Money & Policy

Why You Should Hire a Retirement Planner

A good financial pro can help you figure out how to retire the way you want

Planning for your retirement, however you define the word, may be one of the biggest challenges you ever face. That’s why you might want to hire a professional retirement planner – a financial planner who specializes in retirement – who can work with you to steer your course.

The right retirement specialist, as opposed to an all-purpose financial planner, can help you determine your goals then find ways to reach them.

A pro can do three important things for you:

1. Ensure that you’ve covered all the bases. The adviser can analyze your present financial state (your investments, your debts, your sources of income) to see if you’ve made the right moves then discuss what you need to focus on for your retirment planning. The adviser can help you look for ways to eliminate unnecessary expenses in retirement. For instance, you might learn that you no longer need to pay for disability insurance. “A planner can help identify problem areas that you may never have thought of,” says Tom Gryzmala, a retirement planner in Charlottesville, Va. Equally important: the planner can recommend actions to deal with these potential landmines.

2. Explain how much things will likely cost you. Retirement can be expensive, and many people fail to plan properly for the cost of living that would let them retire when and how they want.  They're sometimes unrealistic about how long their money should last. “Few people realize that the average life expectancy for a couple who reaches their 60s is actually 90,” says Glen Clemans, a financial planner in Portland, Ore. A healthy couple turning 65 this year would need at least $305,000 in cash, on average, to meet their out-of-pocket health care costs up to age 90, according to a study by the Employee Benefit Research Institute.

Inflation can be a brutal beast: If you’re now living on $80,000 a year and want to live on that same amount in retirement, you might need roughly $95,000 annually if you’ll start retirement in nine years.

A planner can also explain not only how much retirement is likely to cost, typically, but also how much your desired retirement lifestyle would run. That will help you see whether there's a gap between the retirement of your dreams and reality, so you'll know whether and how to adjust your plans.Help you devise a comprehensive plan. A retirement planner can draw up a detailed program, including:

  • A financial plan with a forecast of your annual expenses.
  • How much you can withdraw from savings each year.
  • Recommended investments for your various savings and retirement accounts.
  • A statement of net worth, augmented with details related to estate planning and estate taxes.
  • Advice on particular needs such as long-term care insurance, and health insurance to supplement Medicare.

3. What to look for and ask

To begin finding a retirement planner, first determine what type of advice you need. If you’re looking primarily for investment guidance, for instance, you’ll want to search for a pro with that specialty, like a Certified Financial Planner (CFP) or a Chartered Financial Consultant (ChFC). The website for the Certified Financial Planner Board of Standards lets you search by specialty and by the value of your assets. If you want help in evaluating your life insurance needs, look for a retirement planner who is also a Chartered Life Underwriter (CLU).

Since the term “retirement planner” is open ended and there are no requirements for someone to use that designation, don’t be shy about asking for specifics. The National Association of Personal Financial Advisors has a detailed list of questions to screen financial advisers. But these are the essentials:
  • How long have you specialized in retirement issues?
  • How are you compensated and do you have any vested interests in products and insurance you recommend?
  • How have the investments you've recommended performed?
  • Have you had any disciplinary problems? (These might be suits against the planner, but they could also be complaints filed against them such as misrepresenting a product to a client or acting unethically)
  • How long will it take to draw up a plan?
  • How much will a plan cost?
  • Are there charges for follow-up visits?
  • Can you give me the contact information for other clients who have had similar needs? 

How retirement planners are paid

Retirement planners can be compensated in a variety of ways. You’ll want to nail down the fee structure before you hire one. These are the typical options:  

  • Hourly rate. You’d generally pay $150 to $250 an hour, depending on where you live and the planner’s experience.
  • A retainer or flat fee. Here, the cost depends on the complexity of your finances. You could pay less than $1,000 for a comprehensive retirement plan or you could owe more than $5,000.
  • The amount of money you have to invest. In this arrangement, your fee is based on a percentage of the value of your portfolio, generally around 1 percent. Ask if  the pro would provide portfolio management services as well as financial planning services. 

Taking Advantage of Online Tools

If all you want is a rough gauge of how much money you’ll need to retire, you could use an online calculator instead of hiring a retirement planner.

The Employee Benefit Research Institute’s website, choosetosave.org, has a particularly useful calculator called Ballpark E$timate
Just keep in mind that these types of calculators often ask you to make some forecasts, ranging from how much you think your investments will earn to how high you think inflation will be to the percentage of your pre-retirement income that you expect to live on.
That’s one more reason why a competent retirement pro, who can help you with these projections, just might be worth the expense.
Jeff Wuorio
By Jeff Wuorio
Jeff Wuorio is the author of 14 books on business and personal finance including Investing Made Easy. He has written for Next Avenue, Money, Business Week and The New York Times.

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