Steve Kerby

Oregon Financial Group

Is Financial Planning Different Than Retirement Planning

Financial Planning vs. Retirement Planning: What You Need to Know

When we talk about our financial futures, two terms frequently emerge: financial planning and retirement planning. But are they the same thing? In short, no. Each plays a distinct role in securing our financial futures, and it's crucial to understand their differences.

Financial Planning: This focuses on the accumulation phase during our working years. Its main goal? Ensuring we set a realistic target for the savings we'll need when we stop working. Financial planning helps guide our saving and investing habits by calculating how much we might need post-retirement. It's most beneficial during our prime earning years.

Retirement Planning: Think of this as the plan for how your money will work for you once you're no longer working. This strategy is about replacing your paycheck and figuring out how your assets may create a steady income that will last your entire retirement. It's more intricate than financial planning because it's not just about accumulating money but making it last.

In professional practice, the starting point is recognizing your income sources – from work, Social Security, pensions, or other avenues. You get a clearer picture of your retirement outlook by pinpointing assets that may be transformed into steady income.

But retirement planning doesn't stop there. It's essential also to be aware of potential risks in retirement. These include:

  • Longevity risk – outliving your savings.
  • Inflation risk – reduced purchasing power of your money.
  • Healthcare and long-term care risks – the costs of medical care and support.
  • Investment and reinvestment risks – fluctuations in returns on your investments.
  • Public policy changes – alterations in governmental policies that might affect retirees.
  • Unexpected financial responsibilities.
  • Loss of spouse – the financial implications of losing a partner.

Making decisions is vital, like determining the best age to claim Social Security. Often, individuals begin considering this in their mid-fifties to early sixties.

Now, let's talk a bit about happiness in retirement. A Wall Street Journal study found that retirees with steady income sources and a robust social circle lead happier, more fulfilling lives.

Enter annuities. Research indicates that they offer not just financial but also mental benefits. The LIMRA Secure Retirement Institute found that retirees drawing guaranteed income from annuities felt more secure about affording their desired retirement lifestyles, even if they lived beyond 90. But remember, annuities aren't a one-size-fits-all solution.

If the idea of retirement finances feels overwhelming, you're not alone. Many find that drafting a detailed retirement financial plan removes much stress. Having a clear strategy may turn retirement from a period of worry to a time of enjoyment.

While financial planning helps build your nest egg, retirement planning ensures the egg lasts. Knowing the difference may pave the way for a more secure, fulfilling retirement.

  • Financial Planning: Focuses on the accumulation phase during working years.
  • Retirement Planning: Centers on generating a consistent income post-retirement.
  • Retirement planning assesses various risks, including longevity, inflation, and healthcare.
  • Choosing the right age for claiming Social Security is crucial.
  • A steady income in retirement, such as from annuities, may contribute to happiness and security.
  • Having a detailed retirement financial plan can alleviate stress and enhance retirement enjoyment.
Steve Kerby picture

Steve Kerby

Oregon Financial Group

5555 SW 196th Ave.

Aloha, Oregon 97078

(503) 936-3535

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