The terms “retirement planning” and “retirement income planning” are often used interchangeably, but there is a distinction between the two. Retirement planning generally refers to the steps you take to ensure you have enough money saved up to cover your expenses during retirement. Retirement income planning, on the other hand, is about making sure you have a steady stream of income to cover those expenses.
In this article, we’ll take a closer look at the difference between retirement planning and retirement income planning, so you can decide which one is right for you.
What is retirement planning?
Retirement planning is all about saving for retirement. This includes figuring out how much you need to save, where you should invest your money, and how to make the most of any employer-sponsored retirement savings plans.
The goal of retirement planning is to ensure you have enough money saved up to cover your costs in retirement, whether that’s for a lengthy retirement or a shorter one.
To do this, you’ll need to take a close look at your current financial situation and figure out how much money you’ll need to cover your costs during retirement. This will require estimating your living expenses and factoring in things like inflation and healthcare costs.
You’ll also need to consider how long you plan to stay in retirement. If you’re planning on retiring early, you’ll need to make sure you have enough saved up to cover a longer period.
Once you have a good idea of how much you need to save, you can start putting together a retirement savings plan. This will involve figuring out where to invest your money and how much you need to contribute each month or year to reach your goal.
There are several different retirement savings plans available, so it’s important to compare your options and choose the one that best suits your needs.
What is retirement income planning?
Retirement income planning is all about making sure you have a steady stream of income to cover your costs during retirement. This includes figuring out how much income you’ll need, where that income will come from, and how to make the most of it.
The goal of retirement income planning is to ensure you have a consistent stream of income that will last throughout retirement. This means taking into account things like inflation and longevity risk.
Every person is different and has different retirement income needs. Some people may have a pension that will cover a portion of their costs, while others may need to rely solely on savings and investments.
However, you do need to make sure you have a plan in place to cover all your bases. This includes figuring out how much income you need and where it will come from.
Key differences between retirement planning and retirement income planning
So now that we know the difference between retirement planning and retirement income planning, let’s take a look at some of the key differences between the two:
- Focus:The main difference between retirement planning and retirement income planning is the focus. Retirement planning is focused on saving for retirement, while retirement income planning is focused on making sure you have a steady stream of income in retirement.
- Time frame:Retirement planning generally has a longer time frame than retirement income planning. This is because you need to start saving for retirement well in advance, whereas retirement income planning is more concerned with the years leading up to and during retirement.
- Goals:Retirement planning generally has two main goals: to ensure you have enough money saved up for retirement and to grow your money over time. Retirement income planning, on the other hand, generally has one goal: to provide you with a steady stream of income in retirement.
- Strategies:The strategies used in retirement planning and retirement income planning are also quite different. Retirement planning generally involves investing money in a variety of different assets, while retirement income planning typically entails withdrawing money from those same assets.
- Risk tolerance: Retirement planning generally requires a higher risk tolerance than retirement income planning. This is because you’re investing money to grow it over time, which means there’s a chance you could lose some or all of your investment. Retirement income planning, on the other hand, is focused on preserving your capital and ensuring you have a steady stream of income, so it generally requires a lower risk tolerance.
- Complexity:Retirement planning can be quite complex, as there are several different factors to consider. Retirement income planning is generally less complex, as it’s focused on a single goal: providing you with income in retirement.
Which one is right for you?
The answer to this question depends on several factors, including your circumstances and goals.
If you’re still working and have yet to start saving for retirement, then retirement planning is the way to go.
On the other hand, if you’re nearing retirement or are already retired, then retirement income planning is likely the more appropriate option.
Or you can do both!
There’s no reason you can’t do both retirement planning and retirement income planning. Many people find that a combination of the two is the best way to ensure a comfortable retirement.
No matter which route you choose, the most important thing is to make sure you have a plan in place. Without a plan, it will be difficult to achieve your retirement goals.
You can also talk to a financial advisor to get help with retirement planning and income planning. A financial advisor can assess your situation and offer guidance on which approach is right for you.
Conclusion
We hope this article has helped you better understand the difference between retirement planning and retirement income planning. Retirement planning is focused on saving for retirement, while retirement income planning is focused on making sure you have a steady stream of income in retirement. Each has its own set of strategies and goals, so it’s important to choose the approach that’s right for you.
Retirement planning can be complex. We’re here to help simplify it for you! Click here to book a call with one of our Certified Financial Planners and let us show you how we can help.
