Possibly the most ignored part of your everyday money life is your retirement. For some, retirement is decades away, so why think about it now? Others feel that they’re so far behind on savings that their situation is hopeless. Neither is true. It’s never too late to start saving. Equally true: It’s never too early.

Retirement planning is complicated. Getting help early might be your key to retiring comfortably, but even if you’re older and behind on your savings, a retirement advisor can identify unexpected areas for improvement.

Key Takeaways

  • Retirement planning is an increasingly important of one's financial life and it can be complicated, causing anxiety and poor decision-making.
  • If you are looking to save for retirement, or are at retirement and need to live off of the income generated by your assets, you may need the help of a financial advisor.
  • Not all financial advisors specialize in retirement planning, and so a qualified and knowledgeable retirement advisor should be sought out.

Whom Should You Hire?

The easy answer is a financial advisor, but there are all kinds of advisors out there. If you’re looking for help building a retirement nest egg, you probably want someone who specializes in financial planning. A Certified Financial Planner, CFP for short, would be a great fit for your needs, though other advisors may specialize in planning as well.

Other financial advisors that specialize in retirement planning can be identified by other credentials following their names - for example: Chartered Retirement Plans Specialist (CRPS); Retirement Income Certified Professional (RICP); Certified Senior Consultant (CSC); or Chartered Retirement Planning Counselor (CRPC), to name a few.

To find a financial advisor, first, identify your specific demands and goals, then look for an advisor who fits them. Take recommendations from people you trust, ask for references and consider finding a fee-based advisor instead of one paid solely on commissions.

Independent Advisor or Private Bank?

If you have a big (and we mean big) bank account balance, you could go the high-net-worth private banking route. If you’re more of a middle-class family and would rather stay with a big establishment, you could talk to your bank. Beware, though. Bank advisors may only recommend their banks’ mutual funds, and the fees could be high. Make sure to learn about expense ratios before making any decisions with any investment products.

There are also advisors affiliated with big investment firms such as Fidelity and independent advisors who work under their own name and keep your money safe with a custodian.

So how do you pick? The biggest headwind that can reduce your retirement savings, aside from not saving enough, is investment fees. When you interview potential retirement advisors, ask them how they are paid. If they’re paid by fees from you (generally based on how much of your money they are managing), ask them how much and whether the investment products they put you in will have fees too. Fee-only advisors will likely charge you somewhere around 1.5%.

Some advisors have account minimums. If you’re just getting started, you may not have a high enough balance to qualify for ongoing advising. On the other hand, many commission-based advisors will take on clients with low balances – just be sure they don't try to put you into inappropriate or unduly expensive funds. Also, don’t forget to take advantage of the free advising that often comes with your employer-sponsored plan, such as a 401(k). The plan may not offer full financial planning, but the advisor can at least explain your fund choices and help you figure out the fees.

What to Expect

The first thing you should expect when you sit down with a retirement advisor is a detailed look at your complete financial picture. What are your assets? Do you have investments, real estate, pending inheritances or other resources of value? What are your debts? Do you have a mortgage, car payments, credit cards, student loans, small business liabilities or other loans? How do you service your debt while still saving for retirement?

Speaking of retirement, what are your plans for it? Do you plan to work until you can’t anymore, or do you want to retire sooner? How much will you collect from Social Security each month, and when is the best time to start collecting benefits? How about insurance? Are you adequately covered?

Once your retirement advisor collects all of your information, he or she should create a report that gives you detailed financial information about your retirement. This report will include how much money you will be able to withdraw from the account each month and how much you will need to save on a monthly basis to reach that goal.

Your retirement advisor should also take you through the various tax considerations of your financial picture. If you have a traditional IRA, should you consider making it a Roth? How can you minimize the taxes you will pay on your other assets? How about your estate? If you end up with a lot of assets, how will you minimize your estate taxes?

If the advisor is an experienced portfolio manager, he or she may set up a portfolio that fits your goals. If your advisor isn’t able to do that, he or she may recommend someone who can. Consider the recommendations, but be sure to interview anyone who may join your retirement-planning team. Talk to more than one person, and ask your advisor if he or she is getting a referral fee.

The Bottom Line

Ideally, your retirement shouldn't be a do-it-yourself endeavor unless you have expert knowledge and experience in retirement planning. Even the most skilled advisors sometimes use somebody else because staying objective with your own money is difficult.

As soon as practical, get the help of a financial planner. If your balance is low or you’re just starting out, ask for help from your employer-sponsored plan administrator.