Should You Hire a Retirement Advisor?

Saving for your golden years may not seem like a priority compared to daily expenses, debt repayment and short-term savings goals. However, the sooner you start, the sooner you can leverage compounding interest to grow your investment. Getting an early start on retirement planning also provides some flexibility if you decide to tweak your strategy. This doesn’t mean you have to plan your retirement alone, though. A retirement advisor can help you build a plan to save for retirement and make your income last.

To find a financial advisor who serves your area, consider using SmartAsset’s free matching tool.

What Is a Retirement Advisor?

A retirement advisor is a financial professional whose services center on helping clients save and prepare for their future retirement. Some areas they typically focus on include investment management in your retirement accounts, retirement income planning, insurance planning and tax management.

Retirement advisors can carry any number of financial designations and certifications. These various titles describe the training and expertise an advisor has, as well as the types of services they offer. They also usually involve the advisor enrolling in specialized education courses and completing one or more exams.

These are some of the most popular financial advisor certifications for retirement:

• Certified Financial Planner™ (CFP®)
• Retirement Income Certified Professional (RICP)
• Chartered Financial Analyst (CFA)
• Certified Retirement Financial Advisor (CRFA)
• Certified Retirement Counselor (CRC)
• Retirement Management Advisor (RMA)

Retirement advisors can operate independently or work for an advisory firm or bank. One is not necessarily better than the other. The type of retirement advisor you choose largely depends on the help you need and the type of relationship you’re seeking.

What Do Retirement Advisors Do?

In a nutshell, a retirement advisor helps you set financial retirement goals and develop a plan to reach them. They can also help prioritize, qualify and quantify your retirement objectives. Additionally, your advisor can act as the person who keeps you focused and motivated as you approach retirement age.

The services that a retirement advisor can offer you will depend largely on their professional certifications and experience. Generally, however, a retirement advisor performs these services.

• Helps identify your retirement savings goals and the steps to achieve them.
• Pinpoints potential gaps in your retirement savings plan.
• Offers advice on how to maximize tax-advantaged accounts, such as a 401(k) or individual retirement account (IRA).
• Helps you devise a strategy to pay off debt, including student loans, credit card bills, a mortgage or other loans.
• Discusses how best to plan for healthcare costs and long-term care needs.
• Guides you in choosing the best asset allocation that balances risk and reward.
• Informs you about products designed to preserve supplemental retirement income, such as annuities and long-term care insurance.
• Helps you determine where Social Security benefits fit into your overall retirement plan.
• Assists with managing the tax implications of retirement account withdrawals and insurance payouts.
• Suggests solutions for alternative investments, such as real estate or collectibles.

Once you find a retirement advisor to work with, speak with them extensively about your current financial situation, as well as your future goals. Only then will you and your advisor decide which of the above services is necessary for you.

Pros and Cons of Working With a Retirement Advisor

Pro: Expertise

Perhaps most obviously, a retirement advisor has specialized retirement knowledge that you likely do not. They can analyze your plan objectively to help you determine what is working and what may need improvement. Your advisor can also help you stay level-headed when the market experiences volatility, avoiding emotional investing.

Pro: Tax Support

An advisor also stays on top of tax laws and policy changes that can affect your retirement plans. That’s important for avoiding common costly mistakes. For instance, if you’re planning an early IRA withdrawal to pay for your child’s college education or buy a first home, you want to know beforehand about penalties or income tax on the withdrawal. You also want to calculate how an early withdrawal may impact your long-term savings plan.

These are questions a retirement advisor can answer.

Con: Cost

Perhaps the most obvious downside to a retirement advisor is the cost of their services. In almost all cases, retirement advisors will charge you some combination of fixed fees, hourly fees and percentage-based fees. Additionally, you must cover any investment fees you encounter.

The good news is that it’s possible to find advisors with reasonable fees.

Con: Wrong Fit

The bigger drawback to consider is the consequences of choosing an advisor that doesn’t fit your needs.

Let’s say you’re looking to drill down on your asset allocation and fine-tune your investment strategy beyond just stocks and bonds. If your advisor isn’t well-versed in alternative types of investments, they may unintentionally offer advice that doesn’t suit your purposes. In some cases, advisors might even push products that are not necessarily right for you because it benefits them to sell that product.

That’s why it’s critical to research and vet an advisor before working with them.

How to Choose a Retirement Advisor

If you feel ready to hire a retirement advisor, there are several things to keep in mind as you look for candidates.

• Professional background and certifications
• Range of services available
• Fee structure
• How often they communicate with their clients
• Preferred method of communication
• Overall investment strategies and styles
• Whether they are a fiduciary

Finally, consider the type of clients an advisor typically works with. People in their 20s who have yet to start a family likely have very different retirement planning needs than someone in their 50s. Ideally, your advisor will have experience working with clients with similar financial backgrounds and aspirations to your own.

Mistakes People Make When Choosing a Retirement Advisor

No Verification

One of the most common mistakes is hiring an advisor based on a personal recommendation without doing any independent verification. A clean record does not guarantee a good fit, but a history of complaints or regulatory actions is a clear warning sign.

Before working with anyone, check their credentials and disciplinary history through FINRA BrokerCheck or the SEC Investment Adviser Public Disclosure database. Both are free and take only a few minutes.

No Fiduciary

Not all advisors are held to the same legal standard.

A fiduciary is required to act in your best interest at all time. In comparison, a broker or insurance agent may operate under a suitability standard or Regulation Best Interest ¹ .

While this requires appropriate recommendations for you, it does not eliminate all conflicts. By assuming every advisor is a fiduciary, you could end up working with someone whose recommendations are shaped in part by what they earn on the products they sell.

Only Considering Cost

Choosing an advisor based on cost alone can also backfire. An advisor who charges a lower fee but only manages your investments may not help with tax planning, Social Security timing, withdrawal sequencing or healthcare cost projections.

These are often the areas where professional guidance creates the most value in retirement. Paying slightly more for comprehensive planning may save you significantly more than the fee difference over time.

Not Minding Compensation Structure

It is also worth asking how the advisor is compensated on specific product recommendations. An advisor who earns a commission on annuity sales or insurance products has a financial incentive to recommend those products. That does not mean the recommendation is wrong, but you should understand the incentive structure so you can evaluate the advice with full context.

Not Evolving

Finally, many people stay with an advisor long after the relationship no longer fits their needs. The advisor who helped you save and invest in your 30s and 40s may not specialize in the withdrawal planning, income tax management and healthcare decisions that define retirement.

As your financial life changes, your advisor should change with it, or you should find one whose expertise matches your current stage.

How to Start Working With a Retirement Advisor

1. Prepare

Before your first meeting, gather the basics and formulate a list of important basics.

• Retirement accounts
• Current balances
• Income sources
• Debts
• Financial questions

The more prepared you are, the more productive the initial conversation will be. An advisor who can see the full picture from the start is in a much better position to provide useful guidance.

2. Interview

Interview at least two or three advisors before making a decision, asking questions like these.

• How much they charge
• Whether they act as a fiduciary
• What certifications they hold
• What types of clients they typically serve

Pay attention to how they explain things. An advisor who communicates clearly and answers your questions directly is more likely to be a good long-term fit than one who relies on jargon or avoids specifics.

Ask what you will actually receive for your money. Some advisors provide a written financial plan with projections, recommendations and action steps. Others offer ongoing portfolio management with periodic check-ins.

Understanding the deliverables upfront helps you evaluate whether the fee is reasonable for the service you are getting.

3. Verify

Verify everything independently. Check the advisor’s registration and history through FINRA BrokerCheck or the SEC database, confirming that their certifications are current.

This step takes a few minutes and can save you from a costly mistake.

4. Consider Alternatives

If you are not ready for an ongoing advisory relationship, consider starting with a focused engagement. Many advisors offer one-time services, instead. This can include a retirement-readiness assessment, a Social Security claiming analysis or a tax-efficient withdrawal plan.

These give you professional guidance on a specific question without committing to a long-term arrangement. You can always expand the relationship later if the initial experience is valuable.

Which Makes More Sense: Retirement Advisor vs. Planner?

If you’re nearing retirement, already retired or dealing with issues like Social Security, pensions or withdrawing from retirement accounts, a retirement advisor can provide specialized guidance. They focus specifically on managing retirement assets, making your savings last and handling taxes and healthcare expenses.

A general financial planner is typically helpful for younger clients and those with multiple financial goals beyond retirement. They can generally help with several areas.

• Budgeting
• Managing debt
• Saving for college
• Building your investment portfolio
• General long-term planning
• Wide-ranging estate and insurance advice
• Retirement planning

Even if retirement is far away, you may still benefit from a retirement advisor if you have complicated retirement-related decisions. That may include managing inherited retirement accounts, planning tax-efficient withdrawals, or evaluating insurance for retirement.

Your choice ultimately depends on how close you are to retirement, the complexity of your finances and your specific needs. A retirement advisor specializes in retirement concerns, while a general financial planner takes a broader approach covering many areas of your financial life.

Bottom Line

Between taxes and regulations, a fickle investment environment and varying savings strategies, there are many elements involved in retirement planning. While you don’t have to hire a financial advisor, enlisting a retirement advisor can help you build a more secure financial future. They can also help you make more objective decisions.

Just remember to take your time when choosing an advisor. Do your research and due diligence to ensure you choose the advisor that’s the best match.

Tips for Working With Your Retirement Advisor

• Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• If retirement planning is your ultimate need, you could also work with a financial planner. Check out SmartAsset’s guide on financial advisors and financial planners to understand the differences between them.

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