The foundation: Immediate concerns and debt readiness
The foundation addresses immediate concerns and debt. This would mean using your pension savings to manage insoluble debts such as arrears on mortgages, credit cards or personal loans. We believe the repayment of such debts should be prioritised as they could cause financial instability, emotional stress and hardship and serve to hinder your enjoyment of retirement.
Level 1: Essential income
This is where a person’s retirement income is enough to provide what they need to sustain only the most basic of needs. Their income will pay for their essential expenses and cover their essential bills.
Level 2: Safety fund
This is where a person is able to also build up a rainy day emergency fund (enough to cover them if they lost their income for 6 months, or to handle an urgent house repair) in addition to covering all of their monthly outgoings.
Level 3: Freedom income
At this level, a person’s retirement income allows them to enjoy their retirement with such things as small holidays and entertainment. They have a little ‘extra’ to enjoy life with.
Level 4: Gifts
At this level, a retiree has enough income to make gifts to their family, or take on such things as education expenses for a loved one.
Level 5: Dreams
Not many retirees will reach this level, where they are able to spend their retirement checking off dream items on their ‘bucket list.’ These retirees have significant personal wealth, and a retirement income significantly greater than they need for a comfortable life.