Finally, I can talk about my second book, titled “Can I Retire Yet?” More than three years in the making, the text is in final draft. I expect it to be available on Amazon by early summer.
Subtitled “How to Make the Biggest Financial Decision of the Rest of Your Life”, this will be my detailed look at the retirement question.
The book integrates and updates much of the best material on this blog into a comprehensive but readable exploration of the difficult retirement decision.
To celebrate, I’ll be publishing some excerpts from the book over the coming months, starting this week…
Do You Need a Financial Adviser?
You’ve thought through your retirement expenses and income. You’ve been introduced to the basic math principles underlying retirement analysis. Where do you go from there? Can you proceed on your own, or do you need help? I’m a strong believer in do-it-yourself retirement. I think most people have the ability, if they can invest the time. But I don’t discount the value of professional advice in all situations….
Given all the variables in the retirement equation and your personal situation, you might be inclined to seek expert advice. And, if you are truly bad with numbers or financial discipline, or have a very complex financial situation, an expert might be advisable.
But understand that many financial advisers are more expert in how to sell financial products and conform to the thicket of government regulations for their work, than they are technical experts on retirement finance. And their focus is necessarily on their own livelihood.
I’ve met advisers who had never run the retirement calculator on their own company site, and others who tell clients to focus on their “feelings” and let the numbers take care of themselves. I’ve seen serious mistakes made in retirement calculations, from ignoring Social Security, to forgetting to index it for inflation, to using excessive tax rates.
And, if an adviser makes an error in judgment, you can bet it will be on the conservative side. Maybe that sounds good, but it means you will be working longer before you retire, and the adviser will be getting more of your assets to manage, and charge fees against, for longer. Several advisers have told me that “compliance runs the show” – the legal department is in charge. As an adviser, it’s far easier to get sued for losing client assets, than it is for excessively holding on to them, whether or not that serves the client….
Many forms of financial planning or investment management boil down to attempts to predict the future. Smart people and resourceful organizations develop clever models that help them market themselves as having an edge over the competition. But guess what? They don’t know the future any better than you do. You pay a lot for certainty, a confident opinion. But that doesn’t mean it’s right.
After many years of reading every investment book I could get my hands on, talking to numerous players inside and outside of financial services, making my own mistakes in the real world, and enduring several major market meltdowns, I’ve learned to simply accept the uncertainty. Nobody can predict the future or outperform the market over the long haul.
Aside from predicting the future, I think it’s extremely difficult to find an unbiased opinion on whether or not you can retire. Even the best financial professional will have a conflict of interest in trying to answer this question accurately. If they are commission-based, they have products they must sell to make a living: They might benefit if you retire sooner and buy an annuity. If they are fee-based, then they profit when your assets under management grow: They might benefit if you work longer, accumulating more assets to be managed. And, always, the risk to them is lower if you don’t leave your secure job based on their advice.
Still, there are certain money or tax management topics that can benefit from expert advice – the timing of Social Security, integrating annuities with other assets, sequencing and taxation of retirement withdrawals. But know that there are authoritative web sites and powerful software tools available for the do-it-yourselfer in all those areas.
If I, or a family member, absolutely required professional financial advice, I’d start with the advisers at my most trusted, consumer-oriented companies: Vanguard or USAA. If I needed to find a local adviser, I’d use the directories at the NAPFA or Garrett Planning Network sites.
And, once I’d found an individual, I’d have four questions for them before turning over my money:
1. Are you bound to a fiduciary standard?
2. Are there restrictions on the investment/insurance products you can recommend to me?
3. How are you paid, and at what rates?
4. Will you put all of this in writing?
You don’t need an adviser to predict the future. Financial plans quickly become outdated and are ignored or thrown away. Sophisticated and complex attempts to forecast the future are no better than simple rules of thumb, and possibly worse, for obscuring the view.
But sound financial behavior and habits, along with up-to-date information, are essential. A good adviser could help coach or inform you in certain situations. Financial planning should be more about equipping yourself with the analysis tools and mindset for a safe and enjoyable journey, than about trying to predict and control your exact route and arrival time!