Saving for retirement is the easy part for most people, believe it or not.
If you are in a job with a 401(k) or 403(b) retirement plan, your employer will not only manage the saving but often also add to it — free money!
Once you get that part of saving settled, investing can be easier still.
Many people buy a recommended portfolio based on their retirement goal, or they purchase a target-date fund that reinvests automatically as you age.
You can thus easily go 20 or 30 years of working without even thinking about needing financial advice.
Then one day you look up and retirement is just a few years away.
By then, many of us have enough money saved up that the stakes feel higher. It’s one thing to have $10,000 in a 401(k). It’s quite another to have $100,000 or more.
It’s about this time that many near-retirees realize that there’s much more going on in their financial lives than just buying and holding stocks and bonds.
How do you decide on insurance? Pay off a mortgage? How do you create income and manage healthcare costs?
The best way to think about the problem of financial advising is to ask what you really want.
Do you want someone to help you buy investments, or someone who can help you manage all the moving parts that those investments will eventually finance?
The fact is, investment selection has become much easier than in the past. There’s no good reason to pick stocks, for instance.
Years of data show that, after fees, the work of stock selection very often results in a net loss to the investor.
That’s why index investing has taken off, drawing in billions of retiree dollars. The idea of owning the whole stock market in a risk-adjusted portfolio is here to stay.
Lower cost means investors keep more of their own money.
Keeping the cost of investing low means you can then turn around and spend money as necessary on the actual advice you need for the other financial decisions ahead.
For instance, you could hire an unconflicted financial advisor, namely a registered investment advisor (RIA), for help with managing taxable investments.
Likewise, you could use a licensed insurance agent to help protect your assets.
A good tax advisor can help you navigate of the impacts of when and how to take income over the years, and a certified financial planner (CFP) can help build a team of people with the skills you need to be sure your retirement works.
What you don’t need in all of that is a stock broker or any kind of advisor whose primary skill is portfolio management. The RIA can advise you on rebalancing, for one, as could the CFP.
Keeping your fees low on the investment side is the key to being able to afford good advice on everything else.
Index investing is becoming popular at the right time for millions of Americans who will need extra help as they begin to make bigger and bigger decisions about their money.
MarketRiders, Inc. is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.