Retirement Planning Different From Financial Planning

How is Retirement Planning Different From Financial Planning?

Updated on Jan 28 2019


The terms “retirement planning” and “financial planning” are often used interchangeably as people talk about long-term financial goals. The truth is that while related, the two are very different and understanding the difference between the two is crucial to developing a sound and secure financial future.

Learn more about the important differences between retirement planning and financial planning.

What is Retirement Planning?

Simply put, retirement planning is your plan for life after you stop working. A holistic retirement plan will include not only financial planning, but also important lifestyle choices including when to stop working, where to live, and potentially pursuing a second career. This looks different for everyone. Maybe it means downsizing, maybe it means traveling, maybe it means a big move, or moving in with family. Whatever it means, it’s going to take a fair amount of planning to get there.

To begin financially planning your retirement, you first need to establish your retirement goals. Only then can you assess where you are currently and what you need to do to reach those goals. Financially planning for retirement should include identifying any sources of income like Social Security and pensions, estimating expenses, managing assets, and implementing a savings or investment plan to achieve retirement goals.

What is Financial Planning?

Financial planning is more current than retirement planning. Where retirement planning is something in the future, financial planning is ‘in the now.’ This is your current strategic plan based on your finances with a paycheck. It’s how you spend and budget with your current income. It involves making strategic investments with the money you have now to secure a healthy financial future.

You can not have a healthy retirement plan without a solid current financial plan and a good financial plan will include a retirement plan. Making a financial plan is a comprehensive process that includes resource allocation, risk assessment, investments and a plan for meeting future needs.

The Importance of Financial Planning and Retirement Planning

While the two terms are different and should not be used interchangeably, they are closely related in that you can not do one without the other. Your financial plan, which includes budgeting, spending, and investing now, has to be on track to keep your long-term retirement plans on track. Therefore, one is not more important than the other. They are equally important, both major parts of a secure financial strategy.

A fiduciary financial advisor can help you further understand the differences between the two and conduct a financial assessment that will help you visualize where you are now in comparison with both your financial and retirement strategy. Trusted partners in both financial planning and retirement planning, fiduciary financial advisors can walk you through financial strategies to bolster both current and long-term plans. They can help hold you accountable and walk you through investment options, helping you create a budget that maximizes contributions to your future while spending wisely today.

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