Is Financial Planning Different Than Retirement Planning

What is the difference?  Make sure you know.

Yes, it most certainly is. A financial plan will focus on the accumulation phase during your working years. Its purpose is to make sure you have a realistic target of how much money you will need after you stop working. It also helps ensure that you’re saving and investing enough to hit the desired target when you do retire. Financial planning is most helpful during your accumulation years.

By contrast, retirement income planning is designed to focus on replacing your paycheck, once income stops, and how various assets can generate an income stream that will cover your expenses for the rest of your life. It’s the difference between you at work and your money at work. Retirement income planning is much more detail-oriented, and it’s a different experience.

In my practice, I start by identifying sources of income….work, Social Security, pensions, and other current income streams available to meet the client’s needs. It’s essential to identify assets that can be used to generate income, and estimate the sustainable income stream, to get a preliminary picture of each client’s situation.

It’s crucial to evaluate retirement risks and to offer alternative solutions to address these risks. The top risks associated with retirement income planning are longevity risk, inflation risk, long-term care risk, health care risk, investment risk, reinvestment risk, public policy change risk, the risk of unexpected financial responsibilities, and risk of the early loss of a spouse.

Choosing the optimal Social Security claiming age, that is appropriate for the client’s situation, is imperative. Many people start thinking about their claiming strategy once they reach their mid-fifties, and most certainly by age 60.

Retirees surrounded by family and friends and who also have a check coming in every month for the rest of their lives are much happier, more stress-free and live longer more interestingly life, according to a study published in The Wall Street Journal.

Research shows that annuities can provide both psychical, mental and financial benefits. Many retirees using guaranteed income from annuities are more confident about affording their preferred retirement lifestyles even if they live to age 90 or older than those who do not own an annuity. A recent report from the LIMRA Secure Retirement Institute, published February 20, 2018.

Annuities are powerful, but they’re not for everyone. For anyone concerned or worried about being able to afford to retire, conducting a detailed retirement financial plan can be extremely valuable.

I see it all the time, in my practice of retirement income planning. Our clients tell us that having a retirement plan is making retirement a lot more fun, with a lot less stress.

LIMRA Secure Retirement Institute: https://www.limra.com/secureretirementinstitute/research/