risks can be a huge drain if you are trying to make money last longer by investing more money, which adds more risks and chance of loss.
These 4 C’s are strategies that must be addressed for you to be at peace when arriving at retirement. I have lots of great experience and advice with how to deal with these 4 C’s and am happy to share them with you: peter@moneymastery.com.
