CAMP is not a place with temporary accommodations of huts, tents, or other structures, typically used by soldiers, refugees, prisoners or travelers. When I was a child, I went to camp to escape the New York summers. CAMP is not a destination! If you do not know what CAMP is, you should! CAMP is a way of realistically measuring your retirement readiness.
What is CAMP? It is an acronym for four key retirement concerns! There are hundreds of retirement calculators that barely touch on some of these concerns. The various calculators are just supposed to help you determine how much you should save for retirement. Are you on track? Can you maintain your current lifestyle in retirement? Do you have a pension, Social Security or IRA? How long did you plan on living in retirement? Will it be enough?
What is CAMP?
- Cash flow – In this case, cash flow is the amount of income you receive from all sources in retirement which is intended to replace your work income. Can you live on a lower income than you received when you were working? Are your expenses lower in retirement? I know I will no longer have an eight (8%) percent pension deduction in retirement. Also, I will no longer save thirty-five (35%) percent for retirement. Based on those two deductions, I can live on sixty-seven (67%) percent of my monthly income. How much do you need in income during retirement?
- Aging –I expect to live as much as thirty (30) years in retirement. I may need assistance in my later years at home or in a facility. I will need Long Term Care insurance. Long term care (LTC) can cost $6-7,000 per month in today’s dollars and it could be for years.. You need LTC insurance to cover the support and services you might need for your daily activities and cognitive impairments at home or in a facility. I bought LTC insurance for my wife and myself to avoid depleting my savings. You may not need LTC insurance, but how will know?
- Medical - As we get older, medical expenses are a bigger factor. Although you are eligible for Medicare, there are deductibles and co-payments. Many older American buy gap insurance to cover these uncovered medical expenses. If you do not have gap insurance, you will have to pay these medical expenses from cash flow. How will you cover your medical expenses?
- Purchasing Power – Inflation destroys your purchasing power. The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. How do you keep your income inflation proof? You need to generate enough growth to keep up with inflation. The CPI less food and energy is typically used for Social Security or pensions increases. It is commonly called a Cost of Living Adjustment (COLA). The Federal government thinks food and energy is a commodity which goes up and down. It can materially affect your purchasing power! What are you going to do?
Are you thinking about retirement? If you are fifty (50) or older, you probably thinking about retirement quite often. You probably start with how much savings you have, but as I pointed out, it is not enough. I approached this question before there was an acronym! I divided my needs and wants in terms of cash flow. I covered my needs with cash flow that had COLA annual increases. My wants are funded by my stock market asset allocation that will grow faster than inflation.
I am fortunate enough to have a pension that has lifetime medical/dental/vision insurance along with Medicare. My wife and I took out Long Term Care insurance to cover our expenses in our later years. My mother needed long term care in her later years. These issues are not normally included in retirement calculators, but should be. How are you going to address these factors? CAMP are factors you should consider when you are getting ready for retirement!
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