Four “L’s” Of Retirement Planning
Wade Pfau, Professor of Retirement Income at the American College, came up with this idea and I want to pass it along to you. He notes that the goal of retirement planning is to create a balance between four “L’s”:
- Longevity: ensuring you don’t outlive your money (the #1 fear for most when thinking about retirement)
- Lifestyle: we all envision a retirement lifestyle that is fun, active, filled with experiences, friends and travel
- Liquidity: to make sure we have money for an unexpected expense (or opportunity)
- Legacy: most people want to leave something to kids or their favorite charity; or not.
There are no right or wrong answers to the question of how to weight each of these; it’s the interplay and trade-offs we make as we plan for retirement that is important. Once we know the goals, we can plan the execution to how to achieve these goals. But it starts with the four “L’s.” If you’re thinking about retirement (or if you’re already retired), how would you prioritize and put specific numbers around them?