Prior to discussing 7 reasons to hire a financial advisor, we'll briefly explain what to look for in a financial advisor. Quality of advice varies widely, and this critical first step cannot be overlooked.
First, only hire a financial advisor or financial planner who is a fiduciary at all times.
A Fiduciary Financial Advisor has a legal obligation to put your best interest first and does not get paid hidden commissions or hidden fees based on what’s recommend in the plan you build together.
A financial advisor who is not a fiduciary at all times does not necessarily have a legal obligation to put your best interest first, and may be paid hidden commissions and hidden fees. Conflicts of interest such as hidden commissions and hidden fees can and will reduce the quality of the advice.
To eliminate the risk of working with a bad advisor, ask the financial advisor to sign a statement confirming they will be acting as a fiduciary at all times and will not get paid hidden commissions or hidden fees if you follow the plan you build together.
Fiduciary Financial Advisors welcome this, will gladly sign, and will applaud you for asking. Bad financial advisors and financial planners run. This matters because it helps protect your financial security.
Second, only hire a financial advisor who specializes in exactly what you need. There are many nuances that require focus and expertise to master. A plan from a generalist might not be terrible, but if the person does not specialize in exactly what you need, keep searching.
Why settle? Only hire a financial advisor or financial planner who specializes in exactly what you need.
This article will discuss reasons to hire a financial advisor or financial planner as it relates to retirement planning because retirement planning is our expertise.
Lifestyle planning – A good financial advisor will nudge you to consider what your life will look like after you leave your full-time job. They’ll share valuable experiences gained and lessons learned to help set your retirement life on a good path.
Expense planning – After you hire a fiduciary financial advisor, they will help you estimate how much you’ll need to spend each year during retirement. This includes estimating retirement taxes and retirement medical costs, and also factoring in the impact of inflation on your expenses over time.
Income planning – A good fiduciary financial advisor will help you decide when to start social security benefits. They’ll also explain how different facets of the social security program works, such as how spousal benefits and survivor benefits work. A good financial advisor will also help you decide which pension option makes sense for your unique circumstances. For example, in the state of Pennsylvania, public school teachers are automatically enrolled in the PSERS pension program. Those retiring must decide if they want to take a lump sum, if they want to provide a survivor benefit, and how much of a survivor benefit they want to provide (if any). Many other pension programs provide employees with similar choices. Hiring a fiduciary financial advisor will help you choose which option makes sense for your unique situation within the context of a well-organized, comprehensive retirement plan.
Investment planning – The two steps listed above, expense planning and income planning, will help you determine how much income you’ll need your investment accounts to produce each year. A fiduciary financial advisor will then help you set up an investment plan designed to generate the amount of retirement income that your individual situation requires. Retirement planning specialists design customized investment plans with the unique retirement income needs of each specific client in mind. Financial planning generalists, on the other hand, commonly use age as the primary input to create their investment recommendations. If two people are age 65 but the first one doesn’t need to touch the money until Required Minimum Distribution age at 72 and the second one needs income now, why should their investment plans be the same? A good fiduciary financial advisor who is specialized in retirement income planning will help you set up an investment plan that’s appropriate for your unique retirement income needs.
Tax planning – After you hire a fiduciary financial advisor, they’ll help you with tax planning. In the current year, this could mean increasing 401k or IRA contributions to reduce taxes now. Longer term, this could mean working Roth conversions into the financial plan at a point when it makes sense depending on the tax bracket. A good financial advisor will also explain tax considerations related to Required Minimum Distributions, both during the original IRA owner’s life and when the IRAs are inherited. A fiduciary financial advisor with retirement planning expertise will deliver long-term tax planning value, sometimes in partnership with a good Certified Public Accountant.
Medicare and long-term care planning – A fiduciary financial advisor will help you prepare to address medical costs during retirement. Related to Medicare, this may involve an introduction to a Medicare Supplement planning specialist who can make sure you are enrolled in the right Medicare Supplement plan for your unique needs. A good fiduciary financial advisor will also help you assess pros and cons of options to protect assets from long-term care expenses, which may also involve the help of a good estate planning attorney.
Estate planning – A fiduciary financial advisor, especially one who specializes in retirement planning, will usually loop an estate planning attorney into their retirement planning process in spots where they add value. The estate planning attorney will help with a will, powers of attorney, trusts, inheritance tax considerations, and many other items unique to your specific situation.
To summarize, why hire a financial advisor or financial planner? A good financial advisor will help you organize your financial resources into one focused, written, actionable, comprehensive plan.
A good financial advisor help you identify areas for improvement that you may have overlooked. A good financial advisor will bring many unique experiences and specialized knowledge to the table for your benefit.
You can learn from their experience, rather than learning the hard way through your own mistakes.
Would you like a 1-on-1 retirement planning consultation? Fill out the “Request Consultation” form, call us at 267-427-5667, or email kyle.rolek@rolekretirement.com