Everyone wants a healthy, financially secure retirement, and today, we’re going to cover the four steps you need to take to reach this goal. If you haven’t already, we highly recommend reading the two blog posts that we’ve written before getting started:
- 4 Costly Misconceptions About Retirement Planning
- Avoid 4 Retirement Investment and Planning Rip-Offs
Ready? Let’s dive right in with the first step.
Step 1: Make a Commitment to Yourself to Get Your Checkup Done
How long has it been since you’ve had a physical or full checkup? Chances are, you’ve pushed off a lot of medical checkups because you feel great or don’t want to spend the day in the doctor’s office.
The same scenario happens all the time with people’s retirement checkups.
People often push off their financial checkups because:
- They plan to do it closer to retirement
- The markets are doing good
- They’re busy
We encourage you to set a goal – it could be 30, 60 or 90 days from now – where you get your retirement plan checkup done. Then, sit down with your advisor, get a checkup down and see where your retirement stands.
This is a great time to gather all your account information and documents, too.
Step 2: List Your Objectives
These aren’t the normal objectives, such as wanting $1 million in retirement accounts. Instead, the goals we’re talking about have to do with your advisor. First, you should figure out your objectives, such as:
- How will the advisor help you? What do you want your advisor to do?
- Do you want your advisor to take complete control of your retirement, or do you want brief monthly advice?
- What type of advisor do you want to work with? Do you want a product-based advisor, holistic advisor, or robo advisor?
- Do you want to work with a fiduciary? Hopefully, you do.
- What credentials do you want your advisor to have?
- What type of fee structure would you prefer your advisor to have?
Create a list of objectives that you can take with you to an advisor to ensure that your objectives are all met. You need to know exactly what you want from an advisor so that you can find one you trust.
Step 3: Ask Questions
Imagine that you’re researching or already working with a financial advisor. You should have questions that you want to ask them. In fact, we’re going to help you get started with eight questions that we think are an absolute necessity to ask:
- Do you work as a fiduciary? If an advisor says, I work as a fiduciary for all my clients, that’s simply not enough. You need to know if the advisor is fiduciary bound by law. Fiduciaries must put your interest above their own.
- Are you registered by our state’s securities regulator? This is important because if the person isn’t registered with the state, they’re not following the rules and may be running a scam.
- How long have you been an advisor? If a person is just starting out, it’s best if they work alongside an experienced advisor that can assist them when working on your retirement.
- What are your credentials? Credentials matter because some credentials have much higher standards than others. A certified financial planner, for example, can provide a well-rounded approach to financial planning that a non-certified individual may miss.
- What are your fees? Fees are important. How are fees taken out? Are you paying fees hourly, quarterly or on a service-by-service basis? You need to know what you’re paying in fees, when and how the advisor is paid.
- What is your investment philosophy? If the advisor cannot answer this question or doesn’t answer it properly, think twice about retaining their services. You must be confident in the philosophy the advisor follows.
- Do you make money from trading mutual funds or stocks? Will the advisor earn a commission on these trades? A commission may be a conflict of interest, and while this is far less of a concern than it was in the past, some advisors are still paid for mutual funds.
- How often do you communicate with clients? The leading reason clients leave advisors is a lack of communication. Ask how the advisor will communicate with you and stress the medium of contact you prefer. For example, you may find that email is best for you when looking over your retirement accounts rather than a phone call.
Of course, add in your own questions to really get a feel for the advisor that you’ll be working with.
Step 4: Meet with the Advisor and Get Everything in Writing
Meet face-to-face with an advisor and get to know them on a deeper level. You can start using email or virtual meetings when you know the person and trust them. There’s something different about sitting in a room with the advisor, talking to them and truly getting to know them.
You can do many things virtually, such as buying a car, but you really need to build a long-term relationship with an advisor.
Additionally, get everything in writing, including:
- Fees you’ll pay
- Risk assessment and tolerance documents
You need to have all these documents because they are proof of what you’ve agreed to and what needs to be done in your plan.
Bonus Step: Credential Certification vs. Title
We’ve dabbled on certifications briefly in one of the past sections, but it’s essential to know the difference between a certification and a title for financial advisors. Anyone can call themselves a financial advisor, planner, consultant or something else professional and fancy.
However, certifications may require a rigorous education and continuing education.
A certified financial planner is one certification that is in-depth and is one of the more difficult certifications in the industry. Chartered financial consultants or chartered life underwriters are two additional certifications that are intense.
If your advisor is a certified financial planner (CFP), you can be confident that they have an excellent education backing the services they offer.
Following the steps above will help you get started or continue with your retirement plan properly.