Saving for retirement is a daunting prospect, but it doesn’t have to be. We all know that we should be saving for retirement, but how do you do it? How do you reach your goals by or before your retirement date? Financial advisors can be a huge asset in these situations as they understand the investment vehicles you should use, the retirement process and much more. When the right financial advisor guides you through the process, your stable future will be something to look forward to. Here’s what you need to know about how to find a retirement financial advisor.
Step 1: Define Your Retirement Goals
When you think about retiring, what do you imagine? No matter how far off retirement is for you, this is something you need to think about. Setting retirement goals can help you get going, and don’t worry — you can adjust your goals later if you need to.
You need to think of all this before speaking to a retirement advisor. Remember, even the best investment advisor can’t help you if they don’t know what you want, what your preferred retirement age is, etc.
When you’re just starting your career, you don’t need to get that specific about your goals. Generally speaking, setting aside any money for your retirement is a good idea. A good way to start this is by taking advantage of company match programs that may be offered by your employer.
You don’t want to bank on Social Security as it’s a target of government cutbacks and has been for some time.
Then, when you’re ready, you can start to establish your retirement goals. The main thing to focus on is how much money you’ll need to live comfortably during your retirement. When deciding on this number, you can consider factors such as the cost of living in your area as well as the expected inflation. You might also want to think about things you may want to do after you retire, such as traveling.
Step 2: Understand How a Financial Advisor Works
Financial advisors are professionals who can help you figure out how to manage your money, including how to craft and stick to your retirement plan. You can go to a financial advisor if you need help figuring out what goal you should be aiming toward. How should your retirement saving journey look? Do you need a debt repayment plan?Should you take a retirement readiness quiz? Don’t take a retirement saving quiz when you can speak to a real person.
You also can go to a financial advisor if you know exactly what your goal is but have no idea how to reach it. In either case, a good financial advisor can help you pinpoint the goal and create strategies to make sure you meet it within your desired timeline.
Your financial advisor can help you plan for retirement in several ways. At the very least, an advisor will help you figure out what percentage of your income you’ll need to achieve your retirement goals. Financial advisors also can help you identify and move forward with other ways to plan for your retirement, including investment choices, a succession plan for your business, long-term investment management, your preferred retirement income and other items. You can count on your financial advisor to help you make sure you’ve included everything you’ll need in your retirement plan, including insurance plans and estate planning.
Step 3: Compare Prices, Commissions and Fees
There are different types of financial advisors. Some are commission-based, and others are fee-based. Thus, you need to decide how much of your retirement benefits you want to dedicate to a plan advisor or expert who can help you reach your retirement income goal.
Commission-Based Financial Advisors
If you work with a commission-based financial advisor, you may never pay an actual bill for your advisor’s services. Instead, these advisors make money based on a commission for the products they sell to you. While working with a commission-based advisor likely won’t cost you any money upfront, you can expect to pay between the advisor anywhere between 3% and 6% of the total assets they manage for you.
Fee-Based Financial Advisors
Fee-based financial advisors are often fiduciaries. This means they are legally bound to act in your best interest at all times. This includes giving you the best financial advice for your situation, avoiding conflicts of interest whenever possible and never selling products to you for their own benefit. Fee-based financial advisors are usually paid either with a flat fee or an hourly fee. On average, flat fees can be anywhere between $1,500 and $3,000, while hourly fees are often between $150 and $400 per hour.
Step 4: Get Matched With a Financial Advisor
Before you decide which financial advisor to work with, you should decide whether you’re more comfortable with the commission-based or fee-based model. Once you’ve figured that out, you’re ready to meet your match. As with any professional service, sometimes the best way to find a financial advisor is to reach out to friends and family for recommendations. You can also do your own research to find someone who’s reputable. Some resources you may want to use to find a financial advisor include:
If you want to work specifically with a fiduciary financial advisor, these resources are a good place to begin your search. When speaking with financial advisors, you shouldn’t be afraid to ask them questions to make sure that they’re a good fit for you. You can ask them how they get paid, why they make the recommendations that they do and how you’ll work together moving forward. In most cases, you’ll want to find a financial advisor who can work with you throughout your career. Establish a good working relationship with your financial advisor who can help you reassess and shift your goals and retirement plan as necessary.
Pros and Cons of a Retirement Financial Advisor
Because you can open a retirement account and start investing on your own, you may be wondering why you’d want to spend your money on a retirement financial advisor. Here are some points to consider when making your decision.
- Financial advisors have professional knowledge of retirement planning and other financial topics and goals.
- Financial advisors who have been in the field for a while have probably been through all sorts of markets. They’re also bound to have experience with a wide range of clientele. All of this can work to your advantage because they can take everything they’ve learned from past experiences to benefit you.
- An experienced advisor can help with asset allocation, make plans for your retirement money, work with your retirement system and even manage your brokerage services.
- You’ll save time. Instead of worrying about your investments and your retirement goals all of the time, you can rest assured that someone else is managing things for you.
- The most obvious downside of using a retirement financial advisor is that it does cost money. This is true no matter how your financial advisor is paid, whether it be commission-based or fee-based.
- By using a financial advisor, you run the risk of getting “too comfortable,” so to speak. It’s a good idea to build some knowledge of investing lingo so you can understand what your financial advisor is doing. This is important because you’ll want to be sure you’re getting the most out of your investments.
- Some retirement financial advisors may suggest that you invest in products that aren’t the best option to meet your goals. This can happen because of pressure from their company, or even because it could personally benefit them. To avoid this happening, you can consider only working with a fiduciary.
Benzinga’s Best Retirement Financial Advisors
If you’re intimidated or confused about your next steps at this point, we wouldn’t blame you. Figuring out how to plan for retirement is a big decision, and having the right financial advisor can be a huge asset. So, to help you out, we’ve compiled a list of recommended retirement financial advisors for you to look into.
Find the Right Retirement Financial Advisor Today
Whether you’re just starting the process of retirement planning or looking to refresh your memory, there’s still time to take control of your future. Understanding the role that a retirement financial advisor plays can help you make a fully informed decision when it comes to your retirement plan and the management of your investments. Don’t feel the need to rush the process, either — it’s never too early to start planning for retirement, but you need to feel prepared before you can make the right moves.
Frequently Asked Questions
Do you really need a financial advisor for retirement?
While you can certainly handle retirement planning on your own, it’s not a bad idea to consider hiring a financial adviser. Financial advisers come with experience and knowledge that, to some, is priceless. It really comes down to whether you prefer to learn and handle it all yourself or trust a professional to do the hard work for you.
Can robo advisors replace retirement financial advisors?
Robo advisors can take the place of retirement financial advisers, in a sense. Robo advisors are different from financial advisors because a robo advisor cannot give you 1-on-1 personal, human support. Even so, robo advisors are an attractive option because they can usually offer lower prices in addition to automated strategies.
Should a retirement financial advisor manage all your money?
Not necessarily. A retirement financial advisor is there to help you reach your retirement goals and manage those funds, but they should not necessarily be placed in control of all your finances.