How Inflation Erodes Your Retirement Savings—and What to Do About It
How Inflation Erodes Your Retirement Savings—and What to Do About It Inflation is often called the “silent” threat to retirement, and the nickname is fitting. Unlike
Nobody wants to spend money on things we think we can do on our own. Maybe you feel that way about investing. Why pay a financial advisor when you could manage your investments yourself? There is a lot of information going around about financial advisors and most people tend to cringe at the fees. So, when it comes to investing, some people say, “I can do it on my own.” But ask yourself this question: Do you repair your own air conditioner? Build your own car? Fly your own plane? Neither do we. You use a professional because they have more education and experience. You want the job done right the first time because that gives you peace of mind. The same applies with your retirement. You need an expert on your side. Here’s a few reasons why.
The word “financial advisor” isn’t an official title or name of a degree. It’s a generic term for people who provide a wide variety of financial services. And those services often have specific training or education attached to them. Here are just a few:
Now, financial advisors can have more than one license. For example, a Certified Public Accountant (CPA) can also be a Certified Financial Planner (CFP). We know, it gets confusing with all the abbreviations. But the gist is this: Work with someone who has training and experience. Don’t trust your uncle’s cousin or an old college “buddy” you kind of knew for help with your investments.
Now that you understand what an advisor does and the areas of expertise they can work in, you need to ask yourself: Why do I need a financial advisor? Here are just a few reasons:
Let’s take a closer look at these reasons. You’ll discover that financial advisors are more important than you thought!
How much money should you have saved for retirement at your current age? How can you make up for lost time if you started investing late? Should you change your investing portfolio as you get older? While answering these questions may seem like quantum physics for you, they’re like preschool math for a financial advisor! And because they know how to work the math, they can keep you on track in saving for retirement. In fact, a study from John Hancock showed that 70% of those who work with a financial advisor are on track or ahead in saving for retirement, compared to just 33% of those who don’t use an advisor.1 Seventy percent is a whole lot better than 33%!
Some people think that a financial advisor’s only job is to invest money. While that is one of their responsibilities, it is not the only one. They can also work with you on a wide range of other financial tasks:
Doctors don’t perform surgery on themselves. Dentists don’t pull their own teeth. Experts in any given field get advice and consultations from others they respect. And that’s true in the world of financial planning, too. That’s because everybody has blind spots. You know what we’re talking about.
When you’re driving, there’s that one spot in your car that blocks your line of sight. And that can cause accidents if you change lanes too quickly. You have blind spots in managing your wealth, too. For some, it’s emotions. For others, it’s misinformation. And those blind spots can cause big mistakes in your financial planning. That’s why you need a financial advisor.
A pro can give you a 360-degree, bird’s-eye view of your financial situation because they’re on the outside looking in. They can spot weak areas you may be blind to and give you advice on how to fix them. They can keep a cool head when you panic, and they can give you educated advice on making wise money moves. Even the best of the best need expert help. So do you.
Think about your typical workday. You’re crazy busy from the time you wake up until you hit the pillow at night, aren’t you? Let us ask you an honest question: Do you really think you can put in the hours of research it takes to choose the right mutual funds or find the right balance of those funds?
Fidelity surveyed its program participants, and 77% of them admitted that they didn’t have the time or knowledge to be confident in their investment choices.2 Our guess is they’re not alone. And even if we do have the time, we can all think of much better things to do than sit around and crunch numbers!
Professional advisors are elbow-deep in investing all day, every day. While you might spend hours looking up definitions, figuring out acronyms, and trying to decipher reports, these folks won’t. They know their stuff. They can find the answers in half the time because it’s the world they live in. They can save you countless hours that you just can’t get back—time you’d rather spend elsewhere.
When the stock market takes a huge drop—like it did with the financial crisis of 2008—your stomach will start churning. Why? Because you’ve got some skin in the game! You know that those drops in the market mean a drop in your portfolio. You feel like your money is disappearing right before your eyes—and nobody invests their hard-earned money just to lose it! If you don’t work with a financial advisor who can remind you that the market will go back up (because it always has), your emotions could take over your logic and cause you to make some stupid decisions—like pull out all your money and hide it under a mattress.
A good investment advisor knows that market dips, that means mutual funds—which are made up of stocks from many different companies—are on sale! They’ll strongly encourage you to leave your investments alone—and to keep investing while you can get mutual funds at a lower price.
Likewise, when a stock or new investing fad is soaring, an advisor will help you keep a balanced portfolio and not turn your retirement outlook into a roulette wheel in Vegas.
That’s why you need an advisor. Feelings are real, but they don’t always tell you the truth.
You want to work with a financial advisor when you start building wealth through investing. And you need to meet with them at least twice a year to review your portfolio and talk through any changes you might want to make. But there are other times things may pop up that you have questions about. Even if you think you might need help, all it takes is a phone call to an advisor you trust.
If you’ve never met with a financial advisor before, you might feel intimidated. And you might not know what questions to ask. We’ve been there. But don’t let that stop you from getting help. To start the process, just ask around. People who like their advisors are often more than willing to spread the love. Now, keep in mind that you don’t have to work with the first person you meet. Talk to a few, ask them questions, and then choose which person is right for you.
Here are some questions you should ask at your first meeting:
Once you’ve chosen the person you want to work with, you’ll set up another appointment. At that meeting, you’ll go over your current financial situation. You’ll talk about any retirement accounts you have, like IRAs or Roth 401(k)s. If you have kids, you may talk about when and if you want to save for their college funds. You’ll talk about your long-term financial goals. And then you’ll work together to create a game plan for reaching those goals.
But it all starts with you. Your financial future is in your hands. And if you don’t take control of your money now, then when? It’s time for action!
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