The first time you hear of income planning, you might think it's the same thing as financial planning. While it is a subset of financial planning, there are some key differences between the two. Let's look at how income planning services differ.

Specificity

Generally, a financial planner takes a broad view of what's going on in a person's life. This includes addressing questions about nearly every scenario that can emerge from the time someone gets their first dollar until well into their retirement years. Financial plans cover debt, income growth, investing, planning to buy a house, and plenty more.

On the income planning side of the ledger, there's a specific focus on making sure someone will have enough money coming in to meet their goals. Rather than promoting growth, this approach favors developing reliable income sources.

Target Period

Most folks seek income planning services when they get to the point in their lives where financial stability is critical. The income focus tends to kick in when people start approaching retirement in the 50s. More importantly, an income planner will help you to make the most of your available resources as you move through your retirement years. In that sense, income planning is more about not running out of money than it is about building your resources.

Identifying Income Gaps

A planner's major goal is to identify and address any potential income gaps. Foremost, they want to think about the potential risks that emerge as someone heads toward retirement. For example, what do you do if inflation picks up unexpectedly 10 years from now? Do you have the necessary income to live a stable existence if the economy outpaces your income sources?

Minimizing Taxes

Planners also want to make sure their clients don't run into major tax bills at this time in their lives. You'll like want to withdraw money from investment retirement accounts, for example. It's not just a question of how much money you can withdraw. Ideally, you want to draw the maximum possible without moving into a higher tax bracket than you're comfortable with.

Setting Expectations

It's also important to think about what your expectations are regarding income and expenses. You don't want to run into a situation where certain lifestyle choices force you into significant drawdowns. Similarly, you need to assume best-case scenarios in terms of longevity to minimize the risk your money will run out later in retirement.