What is a Retirement Financial Advisor?
Updated: Jul 19
A retirement financial advisor, also sometimes referred to as a retirement planner, is an advisor who is specially equipped to provide retirement advice and to help clients with their retirement planning. This article identifies several areas of retirement planning that a retirement advisor is uniquely suited to address.
Retirement Financial Advisor Specialty #1:
Retirement Income Planning
A retirement advisor, or retirement planner, will help you create a retirement cash flow statement like the example shown below. Among other things, a retirement cash flow statement will show whether you will have a retirement income surplus or shortfall during retirement.
The retirement cash flow statement provides the foundation for retirement advice in many of the specialties described below.
Retirement Financial Advisor Specialty #2:
Retirement Expense Planning
A retirement advisor will help you estimate how much you’ll need to spend each year during retirement. To do this effectively, taxes in retirement, healthcare costs in retirement, and many other items including inflation must be factored into expense planning.
A retirement advisor pays careful attention to retirement taxes, healthcare costs, and inflation to help estimate retirement expenses. Estimating retirement expenses in a way that factors in healthcare costs, taxes, and inflation is an important piece of the retirement advice provided by a retirement financial advisor or retirement planner.
Retirement Financial Advisor Specialty #3:
Social Security Planning
A retirement planner will provide advice about when to start social security retirement income benefits. They’ll also help you understand how social security spousal benefits and social security survivor benefits work.
For example, a non-income earning spouse may still be entitled to fairly significant social security benefits by claiming the spousal benefit. A widow or widower may be able to increase their social security income by claiming the survivor benefit instead of collecting their own retirement benefit.
Retirement advice about social security from a qualified retirement advisor or retirement planner can help you make the most of the benefits available to you through the program.
Retirement Financial Advisor Specialty #4:
A retirement planner will help you weigh the pros and cons of taking your pension plan’s monthly income option versus the lump sum option. If you choose the lump sum option, they’ll provide advice about how to perform a direct rollover of the pension lump sum into a Traditional IRA to avoid taxes.
If you chose the monthly retirement income option, they’ll provide retirement advice to help you decide if a survivor benefit makes sense, and if so, which one to consider choosing (100% survivor vs. 75% survivor vs. 50% survivor, etc.)
Retirement Financial Advisor Specialty #5: Retirement Income Tax Planning
A retirement financial advisor will help you determine how to handle retirement income taxes. Taxes need to be considered for Traditional IRA distributions, 401k distributions, pension income, social security income, dividend and interest income, part-time work during retirement, and potentially other retirement income sources as well.
A retirement advisor will explain retirement tax rates so that you can accurately plan for retirement taxes. They’ll also provide advice about the pros and cons of having taxes withheld for you up front vs. having the responsibility to pay taxes quarterly throughout your retirement.
A good retirement advisor will also explain specifics of your state’s retirement income tax laws and rates. Some states tax retirement income, while others don’t (Pennsylvania does not tax retirement income from qualified retirement plans, pensions, or social security).
A retirement advisor or retirement planner can help you build a state-specific plan for handling retirement income taxes.
Retirement Financial Advisor Specialty #6:
Investment Planning for Retirement
A specialized retirement financial advisor is better equipped to provide sound investment advice for your retirement planning than a generalist advisor. A retirement advisor will start by building a retirement cash flow statement, such as the example displayed earlier, to identify how much retirement income you'll need your investment accounts to produce.
In the sample retirement income cash flow statement shown earlier, the family needs about $20k per year from their investments initially during retirement. The retirement advisor will create an investment plan to produce the $20k of net supplemental retirement income they'll need in this specific situation.
The investment plan for retirement will generally include three components:
1 – A “short-term bucket” composed of FDIC insured bank accounts for liquidity and principal protection.
2 – A “middle bucket” composed of high-quality bonds or bond funds, such as US Government Treasuries, for principal protection. This isn’t essential in all cases.
3 – A “long-term bucket” composed of high-quality stocks and stock funds for long-term growth and inflation protection.
The retirement financial advisor will provide investment advice regarding how much to put within each of the “three buckets” included above, which specific investments to own within each bucket, and how to setup the buckets to payout monthly income in a way that’s built to grow over time and last for the long-term.
Investment planning is a very important piece of the retirement advice that a retirement planning specialist is uniquely equipped to provide.
Retirement Financial Advisor Specialty #7:
A retirement financial planner will be familiar with how Medicare works and how to enroll. They’ll also be able to provide guidance about when and how to enroll in a Medicare Supplement Plan, and how to choose a plan that makes sense for your unique situation.
They’ll probably get a healthcare specialist involved to help you select a specific Medicare Supplement Plan (often Part G) and prescription drug plan (Part D).
They’ll also explain the pros and cons of options to protect assets from potential future nursing home costs and long-term care expenses, and they’ll provide retirement advice about how to handle other healthcare costs that will come up from time to time throughout retirement.
Retirement Financial Advisor Specialty #8:
A specialized retirement financial advisor will work in coordination with an experienced and local estate planning attorney to design an estate plan that compliments your overall retirement plan. For example, you may want to protect assets from nursing home costs, but you may also not want to give up the right to use the protected assets during your retirement.
A retirement advisor and estate attorney can work well together to design an asset protection plan that’s unique for you. In addition, a retirement advisor, in coordination with an estate planning attorney, will help with items such as establishing appropriate powers of attorneys, updating wills, and making sure trusts are established when appropriate.
Estate planning is well within the range of topics that the retirement advice provided by a retirement planning specialist will cover.
Retirement Financial Advisor Specialty #9:
Retirement advisors and retirement planners also understand that effective retirement planning isn’t all about money. While providing retirement financial advice, a good retirement advisor or retirement planner will also nudge you to consider how you’ll maintain a sense of purpose and social connection after leaving the full-time workforce.
Good retirement lifestyle planning, in coordination with a sound financial plan built by a fiduciary financial advisor with a retirement planning specialty, will help you make the most of your retirement years.
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