Americans are living longer and most Baby Boomers will enjoy many more years of retirement than their parents or grandparents. But along with this increased longevity comes the fear of outliving one’s retirement savings.
Recent research studies and polls report that nearly half of U.S. Baby Boomers fear they will outlive their retirement savings and not have enough to meet basic family needs. This is not just a concern of the middle class; a survey conducted by Bank of America last January reported that a majority of wealthy Americans were concerned that they won’t have enough retirement income to last through their lifetimes. What’s more, many people fear depleting their assets more than they fear dying, according to a poll by Allianz Life Insurance of people ages 44 to 75.
Ensuring we have an income stream that outpaces inflation and lasts as long as we do will require significant consideration and planning. Mitch Anthony, author of “The New Retirementality” and founder of the Financial Life Planning Institute, has developed a financial life planning approach by adapting Abraham Maslow’s hierarchy of needs to create a “Hierarchy of Financial Needs.” Maslow taught that human beings are motivated by unmet needs, and that lower needs must be satisfied before the higher needs can be addressed. Anthony applies this same concept to identify the income needed for basic survival, safety and security, as well as the amount of money that will help us pursue our aspirations and dreams. He calls this “Income for Life.”
Understanding Your Hierarchy of Financial Needs
Following is an overview of the five levels of Income for Life in Anthony’s Hierarchy of Financial Needs. (See chart.)
Survival income is money we need to make ends meet. What does it cost to cover the very basics of survival – food, shelter, utilities, clothing, insurance and transportation?
Safety income is money needed to meet life’s unexpected turns. We are surrounded by risks related to our financial, physical, and family situations. How much will you need if things don’t go exactly as planned? What might you need if you are faced with a serious illness or disability, a sudden job loss, or damage to your home or your vehicle?
[caption id="attachment_852" align="aligncenter" width="882"] Anthony’s Hierarchy of Financial Needs[/caption]
See Part 2.
[caption id="attachment_433" align="alignleft" width="150"] Robert K. O’Dell, CFP[/caption]
Coyle Financial Counsel’s Rob O'Dell, CFP® has been implementing strategies and providing ongoing wealth counsel to families as they navigate life’s transitions for the past ten years. Contact Rob to learn about visual financial planning and mind mapping and discover a better way to manage your finances.
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Posted on Wed, November 7, 2012