Picking the right retirement planner is not easy. Much like finding a compatible doctor or lawyer, the right retirement planner for your neighbor may not be the best for you. If you have a partner both of you need to feel comfortable with — and confident about — the planning tool you choose. Evaluating your retirement planner involves looking at their specialties, communication style, and how much they respect your specific investment goals.
Retirement Planners | How to Pick the Best
In This Article:
1. Make Sure Your Planner Focuses on Retirement
There are many financial advisers, but not all of them are retirement planners. Even if your planner lists retirement planning as one of the things he or she practices, ask pointed questions about the issues specific to the topic. For example, what’s the best plan for long-term care? Where can you invest your retirement accounts to maximize the after-tax rate of return? You will quickly get a sense of how familiar the adviser is with areas that are of particular concern to future retirees.
Often, the age when you and/or your spouse should begin drawing Social Security payments is an immediate concern. A related question is which level of benefit each should take and where spousal benefits come in. The longer you wait after the age of 62 to begin drawing Social Security benefits, the higher the monthly benefit is. In some cases, though, the money can be put to better use if you start drawing on it earlier and invest.
It is crucial your retirement planner can help you analyze the pros and cons of your options.
The same holds true with pension plans. Should you withdraw the maximum monthly amount or sign up for the plan that gives a lower amount but continues paying your spouse if you die first? What are the other levels of flexibility in pension fund contributions?
The advantages and disadvantages of these pension options vary. Reputable retirement planners help you understand which are most applicable to you and your family.
Questions regarding mortgages are also within the realm of retirement planning. The best retirement planners can advise on questions such as real estate projections for your area, benefits of paying off your mortgage, and sale of your current home.
If you want to move to a senior community, retirement planners can help investigate that community’s reputation. Levels of available care for various age groups may be a concern. (A senior-living community that advertises assisted living or “memory care” facilities may still charge extra for those services as residents age into them. It is important to know what is guaranteed before buying into a community.)
2. Understand the Different Types of Financial Advisers
Even if a prospective adviser specializes in retirement planning, you still need to know exactly what type of financial adviser he or she is. Anyone can list himself or herself as a “financial planner” or “investment adviser.”
Check for registration and certification information. The letters after the names in retirement planners listings may sound like alphabet soup. It is worth the time to get to know what those initials stand for:
- CFP: Certified Financial Planners are the “best all around” in the financial advising world. They are certified by the CFP board. This certification involves taking extensive coursework in a broad range of subjects, including retirement and estate planning. They have also passed a grueling exam and ethics evaluation. The certification additionally requires either a two-year apprenticeship with a qualified CFP or three years’ experience as a financial planner. This broad range of experience and education is often ideal for people planning their retirement. Planning for retirement can encompass many topics. These include Social Security benefits, estate planning, and inheritance. They can help you maximize your retirement savings plan and assets such as an annuity.
- CEBS: Certified Employee Benefit Specialists, as the name indicates, focus on pensions, 401(k)’s, insurance, and other employee benefit plans. They are required to take eight courses on retirement, insurance, and related issues. This type of professional does not necessarily have the broad range of expertise of other retirement planners. If you are trying to choose from among your company’s benefits options, though, a CEBS adviser may be the ideal expert to consult.
- CPA: A Certified Public Accountant is not just a glorified bookkeeper. This type of professional specializes in taxes, as well as actual bookkeeping. If you own a business or would like to start one when you reach retirement age, a CPA may be the best financial adviser for you. Taxes are also an inevitable part of almost every type of retirement consideration. That is why some people prefer CPAs as retirement planners. They consider the tax implications of estate planning, investments, and other retirement options.
3. Establish Your Retirement Planner’s Fiduciary Status
Above all else, your retirement planner needs to meet the fiduciary standard, which essentially states that the planner must put their client’s interests before their own. Retirement planners have different areas of specialties and certification. They will all fall into the two categories of either being a fiduciary or a non-fiduciary.
An adviser who is registered as a fiduciary is legally bound to help only you. Non-fiduciary advisers may be more interested in selling you a plan that pays a commission.
That is not to say that all non-fiduciary retirement planners are unethical, but you will need to ask probing questions to decide whether their investment advice serves you. If you do not feel comfortable with the details of financial advising, you may not be able to spot the difference.
Think of it as the difference between a real estate buyer’s agent and a listing agent. A buyer’s agent is there to find you the house that meets your needs. He or she can help you spot flaws in inspection reports or mortgage deals. A listing agent is motivated to sell you on a property’s high points — and may downplay its problems to make a commission.
In the same way, a non-fiduciary retirement planner may still provide you ethical, neutral advice, but you cannot trust that they aren’t working for commission.
Is this guideline set in stone? Not necessarily. One or more trusted friends and coworkers may rave about a non-fiduciary retirement planner. If so, it is worth meeting with him or her. That planner’s specialty may be of value to you. A solid reputation goes a long way when it comes to who you trust on money matters.
4. Match Your Life Situation with Your Adviser’s Specialty
Your retirement age can have much to do with the person you choose to be your retirement planner. After all, not all people looking for retirement planners are actually nearing retirement. As a rule of thumb, the closer you are to retirement age, the more “risk averse” you should be about what you do with your money. Younger clients can afford to make riskier investments in the hopes of landing a big win. Older clients should prioritize holding on to their savings account and having a reliable monthly retirement income.
For this reason, you need to find a retirement planner who specializes in clients with the same general investment timeline as yours. Your adviser should be able to tell you whether he or she specializes in clients in your age and/or interest bracket. It is a good sign if he or she readily agrees to put you in touch with clients in a similar situation.
5. Seek a Comfort Level
It is not something retirement planners can put on their website, but personality and communication styles are crucial. Someone who seems to specialize in the financial areas you are interested in — and was recommended by your know-it-all cousin — may still not be a good fit. You need to be able to confide in this person, as well as understand his or her advice.
Does the planner address one of you more than the other? Some financial advisers talk only to the husband on the assumption a wife is not in charge of money matters. Even a female retirement planner can still make the mistake of assuming the same.
Smart retirement planners understand couples often have different areas of knowledge, both of which are valuable.
Does your planner respect what you want to do with your retirement? Not every client has the same retirement goals. In fact, yours may be unconventional. Perhaps you want to divert your savings into a new business once you escape your 9-to-5 job. You want to start retirement much earlier than normal. You may seek to live an extremely rich life to help your children or to leave a large sum of money to a charity.
If an adviser you are interviewing makes you feel foolish for pursuing those goals, you should keep looking.
You also need to be in sync with the method and frequency with which retirement planners communicate with you. In terms of timing, you may only want to meet once a year to look at your portfolio and discuss any changes. You may also prefer quarterly or even monthly communication.
If you are already retired and travel frequently, the ability of the planner to be flexible about communication may also be important. Some clients prefer in-person meetings while others may need to get in touch by phone or email. Your retirement planner needs to suit his or her style to your preferences rather than their own.
His or her ability to “speak your language” is also key. You will need to understand the information the planner provides. You should also feel confident the planner understands the priorities you have, as well as the questions you are asking. This is not the time to feel you have to “cover” for your lack of knowledge. The best retirement planners can translate their areas of expertise into layman’s terms. They also will not brush off your concerns.
Even if your retirement is imminent, it pays to take your time when looking for retirement planners. One size does not fit all! This is a professional who may be in charge of your savings, as well as adjustments to your investment portfolio. The best retirement planners boast a broad base of knowledge in all aspects of financial decisions, sterling reputation, and flexibility to meet your changing needs. It is not quite like looking for a needle in a haystack, but it can make the difference between reaching retirement age with a pile of straw or a pile of gold.
What are your qualifications in looking for retirement planners? List them down below.