Retirement Financial Advisor

A retirement financial advisor is one you will use repeatedly throughout your life. They can help you identify what funds you need to allow you to retire and will help you adjust your portfolios as the financial needs of your life change. Whether you are new to the workforce and would like to understand the 401k program your employer is offering, or someone who is ready to retire and would like to review their portfolio, a retirement financial advisor can help.

What is a 401k?

A traditional 401k plan is a savings program that allows an employee to save money for retirement through an investment plan that they contribute part of their salary into. Most 401k plans are offered through an employer. The employer may choose to match all or some of the employee's financial contribution into the fund and may even elect to allow the employee to control the investment of the money. Most 401k plans have an assortment of investment options called mutual funds available to choose from. These funds will most often include money market investments, stocks, bonds, or a combination of all three. The employee can choose to invest in high, medium, or low risk funds depending on their needs.

A 401k plan is one of the best ways to plan for retiring. A retirement financial advisor, even online financial advisors, can help you understand a 401k plan's benefits and provide you with advice on which funds to choose. 401k contributions are made pre-tax which means that they are considered to be tax deferred. In non-technical language, this means that although you will not pay taxes on the money up front, you will pay taxes on it when you take the money out of the plan. Some employers allow employees to borrow against a 401k account up to a certain percentage of what is available. Although this can seem like a good idea if you need cash, you are actually borrowing money from your future to use in the present.

Upon retiring, a 401k plan can be disbursed in several different ways. Either it can be rolled over into another retirement plan such as a traditional or Roth IRA or it can be cashed out. If the cash out option is chosen, there are usually penalties involved that can be substantial. Talk to a retirement financial advisor before you choose this route.

What is an IRA?

An IRA, sometimes called an individual retirement agreement or account, is a financial savings plan that allows you to contribute money up to a certain amount into an investment account. In many instances the contributions you make to an IRA are tax deductible in the year you make them which provides you tax savings each year. If you withdraw the funds prior to age 59 ½, you may be subject to a tax penalty. This law is in place to provide an incentive to individuals to leave their money in the IRA to use upon retiring.

On the other hand, the government does want you to withdraw your money and pay the taxes after age 59 ½ so there is another penalty if you do not begin withdrawing your funds before the age of 70 ½. This is called required minimum distribution and it governs how much you are required to remove from your IRA each year. You should talk to a retirement financial advisor before contributing to an IRA to ensure you understand the rules and regulations of the plan.

Choosing a Financial Advisor

There are many ways to choose a retirement financial advisor. You can find an advisor online, ask friends or family whom they would recommend, or talk to your local Better Business Bureau to find and advisor in your area. Be sure to interview several financial advisors before choosing one. Ask about their financial experience and accreditation. Make sure they are licensed and insured. Finally, find out how they collect their earnings.

Two of the most common pay types for a retirement financial advisor are fee only and fee based. A fee only advisor will collect fees based on what they do for you while a fee-based advisor will collect fees and commissions. The fee only advisor's charges may be slightly higher but you run less of a risk in a conflict of interest being present than you will with a fee based advisor. A fee based consultant may earn commissions based on what they talk you into investing in which means they may not have your best interests at heart.

A retirement financial advisor can provide advice on creating a systematic plan to reach your retirement goals. Search for advisors who are not only highly trained in retirement planning, but whose investment style aligns with yours. No matter whether you are new to retirement savings, or an old pro, you can benefit from the advice from a retirement financial advisor.

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