As you near retirement, the reality of exiting the accumulation phase and entering the distribution phase of life starts to set in. Everything is going to change; financial strategies during retirement vary drastically from the strategies you used during your working years. Are you prepared? Have you adequately planned and saved?
Many pre-retirees claim to have a retirement plan, and some even assert that they have been working with a “retirement-planning firm” throughout their life. Nevertheless, when thoroughly examined, we often find that their “plan” is simply a standard, diversified pie chart of stocks and bonds.
Of course, this is better than nothing. Putting away any kind of money for retirement is something to commend. However, there are many more facets to a comprehensive retirement plan. Items such as Social Security, risk mitigation, withdrawal strategies, and tax optimization must be planned for. Thus, as you near retirement years, it is critical to work with a medical financial advisor to maximize your funds and make proper plans for the future.
How much can an advisor actually help me?
A recent study by Vanguard concluded that a retirement plan, when properly managed by an experienced advisor, will likely yield 3% more net benefit than a plan managed by a do-it-yourselfer.* So, even if you are paying your advisor a 1% fee (and some charge less than that, including us), you are still making at least 2% more net return than you would on your own.
The numbers are clear; hiring an experienced advisor will typically increase your overall returns. But how? What can an advisor do beyond what you can do yourself?
How can an advisor add value to my retirement plan?
1. Increasing Total Return
In Vanguard’s study, they found that one of the main ways that advisors add value is by supplying clients with additional opportunities for growth. Among many strategies, advisors do this by focusing on total return rather than just increased income. They are also experts at properly diversifying investments.*
Additionally, experienced advisors will ensure that you are using effective accounts and correct withdrawal strategies in order to reduce the impact that taxes have on your retirement income. Because taxes are often a retiree’s top expense, having an effective tax mitigation strategy is essential.
2. Maximizing Social Security Benefits
One of the most significant things you can do to increase retirement income is to create a Social Security distribution strategy that will maximize your benefits. Collecting social security looks different for everyone and deciding when and how to collect will vary from case to case. Working with a professional advisor ensures that your Social Security strategy supports your retirement goals. We further dive into social security strategies in this article here.
3. Additional Benefits
Advisors also help in other, less measurable (although equally important) ways. A trustworthy advisor will encourage you to stick to your investment plan during times of economic downturn, assist in rebalancing your portfolio, and help you keep a level head during market swings. For this reason and others, working with an advisor greatly decreases your risk of making poor financial decisions.
Another often overlooked benefit is time. It takes hours and hours of research to create and maintain an adequate retirement plan, and even then, you lack the thousands of hours of experience of a professional. When you work with an experienced financial advisor, you will find you have more time (and money) to do the things you really care about.
So, whether you are decades or years from retirement, consider sitting down with an expert financial planner. At IMAFS, we are wealth management planners based in Boise, ID, that specializes in retirement planning. We are committed to creating retirement plans that help individuals and families reach their unique retirement goals.