Financial Planner

A survey by the National Financial Education Council found that the lack of financial knowledge could cost an individual an average of $1,634 per year. This increases when it comes to financial planning for retirement because retirement is the most ignored part of financial planning.

It is never too early nor too late to save for retirement. But planning for retirement is complicated, and it is important to seek help from a credible financial planner to preserve your savings and have a trouble-free post-retirement life.

Goals of Retirement Planning

Retirement planning is a multistep, long-term planning process that helps people enjoy a fun, secure, and comfortable retirement. First, retirement planning depends on your retirement goals and the time that is left before retirement.

Then the financial planner will help you select the right plan to fund your retirement. Finally, they will guide you through reducing your taxes while withdrawing savings.

Retirement planning includes determining the time horizon and retirement expenses, calculating the after-tax returns, and assessing risk tolerance. Planning for retirement evolves through the years, and a financial planning advisor will be of great help in navigating the process.

How Can a Financial Planner Help You Plan for Retirement?

Generally, financial advisors help you decide what to do with the money you have earned. They will guide you on monetary investments and other courses of financial action. Ultimately, they help you achieve your financial goals.

Apart from planning investments, a financial advisor also helps in framing budgets, savings, insurance, and other tax strategies. Financial advisors also regularly collaborate with their clients to re-evaluate their current situation and future goals and plan their finances accordingly.

A financial advisor is also an educator. They will work closely with you to assess your assets, liabilities, income, and expenses before developing a precise retirement plan.

They will compute all your financial information into a comprehensive financial plan that projects what you need to meet your financial goals and the issues you might encounter along the way. This includes long-term risks, retirement planning benefits, estate planning details, and so on.

Choosing the Best Financial Planner for Your Retirement

Your financial advisor is your chief financial planner, and you will work with them for many years. They are the one who will help you secure your funds and save for your future. After retirement when you may have no active income, you will rely on the money you saved in your working years to pay bills and buy necessities.

Thus it is essential that you find a suitable financial planner so you don’t put your hard-earned money at stake. Here are some insights to understand and steps to follow in choosing the best financial advisor for your retirement needs.

1. Know the Types of Financial Advisors

There are many different types of financial advisors. Some help with financial planning services but don’t offer any investment management services. Others will help in managing your investments but will offer little help in financial planning. Some financial planners specialize in retirement planning.

You must choose the best financial advisor to help with your current financial situation. Correlate the type of advice you require with the type of service that they offer.

Financial advisors who focus on retirement income planning focus on coordinating all information about taxes, Social Security, pensions, investments, retirement date, and so on. They will align all this information to ensure you will have money in your golden years.

2. Check the Credentials of the Financial Advisor

Choose a retirement advisor who is a certified financial planner or is designated as a personal financial specialist. Investment advisors with a Chartered Financial Analyst certificate are also a good option for your financial planning goals.

Financial specialists earn their credentials by passing examinations that demonstrate their subject proficiency. To maintain their designation, they have to adhere to their policy standards and meet continuing education protocols.

Make sure that the financial advisor you choose is credible and places the interests of their clients above their own. You can browse for their business online or read their online reviews before deciding to collaborate with them.

Another pro tip is to choose financial planners who are members of the National Association for Personal Financial Advisors (NAPFA).

3. Use the Time Horizon to Plan for Retirement

Work with your financial planner to understand your time horizon and plan for your retirement accordingly. Your present age and your expected retirement age will offer a baseline for a sound retirement strategy.

The longer the time until retirement, the higher the financial risk of the investment portfolio. Young people in their 30s can invest in high-risk investments such as stocks. However, older people should concentrate on their income and capital preservation.

You can allocate funds for securities such as bonds for appropriate retirement planning, as they are less volatile and offer income after retirement. They also have little correlation with investment.

However, it’s advised to choose a financial planner who takes you across multi-stage retirement planning with different time horizons and leverages an optimal fund allocation strategy. They should also keep rebalancing the portfolio over time, as the time horizon and life’s commitments keep changing.

4. Build Retirement Portfolio Based on Your Spending Needs

Choose a financial planner who helps determine realistic expectations about post-retirement spending and creates a retirement financial portfolio accordingly. Generally, people believe that their annual spending will decrease by 20 to 30% after retirement, compared to what they spent previously. Such an expectation is completely unrealistic, especially when there are loans and mortgages to pay for.

Also, most people post-retirement want to fulfill their travel plans and accomplish the items on their bucket list.

Thus to have enough savings for investment, the ratio of savings should be 100%. Also, many older people have health care expenses, and their cost of living likely will keep increasing with each passing year.

Retirees want to live longer and thrive through retirement, so they require income for the long term and need to invest and save money accordingly. Wealth planning is incredibly important in the long run.

Post-retirement, you won’t be working for eight hours a day, and you likely will have a lot of leisure time to spend on sightseeing, traveling, and engaging in other activities. Thus it is essential to have additional savings and build an investment portfolio with a higher withdrawal rate.

Your financial planner will be able to help you through the process and advise on investments according to your withdrawal rate each year. Build an investment plan that doesn’t underestimate your expenses, as you can easily outlive your portfolio, or overestimate your expenses, as this will cause you to miss out on your dream lifestyle in retirement.

5. Let the Financial Planner Help You With Estate Planning

Estate planning is an important aspect of financial planning, and a retirement plan is incomplete without this step.

First, choose a financial advisor who can help you through the estate planning process. Generally an appropriate investment plan for retirement should focus on both estate planning and life insurance coverage, as this helps distribute the assets as per your choice.

Tax planning is also an essential aspect of estate planning. If you wish to leave behind your assets for charity or family members, then the tax implications of either gifting or passing them through the estate process should be ascertained.

In most cases, investment advisors leverage an approach of estate planning that meets the living expenses of the retired. Then the property will be transferred to their beneficiaries after their death. A financial planner with sound knowledge of tax planning will help determine the appropriate plan for you.

6. Use Online Tools to Choose the Best Financial Advisor for You

You can choose the best financial advisor in your ZIP code by browsing for them in online searches. Choose the one with the proper credentials and qualifications to meet your retirement investment needs.

You can also choose to pick an advisor remotely, as most of them work online, if you don’t want to establish a face-to-face connection with them.

They will make use of advanced tools and software and make the remote process easy and simple. The use of advanced financial planning software, loan tracking software, and software for portfolio management helps in devising the financial retirement plan accurately.

It also helps in participative planning, where your financial portfolio will be created to match your needs.

7. Discuss Before Making Any Investment

Most retirement financial advisors will encourage their clients to invest in an asset or buy shares to help them with a standard income post-retirement.

However, fraud is common when you give someone custody of your assets. Reputable financial advisors will use a third-party custodian to hold the rights of the assets.

The custodian will place traders and report the transactions. Be cautious of firms that want custody of your money. Clarify with the advisor on the firms that they are recommending you invest in. Learn the ownership structure and other conflicts in the firm’s disclosure document.

Invest only if you are clear on the terms and are confident in the investment.

8. How Much Should You Pay the Financial Planner?

This is the most crucial part of choosing a financial planner for your retirement planning. There is indeed a wide range of fees that they could charge. Their fee will depend on their experience and credentials, along with their scope of service. The market in which they operate also determines their fees.

Make sure you understand their charges before hiring them and know the amount of time they are willing to spend on the planning process. They will charge according to their service offerings, ranging from only suggesting investments to regular monitoring with periodic reporting.

Some financial planners will offer a detailed financial plan that talks about factors like assets, restructuring liabilities, restructuring loans, and investment. The charges will be levied accordingly.

Some Important Tips in Choosing the Best Financial Planner for Your Retirement

But before choosing your financial advisor, follow these tips to prevent fraud and loss of money.

  • Ask questions: Choose an advisor with whom you can communicate freely. Ask how long they have been practicing, how they wish to get compensated, and get to know their experience in the different retirement projections.
  • Ascertain their area of expertise: As we discussed before, there are many different types of investment planners. Choose one who will help you in your retirement planning journey.
  • Ask for references: This is a great idea, but owing to privacy regulations most advisors will not publish the names of their clients. Regulations also prevent them from using testimonials. But you can discuss with peers and choose the best advisor that is popular among your social group.
  • Verify their credentials: Hire someone with a good service record. Verify their credentials and complaint history with the Financial Industry Regulatory Authority or the Securities and Exchange Commission (SEC). Choose someone who has been in business for a while.

Bottom Line

It is not a simple task to entrust your savings to someone else and allow them to make your financial decisions. Choose your investment planner wisely. Browse their expertise online. The best way to find a good advisor is through references.

Understand their style of work and collaborate with them closely and communicate extensively before making a financial plan. There are no one-size-fits-all solutions for retirement planning, so be wise and choose the financial planner that fits your needs.