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Is hiring a retirement advisor right for you?

Saving for your golden years may not seem like a priority compared to daily expenses, debt repayment and short-term savings goals. Yet the sooner you start, the better you can leverage compounding interest and the more your money will grow. Getting an early start on retirement planning also provides some flexibility if you decide to tweak your strategy.

If it seems overwhelming, remember that you don’t have to plan your retirement all on your own. A retirement advisor can help you navigate the course. Discover whether you need a retirement advisor and how to choose the right one for you below.

What Is a Retirement Advisor?

Generally speaking, a retirement advisor is a financial professional whose services center on helping clients save and prepare for the future. A retirement advisor can carry any number of financial designations, including:

These various titles describe the training and expertise an advisor has, as well as the types of services they offer. Typically, you must enroll in specialized education and complete an exam to achieve each of these distinctions.

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 looking for.

What Do Retirement Advisors Do?

Is hiring a retirement advisor right for you?

This too will depend largely on the advisor’s professional certifications. But generally, a retirement advisor should:

  • Help you identify your retirement savings goals and the action steps you’ll need to take to achieve them.
  • Pinpoint potential gaps in your retirement savings plan.
  • Offer advice on how to maximize tax-advantaged accounts, such as a 401(k) or individual retirement account.
  • Help you devise a strategy for eliminating debt if you’re carrying student loans, credit card bills, a mortgage or other loans.
  • Discuss how to best plan for healthcare expenses and long-term care needs.
  • Guide you in choosing an asset allocation that balances risk and reward.
  • Inform you about products designed to preserve supplemental retirement income, such as annuities and long-term care insurance.
  • Help you determine where Social Security benefits fit into your overall retirement plan.
  • Assist with managing the tax implications of withdrawals.
  • Suggest solutions for managing assets beyond retirement accounts, such as real estate.

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

Pros and Cons of Working With a Retirement Advisor

Perhaps most obviously, a retirement advisor has specialized retirement knowledge that you likely do not. They can look at your plan objectively, and help you figure out what is working and what may need improvement. Your advisor can also help you stay level-headed when the market experiences volatility, preventing you from buying or selling at the wrong time out of fear or anxiety.

An advisor also stays on top of tax laws and policy changes that could affect your retirement plans. That’s important for avoiding potentially costly mistakes. For instance, if you’re planning to make an early IRA withdrawal to pay for your child’s college education costs or buy a first home, you’d want to know beforehand whether you’ll need to pay a penalty or income tax on the withdrawal. And of course, you’d want to calculate how withdrawing money early might impact your long-term savings plan. Those are questions a retirement advisor can answer.

One downside is that retirement advisors don’t offer their services for free. In almost all cases, you will pay to work with an advisor. The good news is that it’s possible to find advisors with reasonable fees. The bigger drawback to consider are 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

Do you feel ready to hire a retirement advisor? There are several things to keep in mind as you look for potential candidates. Specifically, you’ll want to consider:

  • The advisor’s professional background and certification
  • The range of services they offer
  • Their fee structure
  • Whether they are a fiduciary, which means they are ethically bound to act in your best interest
  • How often they communicate with their clients and their preferred method of communication
  • Their overall investment strategy and style

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 from someone who’s in their 50s. Ideally, your advisor will have experience working with clients with similar financial backgrounds and aspirations to your own.

The Takeaway

Is hiring a retirement advisor right for you?

Between taxes, regulations, a fickle investment environment and varying savings strategies, there are many elements involved in retirement planning. And 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 make sure you choose the advisor that’s truly a good match.

Tips for Working With Your Retirement Advisor

  • Finding a retirement advisor that fits your needs doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors in your area in 5 minutes. If you’re ready to be matched with local advisors that will help you achieve your financial goals, get started now
  • Once you’ve chosen an advisor, be sure to keep the lines of communication open. Reviewing your plan at least twice per year can help you assess your progress and keep you on track. If your goals evolve or you experience a major income or lifestyle change, you may want to schedule an additional meeting to adapt your plan.

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Rebecca Lake Rebecca Lake is a retirement, investing and estate planning expert who has been writing about personal finance for a decade. Her expertise in the finance niche also extends to home buying, credit cards, banking and small business. She's worked directly with several major financial and insurance brands, including Citibank, Discover and AIG and her writing has appeared online at U.S. News and World Report, and Investopedia. Rebecca is a graduate of the University of South Carolina and she also attended Charleston Southern University as a graduate student. Originally from central Virginia, she now lives on the North Carolina coast along with her two children.
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