Question: My wife and I make a little over $400,000 a year combined before taxes. Our fixed expenses such as mortgage, car payments and other bills are just under $6,000 per month. our discretionary spending averages about $8,000 per month. I work in local government and plan to retire in about 15 years; after that, my pension will pay me about 150 thousand dollars a year. I have a 457 too [a retirement savings plan offered to many government employees] At $71,000 right now and I’m maxed out. My wife has a 401(k) with significantly more that she maxes out every year. We have a 529 plan for our two children to which we contribute $250 per month. And we have about $75,000 in IRAs, ETFs and stocks. We invested in them consistently until the recent market crash, now we just put excess income into a savings account at 3.3%.
Now to my question. we have never spoken to a financial advisor. But now that we have children to think about and as we approach retirement, we wonder if the cost of one would be money well spent at this point in our lives. What benefits will it give us? (Also looking for a new financial advisor? This tool can match you with an advisor that meets your needs.)
Having a problem with your financial advisor or looking for a new one? Email picks@marketwatch.com.
Answer: Overall, it sounds like you’re in good financial shape and better prepared for retirement than most people at this stage. You may not need an advisor at all (here’s who you don’t have to work with), but that depends on how much time, knowledge, or interest you have in dealing with financial matters.
“It sounds like you’re in a good position with cash flow now and in the future, but a planner can help you identify risks to protect your financial success and help plan your wishes for your family, known as legacy planning,” says a certified financial planner. : planner Derrick Hodges at Anchor Pointe Wealth. (Looking for a new financial advisor, too? This tool can match you with an advisor that meets your needs.)
What’s more, based on your questions, a good advisor will help you organize what may seem like a lot of moving parts into a coherent strategy around tax-efficient savings as well as an exit strategy after retirement, says the certified financial planner. Joe Favorite at Landmark Wealth Management. “But there are other issues like proper asset allocation, whether or not you’re adequately insured at a reasonable cost, and estate planning issues that I think, well, only a fee-based advisor can bring value to,” says Favorito. : .
And working with a financial advisor can help you avoid problems with investments, insurance, taxes, retirement and estate planning. “A financial advisor should review each of these topics with you and discuss what your specific goals are and how to achieve them. For example, an advisor can identify a lack of diversification or undue risk in an investment portfolio, or can identify a lack of insurance coverage or help your family avoid conflicts when you die,” says Humphreys.
What kind of consultant might work for you?
That said, there are certain types of advisors that are better suited to your needs than others. Indeed, financial advisor is a broad term, but many only sell insurance or financial products and do not give advice unless it is incidental to the policy or product they are selling. Don’t go to those types of consultants.
Instead, look for a fee-only consultant. They collect fees directly from clients and act as fiduciaries, meaning they put their clients’ best interests first, while fee-based advisors are paid commissions when they sell products or make investment recommendations. You can opt for a certified financial planner because they have completed extensive training, passed an exam, and have extensive professional experience. (Looking for a new financial advisor, too? This tool can match you with an advisor that meets your needs.)
Try to get a sense of whether the advisor you’re talking to is an expert in helping people in your situation and whether their process for working with clients fits your needs, says certified financial planner David Edmisten of Next Phase Financial Planning in Phoenix, Arizona. to whom (Looking for a new financial advisor? This tool can match you with an advisor that meets your needs.)
You may also be a good candidate for a project-based financial plan or monthly retainer to determine whether the advice you need is temporary or long-term. Here are a few different types of advisors and what each might charge. “Part of the process of finding an advisor is understanding what you’re getting when you work with an advisor. Instead of defining engagement as a cost, try looking at it in terms of value. Ask yourself, does the advisor add value to my financial situation,” Humphreys says.
Q:Having a problem with your financial advisor or looking for a new one? Email picks@marketwatch.com.
Questions edited for brevity and clarity.
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