Planning for a secure, comfortable retirement is a nearly universal aspiration. For most people, the idea of living in their retirement without worrying about finances is a top priority. But for many, doubt over how to achieve that goal is troubling. For example, you may have questions about your retirement assets. Do you have enough saved, and is it invested appropriately? For some investors, retirement's special tax and management challenges lead them to rely on professionals for advice.
How are financial planning and retirement planning different?
Financial planning is examining your entire financial situation, including establishing goals and a strategy to achieve them. The goals are likely short, medium, and long-term and typically include savings, investments, owning real estate, and creating a retirement plan. So, retirement is one portion of the overall financial picture.
These days, as lifespans increase, some people need to plan for more years in retirement than they did fifty or even twenty years ago. Still, no one can accurately predict their longevity, so retirement spans must be flexible enough to accommodate various lengths. For example, you may plan to work until you are midway through your seventies, so you forecast a shorter time frame for spending retirement assets. However, if some outside event in your late fifties prompts an early retirement, you may not be fully prepared.
Do I need a retirement planner?
There are numerous varieties of financial guidance available. A financial planner can help you compose your retirement portfolio in a way designed to meet your long-term financial goals. However, as with any other plans, you and your advisor must be prepared to make adjustments in response to changing conditions. Retirement planning isn’t as simple as directing ten percent of your annual income into a sponsored 401(k) account with a retirement year target date and forgetting about it.
A retirement planner will review your overall financial situation and help you evaluate whether you are saving enough and protecting your assets from potential market forces and tax exposure. They will also let you know what you may expect to have available in retirement. Your retirement planner should also continually monitor your investments and recommend changes in response to your circumstances and external conditions.
A Certified Financial Planner (CFP) specializing in retirement planning may be an excellent choice. CFPs are responsible for upholding a fiduciary standard—that means their code of ethics requires that they act in your best interest. That is also true for Chartered Retirement Planning Counselors and Retirement Income Certified Professionals. However, financial advisors are not obligated to uphold a fiduciary standard and can recommend financial moves for you that meet the lower suitability threshold. You may also want to consider a fee-only advisor, to whom you pay an hourly rate. Those individuals do not benefit from commissions or other income from your decisions.
This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions.
Realized does not provide tax or legal advice. This material is not a substitute for seeking the advice of a qualified professional for your individual situation.
Examples are hypothetical and for illustrative purposes only. Withdrawal strategies should take into account the investment objectives, financial situation and particular needs of the individual.
