Can You Feel Confident About Retirement without Consulting a Financial Advisor?

Can you retire without consulting a financial advisor or some kind of retirement professional?  Of course.  You can do anything you want to do.

Can you retire AND have a secure future without talking with a retirement professional?  The answer to this question might be a little more complicated.

Bad News: The bad news is that studies show that most people — even the wealthy and well educated — know very very little about financial planning.  So, going it alone might not be the best idea.  How would you do on this financial IQ quiz?

Good News: The good news is that there are so many new services that can help you — you might do very well in retirement without ever consulting a financial advisor.  On the other hand, the right advisor could give you confidence and peace of mind.

consulting a financial advisorWhat does it take to feel confident about your retirement plan?

Here are the pros and cons of 8 ways to plan your retirement — with or without a financial advisor:

1. Retirement Books, Articles and Videos

There are a lot of sources of retirement content.  You can easily find 10 ways to do this, 5 ideas for doing that and a lot more.

The problem with books, articles and videos is that it can sometimes be hard to know who to trust and how to apply their advice to your own personal situation.  Never mind the complications of different viewpoints and how implementing one strategy might require your plan to be set up in a different way than you happen to be organized.  Retirement advice is NOT a one size fits all endeavor.

Whenever you read about a retirement or financial strategy that interests you, be sure to apply it to your own plans.

A thorough online retirement planning system should enable you to do this.  For example, every time you make a change or try a new scenario, the NewRetirement retirement planner tells you whether your cash flow, out of money age, estate and debt situation improve or worsen.  This is a powerful feature that can really help you assess the impact of different scenarios.

2. Simple Online Retirement Calculators

You’ve probably used one of these online gadgets. You enter a few pieces of information about your finances and then you find out how much money you supposedly need to retire.

While simple retirement calculators are probably more accurate than Facebook quizzes about which celebrity you look like, they are wholly unreliable for planning retirement.

These tools use a bunch of assumptions that may or may not apply to you and your situation.  And, often these tools are used to sell something to you or get you to bank with the institution sponsoring the calculator.

3. Online Retirement Planning Systems

Online retirement planning systems are like simple retirement calculators.  However, the best are very detailed and customizable.  They usually also require that you create an account so that your information can be saved and maintained over time.

Using a comprehensive online tool for planning retirement can be a great way to seriously document and assess your finances.  And because you are taking responsibility for your own decisions and information, it might be more effective than consulting with a financial advisor — to a certain extent.

There are pros and cons to most of these online systems:

  • Fees: Some have a monthly or yearly fee but many are free.
  • Ease of Use: Some are easy to use, others are intimidating and complicated.
  • Focus: Some are primarily focused on savings and investments.  Others are more holistic and offer more guidance on Social Security, pensions, medical costs, housing and more.

Try a few until you find one that you feel good about.  Just be sure that you are updating and assessing your plans at least once a quarter. CanIRetireYet has the most detailed list and analysis of various online retirement planning tools.  They compare the best retirement calculators and best retirement planning systems.

They recently published this about NewRetirement’s retirement planner:

“Another worthy entry on the high-fidelity retirement calculator scene, that only recently came onto my radar, is NewRetirement — a friendly planning and information platform for prospective retirees. Try this online tool if you’d like an unintimidating walk through your entire retirement scenario. It’s particularly helpful in the areas of retirement income including Social Security and annuities, health care planning including Medicare Supplemental Insurance and Long Term Care Insurance, and follow-on retirement tasks like estate planning.”

4. Investment and Retirement Clubs

Studies have shown that people who have friends with high financial intelligence become more financially intelligent themselves. Just as you are more likely to exercise if your peer group exercises, you are more likely to save for a secure retirement if your friends are saving as well.

Many people have investment clubs that meet regularly to discuss ideas for how to best grow savings.  There are also active online forums like those on bogleheads and the American Association of Individual Investors.

Some groups host more general retirement planning clubs. Learn about how to set up a retirement club for you and your friends.

5. Robo Advisors

Robo Advisors are online services that automate investing.  They collect some information about you and your goals and then apply a formula to decide how you should be invested, when to re allocate and more.

Many people like Robo advisors because their investment management fees can be a lot less expensive than using a broker or advisor.  Robo Advisors typically charge between .2% to .5% of the value of your savings annually which is a significant savings from the 1%-2% charged by more traditional wealth management resources.

Another advantage is that you don’t have to be a millionaire to take advantage of a Robo Advisor.  Most Robo Advisors have a minimum investment amount of $100,000 while many investment managers require that you have more than $500,000.

6. Specialized Services

There are a lot of distinct questions to answer and things to manage when it comes to your retirement finances.  You may want to seek specialized advice for Social Security, lifetime annuities, taxes, living abroad, real estate (downsizing, relocating, retirement communities, etc…), career changes, supplemental medicare coverage, and more.

When assessing these services, it is important to understand how each one makes money and what the value to you could be.  Most people opt to use a real estate agent when selling or buying a home, even though they could do it themselves. You should apply similar thinking to other types of services for retirement.

Many of these types of services will charge you a flat fee for a specified deliverable.  Others may be earning a commission on any services they sell to you.

7. Brokers and Agents

Stock brokers, insurance sales people and services, and real estate agents are just a few of the sources from whom you might get specialized retirement advice.

While most of these providers will be earning a commission if you act on their guidance, many will still try to make your goals be what is most important —  not how much they are being paid.

Nonetheless, it is important to ask a lot of questions and to understand what you are buying and why the agent or broker is making any specific recommendations.  Insist on understanding how they are getting paid.

A downside to working with specialized services or a set of brokers and agents is that you may end up paying more to a variety of organizations than you would to a full service advisor.

8. Talking with a Financial Advisor or Planner

The benefits of consulting a financial advisor are numerous.

  • Studies indicate that working with a financial advisor can measurably boost your confidence.
  • People who use an advisor also typically get better investment returns and spend more time making sure that they set and achieve retirement financial goals.
  • In most cases, consulting a financial advisor insures better retirement outcomes.

The downside of financial advisors is the reality that most people simply don’t trust them. Part of the problem may be that there are infinite choices to make for retirement and it can be incredibly difficult to understand exactly why an advisor is recommending one investment over another.  And, human nature suggests that the grass is always greener on the other side of the fence… So, we will always question and wonder if we could be getting better advice elsewhere.

If you want to use a financial advisor, address the trust issue head on.  Look for one who will act as a fiduciary.  Most importantly, look for one that you yourself feel good about, trust and understand.

Additional tips and resources for assessing professional financial advice:

Help with Finding the Right Retirement Resources

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