Question: I accept an offer of early retirement from my longtime employer of 24 years. In March 2023, I will retire and receive nine months of salary and benefits. During this time, I will look for another job of 30 or 40 hours per week. I would like to do this in order to invest part of the allowance I will receive. I have about $113,000 in a 401(k) which I will also be looking to invest. I have no other savings or checks and I am 60 years old. I need advice on whether it would be beneficial for me to engage a financial advisor other than the one I have with a large investment firm through my current employer. (Are you also looking for a financial advisor? This tool can help connect you with an advisor who might meet your needs.)
Reply: While it may be beneficial for you to work with a financial advisor outside of your employer, this is not always the case. “It really depends on what the employer-advisor costs, what their fiduciary duties may or may not be, and how certified they are. If they are low cost, act as trustees, have a pre-eminent planning designation, then that may be a good choice, but if not, you may want to find an adviser elsewhere,” says Certified Financial Planner Philip Mock by 1522 Financial.
Do you have a problem with your financial advisor or are you looking for a new one? E-mail [email protected].
For his part, certified financial planner Joe Favorito of Landmark Wealth Management, says he recommends meeting with the current adviser and reviewing your situation and your longer-term goals to see if he is qualified and if he has done a good job so far. . “If they are not and you are looking elsewhere then I would suggest using whichever one you choose exclusively because you want your financial plans to be a cohesive strategy and having two competing advisers can sometimes create more problems than you can’t solve it,” says Favorito. (Looking for a financial advisor? This tool can help connect you with an advisor who might meet your needs.)
Whichever adviser you choose – or if you go it alone – you have a number of things you’ll want to consider here. “I would like to know what your net monthly expenses will be in retirement in today’s dollars, if you have pensions planned for the future, and if not, what Social Security will look like at age 67 and 70. I would also like knowing when you’d like to have the choice to stop working, but all of these questions come with assumptions, and my biggest concern is that you haven’t saved enough to stop working when you want to,” says one Certified Financial Planner Adam Koos at Libertas Wealth Management.
Indeed, Koos says there are two possible scenarios here. “I guess you’re either going to have to save as much as you can by full retirement, or hopefully you’re a relatively frugal person. For example, if your Social Security is $3,500 a month and your total retirement savings reach $150,000 by retirement at age 65, you can only expect a gross check of $500. $ per month from your retirement portfolio, which puts your monthly gross retirement income at around $4,000 per month,” says Koos.
The good news here is that this may be enough for you and you plan to continue working and earning money that you can use to increase your retirement funds. And if you decide to go the financial advisor route, this person can help you invest your earnings and develop a solid plan for a smooth retirement. Make sure the person you work with has the ability to handle – or knows someone they can recommend – not just the investment advice, but all the other issues that become paramount as you get closer to your retirement years. “That means estate planning, insurance planning, and tax planning,” says Favorito.
Something else to consider: Advisors say you should plan to have some liquid emergency savings on hand. “Your question about having no other savings means you definitely need an emergency fund,” Mock says. The pros advise having between 3 and 6 months of living expenses in an emergency fund, whether or not you’re nearing retirement.
You should also think about when you will be taking Social Security. If you retire at full retirement age (66 if you were born between 1943 and 1954 and 67 if you were born between 1955 and 1960), you will receive the maximum benefit. It’s best to delay taking Social Security for as long as possible because benefits are increased by a percentage each month you delay starting after full retirement age.
If you can’t find a job you love due to an impending recession, it might be a good idea to get into the gig economy and work wherever you can to earn some extra cash.
Looking for a new advisor? Consider consulting professional planners using the National Association of Professional Financial Advisors (NAPFA) online tool, as hiring a personal financial planner is highly recommended in your case, as the person who help with your workplace retirement plan probably doesn’t have the ability, license, or legal capacity to provide the kind of advice you’ll need. (Looking for a financial advisor? This tool can help connect you with an advisor who might meet your needs.)
Questions edited for brevity and clarity.
HaDo you have a problem with your financial advisor or are you looking for a new one? E-mail [email protected].
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