A qualified retirement planner will have a skill set that goes beyond basic financial planning or providing investment advice.
What Does a Retirement Planner Do?
Like financial planners, retirement planners must understand your financial goals. They need to know when you will need your savings and on what you will be spending.
In addition, a retirement planner must have a clear understanding that the financial assets you are accumulating, as well as other resources you have such as pensions, Social Security, part-time work, home equity, etc., are all pieces of a puzzle that must be put together in a way that will result in reliable monthly paychecks once you are retired. This regular income planning requires an in-depth knowledge of taxes, Social Security, and retirement plan rules. Such knowledge often requires years of experience and training to accumulate.
What Type of Advice Can a Retirement Planner Give Me?
A retirement planner or advisor will be able to offer advice on:
- When to take Social Security benefits in a way that is best for you
- What pension distribution choices are right for you
- If an annuity is a suitable investment for you
- Which accounts to take withdrawals from each year, and in what amounts, to minimize the retirement taxes you will pay
- The amount of retirement income you could reasonably expect to have
- What withdrawal rate is appropriate when taking money from a traditional portfolio
- How much of your money should be in guaranteed investments
- What types of taxable income your investments will generate
- How you can rearrange investments to reduce taxable income in retirement
- Whether you should leave your money in your company plan or roll it into an IRA account
- If you should pay off your mortgage before or during retirement
- If a reverse mortgage is a good option for you
- If you need long-term care insurance
- Whether you should keep your life insurance policies or not
Good retirement planners will not make recommendations until they understand your expected time horizon, your level of experience with investments, your goals, and your tolerance for investment risk. They will also want to understand your need for guaranteed income and get a thorough understanding of all your current resources such as assets, liabilities, and current and future sources of income.
Good retirement planners will want to know where all your investments are so that your portfolio, as a whole, will make sense and can be optimized to produce a steady stream of retirement income.
How Much Do Retirement Planners Charge?
Retirement planners may charge in any of the following ways:
- An hourly rate
- A flat fee to run a retirement income plan or retirement cash flow projection
- A quarterly or annual retainer fee
- A percentage of assets that they manage on your behalf
- Commissions paid to them from financial or insurance products you buy through them
- A combination of fees and commissions
Always ask a potential retirement planner for a clear explanation of how they will be compensated.
What About Traditional Financial Planning or Investment Advice?
As an area of expertise, retirement planning falls under the broader category of financial planning. However, it requires greater knowledge.
Investment advice is related to how your money is invested, but those who offer investment advice may not offer much planning. Many retirement planners will offer investment advice as well as a broader range of financial planning services, but it doesn't always work the other way around.
How Do I Find a Good Retirement Planner?
As you interview potential planners, seek someone who has expertise in tax planning, Social Security, and retirement withdrawal strategies. They need to be able to devise a timeline and plan that tells you how to take money out in a tax-efficient way, and they need to be able to objectively advise you on the use of guaranteed income products that can create security.
One option is to check out RIIA, the Retirement Income Industry Association. This group offers a designation called an RMA, or Retirement Management Analyst. If you want someone specializing in retirement planning, I would advise you to look for someone with an RMA designation, although currently, there are only a few scattered throughout the country.
The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk, including the possible loss of principal.