9 Finance Tips You Might Not Hear From Your Financial Advisor

These finance tips should be common knowledge but they're not.

Man looking through binoculars for good financial advice.
If your financial advisor is only compensated by the sale of financial products, then you may not hear about these 10 things. Caiaimage/SamEdwads/Getty Images

Financial planning advice is not always objective. Many financial planners are compensated from the sale of investment or insurance products, and some advisors have more sales training than financial training. This can lead to some information being left off the table when you're considering investments and planning your future. Here are 10 things that financial advisors often overlook.

Open an HSA Account Instead of an IRA

An HSA or health savings account goes hand in hand with a high deductible insurance policy, so it isn't an option for everyone.

But if you happen to have a high deductible policy, it might be better to fund your HSA each year rather than your IRA. Why? Because your money goes in tax-deferred and comes out tax-free for qualified medical expenses, and medical expenses are pretty much a certainty in retirement. But if you use IRA withdrawals, the money you take out is taxable. 

Take Your Pension As an Annuity, Not a Lump Sum

It's not too difficult to create a simple spreadsheet to help you see whether you should take your pension as a lump sum or in the form of annuity payments. It can be difficult to generate the same amount of safe, lifelong income with a lump sum that the annuity choice might offer you.

You can compare the potential outcomes of both options over your life expectancy to make an objective decision. Each plan will vary, so there isn't any one-size-fits-all rule. You'll have to do an analysis based on your available pension choices, your age, and your marital status.

Don't let anyone convince you that a lump sum is best until you've done the math.

Roth IRAs Deserve a Second Look

Roth IRAs might be the greatest investment known to man for numerous reasons. You can withdraw original contributions at any time without tax or penalty. Money inside a Roth grows tax-free.

When you take withdrawals, Roth distributions do not count in other tax formulas, like the one that determines how much of your Social Security is taxable or the one that determines how much in Medicare Part B premiums you'll pay. Unlike regular IRAs, you're not required to take distributions from a Roth at age 70 1/2. Find out if you're eligible to contribute to a Roth IRA above and beyond the amount of any employer match you receive, or if your employer offers a Roth 401(k) option.

Use Index funds

You might be surprised to find out that there's one thing you can look at to consistently find the best-performing mutual funds. It's the fund's expenses. Funds with low fees tend to outperform their higher fee counterparts, and index funds have some of the lowest fees in the industry. Why pay more for the same basket of stocks or bonds when you could own them for less? 

Cancel Your Life Insurance Policy 

Life insurance is important if someone is financially dependent on you, but your income and your spouse's future retirement income may be secure no matter what happens as you near retirement. You may not need life insurance at this point unless you want to provide for someone after your death.

That's fine, but it's important to know why you're paying for something and to objectively decide if it's worth spending money on. 

Buy I Bonds, Not a Fixed Annuity

I bonds are a great alternative to CDs, money market funds, and savings accounts. You get tax-deferred, inflation-adjusted interest with complete liquidity after you've owned them for 12 months. I bonds can't be purchased inside a brokerage account so a financial advisor can't charge on them or make money selling them. That might be why you don't hear about them more often. Bottom line: I bonds are one of the best safe investments you can make. 

Social Security Can Make More Money for You 

Making a thoughtful and well-informed decision about when to start your Social Security benefits might add more "return" to your total retirement income than an investment advisor will.

Spend more time on Social Security planning and other forms of financial planning and less time on investment analysis and you'll likely end up with more money.

Stocks Might Not Be Safe in the Long Run

Lots of graphs and charts show that stocks are less volatile over longer periods of time. The stock market might go up 40 percent or down 40 percent in a year's time, but the return is more likely to range from a low of zero to 2 percent to a high of 10 to 14 percent over a 20-year period. What these charts and graphs don't tell you is that stocks might not have a higher return than safer alternatives even over longer periods of time like 20 years. Maybe they won't lose you money, but that doesn't mean they'll outperform less risky choices. People assume that stocks will always deliver higher returns if you own them long enough, but this assumption isn't true. 

Rearrange Your Investments to Be More Tax-Efficient

Many financial advisors will manage one account for you rather than look at all your investment accounts holistically. For example, you might have a 401(k) and an inherited, non-retirement investment account that's handled by an advisor. He might manage your non-retirement account without considering your 401(k), and you'll get a 1099 each year that reports the interest and investment income from this account. 

But sometimes these investments can be structured to be more tax-efficient. It might make more sense tax-wise to locate more bonds in your 401(k) account and more growth investments in your non-401(k). When you have multiple accounts such as an IRA, 401(k) and non-retirement savings, there are numerous reasons to look at your investment allocation holistically rather than at each account on its own.