Nearly 6 million people contribute to a retirement savings plan each year. This is only 24 percent of the eligible population of the country. The average contribution towards retirement savings is less than 4 percent of the disposable income of a household. This is placing many people in a position where it will be necessary to work beyond the traditional retirement age in order pay bills. One solution is to hire a financial advisor to help create a more structured and realistic plan for retirement. There are several reasons to hire an advisor.
No Financial Experience
Even the most well-educated professionals often have a limited amount of knowledge about the financial markets. Understanding the constantly changing world of finance is something that is best left to individuals who have dedicated years to education and learning within the industry. It is always a good choice to turn to a financial planner when personal knowledge of the markets, economics and finance is limited. Making the wrong decisions could have devastating repercussions a decade or more in the future when it is too late to consult an advisor.
Late Start
Many people have trouble starting to save as early as most experts suggest. Some individuals go through long periods of underemployment that make it impossible to save for retirement. Starting to save late in life is a very good reason to contact a financial advisor. The advisor will look at the reality of the situation and establish realistic goals that will allow a comfortable retirement later. The advisor might also suggest using more aggressive investment options that have the potential to erase some of the years without savings.
Complex Assets
Some individuals who are planning for retirement have a very complex collection of assets. This could mean stock options with several employers combined with retirement accounts and tax-deferred investment vehicles. Some people might have to deal with large estates or commitments to businesses established by family members. A financial planner will take the time to sort through complex financial situations and discover exactly how the assets will affect retirement. A planner also has the knowledge to prevent different types of investments and vehicles from becoming a tax burden because of conflicts and missed opportunities.
Previous Mistakes
Financial mistakes do occur on a regular basis. Many people attempt to manage savings for retirement personally at some point. A financial advisor should be hired if a large financial mistake has occurred. The mistake might involve moving accounts and losing money to taxes, losing money because of a poorly balanced portfolio or making poor savings choices that have minimized returns. These mistakes can derail retirement plans. An advisor will have the skill to navigate out of bad investments and could potentially restore the savings over time.
Life Changes
Dramatic changes happen to everyone at some point during life. This could mean a divorce, a death or a bankruptcy. It can be difficult to recover after a life-changing event. Allowing retirement savings to lapse or go unmanaged for a long period after an event can affect returns. A financial advisor will have the objectivity and time to sort through retirement plans and protect the money that is already saved.