Q: I am thinking of hiring a financial advisor. I’m 70 years old, and I’m stopping working this year. I manage my stocks and money myself but I am worried about the market. I haven’t done that well with single stock investing over the last two years.
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Question: I am thinking of hiring a financial advisor. I’m 70 years old, and I’m stopping working this year. I manage my own stocks and money now, but I worry about the market. I haven’t done that well with single-stock investing over the past two years.
A well known financial services corporation recommended a company that charges 1%, which would be around $20K. But 20 years ago I invested in a big investment firm and they lost half of my money when they invested in bankrupt companies, so I’m still hesitant to switch my money to a new one. I could sell everything and put my money in treasury money market funds which currently pay 4.5%. What are my options? (Also looking for a new financial advisor? This tool can match you with an advisor who can meet your needs.,
Answer: First of all, congratulations on reaching retirement, and don’t beat yourself up too much about the recent stock losses. Actually, it was difficult to get good returns in 2022 considering the increase in interest rates and inflation. And while you don’t need a financial advisor — although you may find one very helpful — you need a plan that’s more comprehensive than just putting all your money in a Treasury money market fund, pros say.
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Your desire to invest in Treasuries because of their guaranteed interest payments is understandable, but that guaranteed return can lose ground to inflation. If you’re wondering whether a 4.5% money market yield is enough, you’ll need to create a financial plan that maps your lifestyle spending needs to inflation as well to see if it makes sense. comes
“If you determine with that financial planning that you need slightly higher-than-average returns than the money market to make your money last during retirement, index funds along with money markets to deliver.” Consider a balanced portfolio using a mix of ETFs.”The least you can do is achieve the desired returns over time,” says James Faniel, a certified financial planner at the advisory firm James Faniel.
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Indeed, a good mix of equities (yes, even at age 70), bonds and cash can help you achieve long-term success, say professionals. A rough rule of thumb is that the percentage of your money invested in stocks should equal 110 minus your age, which would be 40% in your case. The rest should be in bonds and cash.
“I recommend that you keep 6 to 12 months of lifestyle cash flow needs in short-term Treasuries or in an online high-yield savings account that is FDIC insured and establish a conservative investment allocation for the balance of your portfolio.” That includes exposure to global equities. “You’ll need that global equity exposure to help you keep up with long-term inflation,” says Bruce Primeau, certified financial planner at Summit Wealth Advocates. to reduce fees and establish a low-cost, tax-efficient passive investment portfolio of ETFs and mutual funds.”
Pros say to avoid picking individual stocks. “Being subject to the risk of a singular company is another red flag in my opinion. By investing in the broad markets, you are exposed to the poor performance or poor performance of any company,” says Matt Fizell, certified financial planner and owner of Harmony Wealth in Madison, Wisconsin. can help mitigate the impact of being put out of business entirely.” Adds Primeau: “Stop picking individual stocks because by the time you realize there’s a problem with a particular company, the stock is up 30% — 40% down and then there’s not much you can do,” says Bruce Primeau, a certified financial planner at the Summit Wealth Advocates.
Should You Opt for a Financial Advisor?
If you’re looking for more than advice-only money management, such as assistance with retirement planning, tax planning, estate taxes and more, hiring an advisor can take a heavy load off your shoulders. It can also be helpful to seek the help of a professional to manage your assets, make recommendations and execute trades on your behalf.
Advisors who charge 1% — which is a pretty typical rate — tend to bundle financial planning services with that asset management fee. Look for a fiduciary (they need to put your financial interests ahead of their own) and you want someone who is a certified financial planner because they have completed extensive research and professional work. To find a planner who fits the bill, the National Association of Personal Financial Advisors (NAPFA) offers a free online search tool. But, you’ll need to do a little homework beyond just picking a name from a list. ,[Just because they’re listed on the site] That doesn’t mean they’re practicing financial planning—you need to be asking questions,” says Frasa. Here’s what to ask any potential advisor you might hire. (Also looking for a new financial advisor? This tool can match you with an advisor who can meet your needs.,
Alternatively, “if portfolio management is the only thing you’re concerned with, you can seek out a robo-advisor for a fraction of the cost. Matt Bacon, certified financial planner at Carmichael Hill & Associates, says these are perfectly adequate and can manage a retirement portfolio reasonably well, albeit with a little optimization and no man behind the algorithm.
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