Financial Planner Necessary?

Q – We’re near retirement, and my brother suggested I find a financial planner to go over our investments to make sure before we call it quits. Is that necessary?

A – I think you probably suspect what my answer will be; Maybe. It all depends on how involved you are currently with managing your investments and if you have a retirement plan. Do you know, for example, what your 1st year budget assumes for income? What expenses will change? Where are your investments, and have you positioned them for entering retirement?

Socking away money in many different funds and accounts is the easy part (if you have the money to sock away, of course). The hard part is understanding what you need from your savings in retirement, how to transition investments from growing to sustaining, and dealing with life changes when you no longer have an income to fall back on. Even if you know you only need $25,000 a year from your savings, do you know how to change your portfolio to provide $25,000 in income? How to increase the amount over time due to inflation? How to decrease the volatility enough and provide a cash cushion to weather a multi-year market crash?

If you don’t have the confidence to do these calculations and portfolio changes yourself, then you just answered your own question. If you’re almost confident you could do it, then what would it take to be confident doing it yourself? More reading and research?  Spending the time creating or using a spreadsheet? Or, maybe just one or two 1-hour sessions with a fee-only planner to decide if you can or can’t do this yourself. But, don’t retire until you do two things: (1) Ensure your investments are postured for retirement by “de-risking” them, as I call it, a few years out, and (2) build a detailed “in-retirement” annual budget, and then do the math to ensure your balance will last as long as you do.

Finally, I am neutral on whether the value of a paid financial advisor is worth the cost for many people. Their fees are excessive in my opinion, and you lose out on the compound value of paying those fees year after year. In my opinion, their value is more as a steady hand by not buying and selling out of panic, and the fact that they make you sit down at least once a year or when a life change occurs to guage where your are. So from that standpoint they're valuable for some people.