Three Questions to Ask Your Retirement Planner

Think again if you think you’ve got plenty of time to start saving for retirement — you might be surprised to learn how much you need to start setting aside right now if you want to avoid putting a heavy financial burden on yourself later. Asking a retirement adviser three simple questions can help you get on a tortoise’s path to retirement savings now instead of having to play catch-up like a hare later.

Effective retirement planning requires knowing when to start saving.

Retirement Planner

While you can start saving for retirement on your own using tools such as a free online retirement calculator, working with a financial planner will help you learn about a wide variety of savings instruments and tax strategies to maximize your assets. In addition to a 401(k) or IRA, you might consider real estate and life insurance in your planning. A qualified financial adviser will help you create a long-term plan that meets your needs, based on your income, family size and age.

How Much?

The obvious first question you should ask a retirement planner is how much money you’ll need when you retire to live the life you’ll want. Using tools that adjust amounts for inflation and life expectancies, a retirement planner can tell you how far your money will go beginning in a specific year. For example, if you plan on having no rent or mortgage when you retire because you’ll own your home, you might decide you can retire comfortably on an amount that’s equal to $75,000 per year today. A retirement planner will determine what that amount will be when you retire, and the total amount of money you’ll need when you reach your desired retirement age to live at $75,000 per year for 30 or more years.

What is Comprehensive Financial Planning?

Rather than simply recommending that you set aside a specific amount of savings per month, a retirement planner will suggest you create a comprehensive financial plan. This will include looking at your life insurance policies — some pay a cash benefit — real estate, employer 401(k) match, IRA, social securities and personal investments. Based on your age, whether you have children and how much you’re earning, your financial adviser will create a plan to include all or most of these options, shifting your asset amounts among your different investments as you age.

Conservative or Aggressive?

It’s important to decide how aggressive or conservative you want to be with your investments. Some securities and mutual funds have the opportunity to yield higher returns, but offer more risk. These would include more stocks than government bonds, for example. Other investments do a better job of protecting what you have, but won’t give you as big a bang for your buck. Discuss with your adviser the right mix for you based on your age and ability to recover from a loss. If you earn a high salary and can recover from a loss, you might want to go more aggressive. If you’re just able to pay your bills and don’t have much excess cash, you might want to be conservative.

Other Questions

In addition to these three key questions, ask your retirement planner for his qualifications and look for reviews of his service on the Internet. Ask about worst-case scenarios, such as the death or disability of you or your spouse. This might lead you to purchase disability income insurance or a larger life insurance policy. Ask about using your pay to reduce debt instead of contributing to a 401(k) plan. You’ll lose money over the long-term by paying down debt, but gain short-term financial stability and improve your credit.