2776: When to Start Working With a Financial Planner - If Ever by Kathleen Coxwell of New Retirement

[00:00:00] This is Optimal Finance Daily, Episode 2776. When to Start Working With a Financial Planner – If Ever by Kathleen Coxwell of New Retirement.com And I'm your host and personal finance enthusiast, Diana Merriam. Now let's get right to today's post as we optimize your life.

[00:00:23] When to Start Working With a Financial Planner – If Ever by Kathleen Coxwell of New Retirement.com The benefits of working with a financial planner are widely known and convincingly supported by research. However, too few of us actually turn to professional help when it comes to planning.

[00:00:42] A recent study by Northwestern Mutual found that only 20% of Americans have a written financial plan. Another third of US adults said they had no idea how much they would need during retirement. You might think you don't need a financial planner or that you don't have enough assets

[00:00:57] to qualify for one. The truth is, we can all benefit from a little professional advice. Whether you have very little saved or if you're already well underway with your investments and savings, you'd likely benefit from a resource like a professional advisor. But there are other options as well.

[00:01:15] What a financial planner can do for you – You might already have a good idea of what you want to do during retirement, including where you want to live or what sort of hobbies and activities you'll pursue.

[00:01:26] Even if you've got a clear idea of what your retirement will look like, working with a financial planner can help you realize those goals and refine them. Here are some of the top benefits of working with a financial planner. Number one – Understanding your goals.

[00:01:42] Turning your retirement aspirations into solid goals that you can achieve is easier said than done. Utilizing the resources of a professional financial advisor will enable you to invest and maximize your savings potential.

[00:01:55] It's unlikely you know all the best tricks and tips to make your money last in retirement, and working with a professional may help you understand what you want later in life and refine some of the goals you're already thinking about.

[00:02:07] Not to mention, an advisor can help you sort through all the financial jargon. Edward Sota, investment advisor and partner at Safeguard Investment Advisory Group LLC says, quote, With mutual funds, ETFs, stocks, bonds, annuities, it's very confusing in the financial world.

[00:02:27] I think a good financial planner will answer the questions that a lot of people have about those products and give a clearer picture of what would be beneficial for them and what wouldn't be. End quote. Number two – Creating a strategic plan.

[00:02:42] Feeling financially secure can benefit you more than you realize. Once you have set goals for your retirement, you need a real plan that can get you there. A financial planner can help you feel about two times more secure about your finances

[00:02:56] compared to others who go it alone, Northwestern Mutual found. Creating a strategic financial plan with a professional can also make you feel happier during retirement. And three – Keeping you on track.

[00:03:10] It's one thing to set a goal, but it can take a lot of hard work to achieve it. A financial advisor can not only help you come up with a plan that makes sense to keep

[00:03:18] your finances in order, but it'll also be there to ensure you stay on track. When to work with a financial planner? While it's never too late to turn for help when it comes to your retirement plans, the sooner you get your finances in order, the better.

[00:03:34] About one-third of Americans are under the impression that having an advisor requires a certain amount of assets, according to Northwestern Mutual. SOTA says that a financial planner might not be the best resource for everyone because it does come with a cost, with accompanying fees and commission expenses.

[00:03:51] If you have a lot of assets or need extra help with planning, it might be time to turn to a professional. SOTA says, quote, If people need help keeping track of their finances or have just come into a lump sum

[00:04:03] of money, I would sit down with a financial planner at that point. If people are looking for some guidance to retirement and need a path for their long-term goals, they should sit down with an advisor. It's about connecting the dots from estate planning to long-term care insurance.

[00:04:19] End quote. What if you don't want to work with a financial advisor? Working with an advisor is not for everyone. Not trusting the advice is one of the main reasons people do not work with an advisor. Cost is another factor.

[00:04:33] The good news is that online retirement calculators are getting better and better. Retirement calculators can be a very effective way of establishing a retirement plan. They can help you establish what you have and what you need. Other online resources can help you with managing retirement investments.

[00:04:51] If you're more of a do-it-yourself kind of person, SOTA suggests turning to online tools that can give you a basic understanding of what investments might be available to you. Robo-advisors are becoming a more cost-effective way of getting investment advice. Finally, SOTA suggests, quote,

[00:05:08] if you're starting out with a small amount of money and you're going to go to someone who's going to charge you, there are a lot of great resources online for basic education on investments. Some people don't want to take the time.

[00:05:21] If you don't want to educate yourself, it might be worth spending the money. Otherwise, there are great resources on the web. You just listened to the post titled, When to Start Working with a Financial Planner, by Kathleen Coxwell of NewRetirement.com.

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[00:07:00] And if you lack some financial literacy, it can be hard to tell if you're getting good advice. For example, a close friend of mine once asked me to look at her portfolio, which was being managed by an advisor. She was 38 with about 200 grand in investments,

[00:07:16] but her advisor only managed her Roth IRA and after-tax brokerage. She also had a Simple IRA through her employer, which was not managed by this advisor. When I asked her how much she was investing, she said that she was contributing 3% to her Simple IRA to get the match.

[00:07:33] She was fully funding her Roth IRA at $6,000 per year, and her advisor encouraged her to invest an additional $1,000 per month in an after-tax brokerage that he would manage. At first glance, it didn't seem too problematic,

[00:07:47] but I asked her why she wasn't fully funding her Simple IRA at $13,500 a year, which was the contribution limit at the time. It usually makes the most sense to fully fund your tax-advantaged retirement vehicles before you start contributing to an after-tax brokerage account.

[00:08:05] The reason was because her advisor never pointed out to her that this would be more beneficial. And why would he? That isn't an account that he manages, so if she invests more money there, that's less assets under management fees for him.

[00:08:19] We also looked at how her money was invested. He chose a simple collection of index funds, nothing that she couldn't have done on her own. I'm not against working with an advisor, but I don't think it can replace self-education. And that will do it for today.

[00:08:35] Have a great day and start to your weekend, and I'll be back here tomorrow as usual, where your optimal life awaits.