It’s easy to say you want to plan for retirement, but it’s trickier to figure out the first step to actually doing it. Planning out the financial logistics of retirement can be difficult, but it doesn’t have to be that way.
If you don’t know where to start with your finances, one option is to work with a financial professional. Financial professionals offer advice and guidance surrounding your investments and personal finances and work with you to help meet your retirement and financial planning goals. Financial professionals can help you make long-term decisions about your money and offer advice regarding your individual retirement planning needs.
There are various types of financial professionals. The type of financial professional you work with is dependent upon the type of advice you seek. Before you start your search for a financial professional, it’s important to understand the type of advice he or she can give. The financial professional you choose might not necessarily be educated or licensed as a tax advisor, but he or she might be licensed to sell insurance products. To find out more about the different types of financial professionals, visit FINRA's resource on choosing a financial professional.
Looking for a helpful resource before you meet with a financial professional? Download our free tip sheet.
When working with a financial professional, you should have a level of trust, satisfaction and confidence with his or her financial advice from the initial meeting, because that can result in a positive economic impact on your retirement plan.
In 2013, Morningstar Research attempted to quantify the value of working with a qualified financial professional. Based on their empirical tests and research, Morningstar determined that a hypothetical retiree could generate 22.6 percent more income when utilizing the services of a financial advisor when compared with the decisions a naïve investor would make.
There are other long-term economic benefits to working with a financial professional and following their expertise and insight. According to a research study from Cirano, study participants who retained the service of financial professionals “for more than 15 years have about 173 percent more financial assets (in other words, 2.73x the level of assets) than non-advised respondents."
In addition, the Cirano research study showed working with a financial professional can significantly increase a person’s level of confidence that they will have enough money to retire securely.
The study stated, “the probability that an advised respondent feels confident about their financial security in retirement is more than 13 percentage points higher than a similarly situated non-advised respondent. This is consistent with the result that long-tenured advised respondents achieve greater savings.”
The Importance of Trust
When looking to hire someone to help achieve your financial goals, it’s important to make that connection by building a rapport and foundation of trust. Rapport is important as it can positively impact the relationship you have with your financial professional, as well as affect your level of confidence in achieving your retirement goals.
Having a feeling of mutual trust allows you to feel more comfortable opening up about your retirement plans and questions and keeps the conversation going. It can also provide a sense of relief to know that you have help tackling this important milestone.
References can be a first step in building a level of trust. Ask friends or family for names of financial professionals who have successfully helped them and the benefits they offered. Also ask financial professionals for references to speak to their clients who have had similar goals or challenges.
What to Bring
Now that you decided to work with a financial professional to help you prepare for retirement, it’s time to figure out what to bring to your first meeting.
For your initial meeting, you should bring current statements for the retirement plans in which you participate (whether it’s an individual plan, such as an IRA, or an employer sponsored plan, such as a pension or 401(k), as well as current investment plan statements, mortgage statements, job pay stubs for you and your spouse if applicable, a monthly budget and most recent tax return. Your financial professional will need to know how much you spend and save within a month, and what current expenses are fixed or fluid within the budget.
Your advisor may want you to bring additional items, as well. It’s a good idea to call your advisor’s office prior to your meeting to get a list of everything you should bring with you.
Questions for a Well-Rounded Portfolio
According to the Morningstar study, households surveyed who selected “financial planner” as their primary source of information regarding savings and investment decisions “had the most appropriate portfolios for their situation, on average, followed by accountants and the internet. The worst three sources (in order) were friends, email, and television/radio.”
Financial professionals can help you determine the retirement portfolio that suits your individual needs decisions. They’ve likely dedicated themselves to ongoing education in their industry and can provide you with helpful insight and experience.
But, the creation of a well-rounded retirement portfolio starts with you and your financial professional asking important questions. They should be asking you what your long-term financial goals are, what is most important to you in retirement and what type of lifestyle you want in retirement.
You should ask your financial professional about their services, licenses and how they are regulated; how they make investment evaluations and how they plan to communicate with you, as well as what fees they charge for their services. You should have a clear understanding of your next steps after your meeting and create a schedule for regular check-ins with your financial professional.
Financial security in retirement doesn’t have to be difficult to understand or achieve. Your retirement goals are important, and finding the right financial professional can help make them a reality.
The content is provided for informational purposes only and does not constitute advice. For specific details on how this may apply to your personal situation, contact your personal financial advisor or insurance agent for more details. American Equity contracts are only sold through independent agents. Please contact your state insurance department to see if there is an independent insurance agent in your area appointed to sell American Equity annuity contracts.
American Equity Investment Life Insurance Company® does not offer legal, investment, or tax advice. Please consult a qualified professional.