Question: “My wife is 62, I’m 61 and we are on the short list to retire, hopefully by 65. We have about $1.4M in retirement and savings and anticipate about $40K to $45K in Social Security and about $30K to 40K in cash. We have no debt, own our home and live a conservative lifestyle. We both still work part-time and I carry our health insurance through my job. I have a small business on the side for an additional $20K to $30K per year. Other than utilities, vehicle insurance, groceries and standard basic living expenses, we are pretty secure.
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Answer: You could be in a decent place to retire, and may not need an adviser. But pros have long told The Advicer that one of the best times in life to get an adviser is before you plan to retire – just in case there are red flags you aren’t seeing. (Here’s who does, and does not, need an adviser.)
You’ll want to avoid the two most common mistakes couples make as they transition into retirement, says Jim Hemphill, certified financial planner at TGS Financial Advisors – something an adviser could help with.
“The first is over-spending early in retirement, causing them to run short as they age. The second is taking the wrong kinds of risks in their investments. Retiring in your mid-60s, you definitely need a significant equity component in your portfolio, but you can’t afford the downside risk of the sort of tech-centered portfolio that has performed well in recent years, but might lose 60% or more in a real bear market,” says Hemphill.
An adviser can help you to clarify two things. “First, how should you structure your cash flows to provide enough income in a form that is comfortable for you? Second, how should you diversify your investments so they can provide an income and capital hedge against long-term inflation,” says Hemphill.
Furthermore, a good planner can help “with various financial factors, such as the optimal age to begin receiving the Social Security benefit, reviewing whether your portfolio is ready to take you to retirement and determining if your portfolio should change once you are retired and simulating different tax minimization scenarios for you by applying leveraged tax planning strategies in your small business,” says certified financial planner Alonso Rodriguez Segarra at Advise Financial.
It’s also important to recognize that there is a distinction between surviving and thriving. “From the sound of things, you should have no trouble surviving. The more important question is whether you could benefit from an adviser who can help coach you to consider what a thriving retirement could look like as opposed to just surviving,” says Anthony Ogorek, certified financial planner at Ogorek Wealth Management in Buffalo, New York.
“Money is a tool that can help you to achieve a certain quality of life. Being overly concerned about accumulating more tools without due consideration to what you can build with the tools can be a real missed opportunity. You do need to find a financial adviser, but not for the reasons you think,” says Ogorek. (Looking for a new financial planner too? This free tool from our partner SmartAsset can match you to financial advisers, as can spots like CFP Board.)
And note that: “You’re planning to retire on the early side and it’s likely you’ll need the combination of your income sources and your portfolio to provide cash flow for at least 20 years and possibly more than 30 years. Your greatest risk is outliving your money,” says Hemphill.
What kind of financial planner can make sense?
Look for someone who specializes in retirement planning, pros say. “You should be looking at someone who includes retirement income planning at a high level dynamic like age-based spending paths versus static spending paths, Social Security optimization, Medicare planning, proactive tax strategies, long term care planning, gifting and legacy strategies. This list is not all inclusive. Most importantly, they should be fee-only and not have their compensation tied to you purchasing any type of product like an annuity, as there is inherent conflict in that and would lead to biased advice,” says certified financial planner Ryan Townsley at Town Capital.
A certified financial planner can be a good option here, because they act as fiduciaries and must complete extensive education and experience requirements. “Simply searching for a fee-only planner in your community would be a good first step,” says James Daniel at The Advisory Firm.
Ultimately, a financial adviser, like any other professional, is there to help you make better decisions, feel more confident in your decisions and save time because you don’t know what you don’t know, says Mark Struthers, certified financial planner and certified retirement counselor at Sona Wealth Advisors.
“Financial planning for retirement is needed more now than 20 years ago because we are living longer. Spending 10 to 15 years in retirement with an inflation-adjusted pension really did not take too much planning. 30-plus years in retirement with no pension does. There are just too many variables to balance,” says Struthers.
Have an issue with your financial planner or looking for a new one? Email your questions or concerns to picks@marketwatch.com.
Questions edited for brevity and clarity. By emailing your questions to The Advicer, you agree to have them published anonymously on MarketWatch; they may appear anonymously in other media and platforms.
