10 Questions to Ask a Retirement Planning Consultant

Ask a twenty-something about their retirement goals, and they will probably laugh at you. Unfortunately, many people don’t think about retirement savings until way later in life, if ever. The sad fact is, according to the US Census information, 60% of unmarried Americans have no retirement savings, while 35% of married couples have not saved for retirement. The reason, according to website Motley Fool ranges from not earning enough money, to having other priorities or simply being to young to feel it is a priority.

The painful truth is, every dollar you save in your twenties will vastly help you reach your retirement goals in the future, simply by applying the rules of investment savings. Look at it this way, at 10% growth, your initial investment would double in just 7 years.

Another way to guestimate your investment growth is to use the Rule of 72. This shortcut for calculating how long it will take for an investment to double assumes that growth compounds annually. To figure your investment growth, simply divide 72 by your expected annual rate of return. Whatever that number is, will represent how many years it will take to double your money.

So, if you have not yet started, but are interested in beginning some savings for your eventual retirement, you will want to find a financial planning consultant to help you develop a path that works best for you and your specific life path.

As you search the web for the right person, we thought it might be useful to share a few thoughts on how to select the right financial consultant for you. These ten questions are not the be-all and end-all, but they will help guide you to an informed decision.

1. How will you determine what I need for retirement?

A good consultant is first a good listener. You want to judge the person you select to entrust your savings with someone who has listened to your desires and does what they say they will do. Your needs are unique, so don’t be swayed by a cookie-cutter program.

2. Does it matter what kind of thing I want to invest in? Do I have to choose just stocks?

Some people have a 401(k). Some people have an IRA. There are those who dabble in futures and risky options. Others invest in a home with a rental property, while others meticulously invest in several rental properties, or even their own business. The point is, there are lots of investment opportunities in this country. And, while your collection of comic books might end up thirty years from now to be a good investment, they may not be the retirement nest egg you can rely upon. It’s important to talk these ideas through with a professional who can help you find a good balance to help you achieve your financial goals. This is particularly true if you have specific religious, social or political beliefs that may guide your investment strategy.

3. Should I invest in one really great company?

Back in the 1950’s people retired on the value of their stock portfolio consisting completely of IBM, GM or even the stock of the company they worked all their life. Those days are passed, and the world of investment is far more complex. The chances that your hot tip on the next Google or Tesla might fund your entire retirement is about as sound as betting on the 4^th race at Belmont racetrack. Retirement savings is not about betting on longshots. Your financial advisor will be able to establish an investment portfolio that balances your tolerance for risk and your needs for a certain rate of return. That will likely be a mix of stocks, stock funds, bonds, and maybe other investment types as well. The mix ensures you get the maximum results over your investment horizon while protecting, as best as possible, against the downsides of market cycles.

4. What about taxes?

Taxes are a big concern, because they can require thirty or forty percent of your savings, unless you plan accordingly. Today, there are ways to save for retirement where you pay taxes with today’s dollars and pull them out of your savings account when you retire tax free. It’s important to discuss taxes and tax planning when talking about your retirement savings plans. Over time, your income may change. Your retirement plans may change. You can be certain that rising taxes will also change and impact your plans.

5. What kind of retirement plan should I have? Does it matter?

As we mentioned earlier, there are many kinds of retirement plans. Your employer probably offers a 401(k) plan (or a 403(b) plan if you work for a nonprofit) and that is an excellent start as these plans often have incentives for savers. If your employer offers a percentage or two of matching funds for your savings, why would you turn down an opportunity to earn free money to help you retire? Of course, if your company does not offer a savings plan, you can always open a personal IRA plan, or a ROTH Ira plan. A good advisor will be able to speak to you about all of these options, and what might work best for you.

6. Most of my income goes to bills. How do I save for retirement? How do I get started?

No doubt, it’s a hard battle. Yet, as difficult as it might be when you are young, think of how tough making ends meet will be decades from now when you are ready to retire, or if you are forced into retirement due to a disability? Even a small amount of savings every week will make a difference. If you have $20 or $50 a paycheck automatically removed, chances are you won’t even miss the money after a while. Some advisors say taking the cost of a cup of coffee at a Starbucks every day from your budget and moving it to savings could make you a millionaire in 40 years. The point, of course, is that even small amounts at the beginning will deliver you real savings in a few years. The earlier you start, the better off you will be in retirement.

6. Most of my income goes to bills. How do I save for retirement? How do I get started?

7. Does the economy impact when and how much I should save?

This is an excellent question to ask an advisor. There are so many factors that go into a successful retirement approach. Let your advisor talk to you about how the economy impacts your approach.

8. What experience do you have and why is that important/not important to my needs?

Credentials vary widely. Your advisor may have all of the appropriate licenses, but lack having credentials such as CFP (Certified Financial Planner) or be a CPA. Worry about having someone who holds the proper licenses, but don’t stress the advanced credentials. If you trust the person and see the results they have demonstrated from other clients, you should feel comfortable in building a relationship with them.

9. Is there a way to get insurance to work as an investment, too?

Another great question to ask, and yes, some advisors will help you use insurance products as part of your investment strategy. Everyone should have some sort of insurance at different periods of their life, such as young parents and couples with a mortgaged home. However, annuities are insurance policies that offer the ability to get payments down the road while still providing insurance value.

10. Does my financial consultant need to be in my hometown? Is it legal to use someone from out of state?

While every state requires professionals to be licensed in their jurisdiction, your investment professional does not have to be local. Ask your professional about their qualifications, and, if they reside out of state, learn if they hold licenses to practice in your state.

If you are looking to find a consultant for your retirement savings goals, insurance, or tax savings initiatives, please feel free to contact our offices for a no-cost, no-obligation consultation about your needs.