I'm a Financial Planner: These Are the Seven Tiers of Retirement Well-Being

In the field of psychology, Abraham Maslow's hierarchy of needs has long been used to explain what motivates human behavior — from basic survival to self-actualization.

What if that same concept were applied to financial planning? For individuals navigating retirement or preparing for it, understanding which financial needs matter most — and in what order — can be a game changer.

Here's a practical take on how to construct your financial life, starting with the essentials and working up to long-term legacy goals.

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Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

1. Income: The foundation of financial stability

Income is the base of any financial hierarchy. Without a steady earnings stream —through employment, business or investment returns — it's difficult to meet even basic financial needs.

Before thinking about tax strategies or estate planning, the first goal must be to generate reliable income that covers essential living expenses.

In retirement, this often shifts from earned income to passive income sources such as pensions, Social Security, annuities and investment withdrawals. Ensuring stable and sufficient income is the bedrock of financial security.

2. Protection: Guarding against the unexpected

Protection includes life insurance, disability coverage, long-term care planning and basic legal documents such as a will and power of attorney.

These tools help ensure that if something unexpected happens — an illness, accident or death — financial hardship doesn't follow.

Protection planning might not be flashy, but it's critical; without it, even a solid income can be derailed.

For retirees, this means having adequate health coverage and considering whether long-term care insurance or other tools are appropriate.

3. Emergency reserves: Preparing for life's curveballs

An emergency fund serves as a financial shock absorber. For those still working, this typically means three to six months of expenses set aside in cash or liquid accounts.

For retirees, it might look more like a buffer within an investment account or designated cash reserves to cover unexpected health care costs, home repairs or market downturns.

Having a reserve prevents reliance on high-interest debt or making premature withdrawals from retirement accounts when unexpected expenses arise.

4. Debt management: Eliminating financial drag

Not all debt is created equal. While a low-interest mortgage might be manageable, high-interest consumer debt — particularly from credit cards — can quickly sabotage financial progress.

Eliminating toxic debt is crucial before building toward long-term goals.

In retirement, carrying high-interest debt can put added strain on those living on a fixed income. Prioritizing debt reduction increases financial flexibility and reduces risk.

5. Retirement savings: Creating future optionality

Contributing to IRAs, 401(k)s or other tax-advantaged accounts builds future optionality — the ability to choose how and when to retire without financial pressure. The earlier this step begins, the more powerful compounding can be.

Saving for retirement often competes with other priorities, such as college funding or lifestyle upgrades.

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But retirement is one of the only major life expenses that can't be financed. You can borrow for college, not for retirement.

6. Estate and tax planning: Optimizing what you've built

Your next step is to ensure that wealth is protected, transferred efficiently and taxed appropriately through up-to-date estate planning documents, thoughtful beneficiary designations and strategies to reduce taxes.

For retirees, this might involve Roth conversions, strategic withdrawals or gifting strategies.

Estate planning isn't just about leaving a legacy — it's also about ensuring your wishes are carried out smoothly and effectively.

7. College planning and other luxuries

The "nice-to-haves" sit at the top of the pyramid. For many, that includes saving for children's or grandchildren's education.

While education is important, college funding is a luxury in the context of financial planning — it's a goal with many solutions (loans, scholarships, grants), and one that shouldn't take precedence over personal retirement security.

Other "top-tier" goals might include dream vacations, second homes or charitable giving. These are important and meaningful — but ideally addressed only after the core needs have been met.

Final thoughts: Financial planning with purpose

Personal finance is personal. Everyone's hierarchy might look slightly different based on values, goals and circumstances.

But the general framework remains a useful guide: Cover the essentials, guard against risk, save for the future, then build toward legacy and lifestyle goals.

When viewed this way, financial planning becomes less about chasing the next best strategy and more about aligning money with what matters most — security, peace of mind and the freedom to live well.

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