Ryan Fox of the Financial Consulate describes age 65 as an ‘artificial retirement date’ because “retiring at age 65 was established when the social security program began, during a period of time when folks didn’t live that long.” According to the Centers for Disease Control and Prevention, the average life expectancy is now 77.9 years, with many people living well into their 80’s and 90’s. Even if a person was able to work until age 70, barring any health concerns, that person could possibly live another 20 years. “It’s not reasonable for people to be able to save that kind of money over 40 years of working to sustain another 20 of not working,” Fox says. “A financial plan helps to create a pathway to retirement. But first we need to ask the client, what does retirement look like to you?” Just as no two people are alike, no two financial situations are alike. A financial planner will be able to offer you personalized options to your specific scenario, making the most of your hard-earned dollars.
The Financial Consulate also recommends asking some key questions to assist in your decision making process:
1. What steps will you take to help me define my financial plan and investment objectives?
Interviews/questionnaires are often used to define your financial and investment objectives. Questions should be focused on: current tax position, estate desires, concern to manage risks of life, the amount of investment risk you are willing to take, the expected return, the assets that may be included in your portfolio, if you have any major contributions/withdrawals planned, and the likelihood of unanticipated future needs.
2. Can you tell me more about your firm?
Ask about the focus of expertise, typical clientele makeup, how ongoing advising is done, the professional’s background, total value of assets managed, number of accounts, average size of portfolios handled, and the number of people employed by the firm.
3. What is your background (certifications)?
Professional designations, such as Certified Financial Planner (CFP), Certified Public Accountant (CPA), Personal Financial Specialist (PFS), and Charter Financial Consultant (ChFC) will tell you more about your advisor’s interests and specialties. All financial planners should be Registered Investment Advisors (RIA) – which is a government requirement.
4. How do you keep up to date in your field?
Ask about your advisor’s primary sources of current financial and investment information.
5. Have you had other clients with my similar situation?
Remember that success is measured by how well your financial goals are met, not merely by a successful investment.
6. Investments are important. What management style and what types of investments do you prefer?
Ask what types of investments an advisor uses and why that approach would work for you.
7. Do you have any source of compensation other than fees?
Some advisors, or their affiliates, may sell insurance, investments or annuities in addition to their financial advisory business.
8. How often will we review my financial plan and situation?
Types and frequency of financial reviews may vary among advisors; ask how often you can do new analysis of retirement or other areas of concern.
9. How do you set your fees?
Consider an advisor who charges clearly defined financial planning and investment management fees. Fees may vary depending on the size of the account or services rendered – discuss the specifics.
Once you have chosen a financial planner, he/she will help you define the needs of your current situation, as well as future possibilities. Compiling important documents and information regarding current income, investments, taxes, insurances, as well as estate and company benefits will help your advisor outline your credits and debts. A visit to the social security office to find out the dollar amount of benefits is another useful tool in planning. Complete reliance on social security without any other supplemental financial planning can be risky. Another often overlooked item is the potential difference in social security earnings by men and women.
