Question: I am planning to retire at the age of 62. I have $200,000 in savings, and I have a rental house paid for with $1,500 a month in rental income. The house I live in has also been paid for. I don’t know what to do with my savings. How can a financial advisor help me? What are your suggestions? (Also looking for a new financial advisor? This tool can match you with an advisor who can meet your needs.,
Answer: Having a lump sum of money in your savings can sometimes be difficult to allocate properly – but you don’t need a financial advisor to help you here, although you may find one helpful. Here are the advantages and disadvantages of hiring a consultant to help.
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Many financial advisors specialize in helping clients navigate the path to retirement, which may include investing and saving for retirement, Social Security benefits claiming strategies, health care costs before and after Medicare, Planning ahead for long-term care (LTC) health expenses and helping you reduce your lifetime retirement taxes. If those are things you don’t feel comfortable dealing with yourself, you may want to consider a financial advisor.
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Another thing a financial planner can do is look at your particular situation and tell you whether or not retiring at age 62 is realistic. In fact, it may make more financial sense to wait. Postponing Social Security’s collection for one year increases benefits by about 8% plus the cost-of-living adjustment (COLA) for each year until age 70. However, as a fiduciary advisor, I would incur a significant cost to do so,” says Chris Chen, certified financial planner at Insight Financial Strategists.
The advisor can also, as you mentioned, help you figure out what to do with your $200,000 in savings. “They can look at your risk capacity and tolerance and make recommendations on how to best use your savings,” says certified financial planner Danielle Harrison of Harrison Financial Planning.
One major downside of a consultant is the cost. Most advisors operate under one of three payment models; Flat fee per plan, per hour and assets under management (AUM). While the cost for each of these varies based on factors such as location, expertise and the complexity of one’s position, hourly advisors charge between $150 and $350 per hour, with flat-fee advisors between $2,500 and $10,000 per plan. Can charge anywhere, and the typical limit for assets under management is typically 1%.
Whatever fee model you choose, make sure you are working with someone who is putting your best interests first, earning a commission, or promoting or selling a specific product. For being paid, look for a fee-only fiduciary advisor. If it’s not the best for your finances. To find a financial planner who fits the bill, consider using the National Association of Personal Financial Advisors’ (NAPFA) Find-an-Advisor tool or the Certified Financial Professionals’ Let’s Make a Plan portal. (Also looking for a new financial advisor? This tool can match you with an advisor who can meet your needs.,
But you don’t need an expert to help you manage your money. You’ll need to do your homework on getting Social Security (waiting, as we discussed above, will generally get you higher monthly payments) and how much and when you’ll need to withdraw from your savings. “$200,000 plus rental income is more than most Americans make, but the Social Security penalty that comes with it will make me rethink the idea of retirement at age 62. I propose an appropriate investment plan. I can,” says Chen.
Chances are you’ll prefer low-risk investments, which means putting your money in high-yield savings accounts, investing in short-term CDs, buying Treasury bills, notes, bonds and TIPS, investing in low-yield can consider. Bonds and fixed annuities to preserve your nest egg. For his part, certified financial planner Caleb Paddock at Ten Talents Financial Planning says you should prioritize getting the best return on your lifestyle and life experiences. “Spend on the things that matter most to you while planning wisely for life’s unpredictable curveballs,” says Paddock.
Want to learn more about finance before taking the DIY route? Consider books like Wade Pfau’s Retirement Planning Guidebook, How to Make Your Money Last: The Indispensable Retirement Guide by Jane Bryant Quinn, and The Ultimate Retirement Guide for 50+: Winning Strategies to Make Your Money Last a Lifetime by Suge Orman. Focus on retirement planning.
Looking for a new financial advisor? This tool can match you with an advisor who meets your needs.
Having a problem with your financial advisor or looking for a new one? E-mail [email protected]
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