There are many things in life that you can do by yourself. Retirement is one of them. You don’t need a financial planner to help you get there. You might, however, wish you had hired one once you’ve lived out a few of those “golden” years. Retirement planning from a professional will almost always get you better returns and higher income in retirement.
Financial planner vs. financial advisor
There are significant differences between what a financial planner does and what a financial advisor does. A financial advisor manages your money for you. They take custody of your assets and invest them in stocks, bonds, ETFs, mutual funds, alternatives, etc. A financial planner teaches you how to manage your money yourself. They don’t take custody of it.
Some financial professionals do both, but the fee structures are typically different for the two services. Financial planning is billed as a monthly fee, usually the same amount every month. Money management services from a financial advisor may billed as a percentage of assets. That percentage is called “basis points” in the advisory world.
Financial planners specialize in retirement
Employees with traditional W2 jobs might have a 401(k) plan or pension fund that is manag by a plan administrator or fund manager. Those people do the heavy lifting. The employee simply selects a strategy based on their risk tolerance, and their funds are manag for them. On the surface, a financial planner does not appear to be needed.
You can choose to DIY your retirement and not pay fees to a financial planner, but your retirement income might not be sufficient if you do that. Financial planners can help you minimize tax liabilities now and after you retire, choose the right insurance for your loved ones, and maximize your retirement savings while you’re still working.
Estate planning should be left to the professionals
The complexity of your financial situation should dictate your choice in this matter. Larger estates with multiple heirs and beneficiaries are challenging to manage if you don’t have a background or education in finance. Those are scenarios you’re better off having a professional handle for you. Financial planners usually have the experience to do that.
Another reason to outsource estate planning is to take human emotions out of the process. A financial planner has a fiduciary responsibility to do what’s right for their clients. You can plan with them and trust that your wishes will carried out, even after you’ve passed on. They can also protect you if you become incapacitated or end up in a long-term care facility.
The Bottom Line
You don’t need a financial planner to plan for retirement, but you’ll likely have a more lucrative retirement life if you hire one. Financial planners can help you plan for tax liabilities, maximize your savings while working, and ensure that you and your loved ones are financially protected in your golden years. That’s worth investing in.