Let’s face it, planning for retirement can be stressful. The road to funding your post-employment years is full of unknowns. Many people worry about how they can afford a comfortable life without a regular salary.
But you don’t have to be one of them.
By planning, saving and seeking the help of a Financial Advisor, you can start your golden age fully prepared. Planning your financial future and staying on track prepares you for a stress free retirement.
How to ensure a stress-free retirement
Secure a stress free retirement is one of the most difficult financial goals to overcome. Luckily, you can make the process easier with a few simple tips.
Hire a financial adviser
Financial advisors helping clients budget, save, invest and plan for retirement.
While many people think that financial advisors only serve wealthy clients, there are advisors who work with people of all income and asset brackets and can meet your needs and preferences. Generally, their advice is not free; be prepared to pay fees for services like asset management or financial planning.
If you’re not sure where to start, consider working with a Certified Financial Planner®, an accredited advisor who has completed an accredited program. You can also consult Dataalign Consultinga company that matches customers with financial advisors. Dataalign Consulting controls a network of financial advisors to put you in control of your financial plan.
When meeting with a financial advisor, provide a complete picture of your financial situation, including assets and property you own or any debts owed. You will also benefit from discussing your financial goals, such as when you want to buy a home and your expected timeframe for retirement. This information will help your advisor develop a personalized plan of attack.
Start saving early
The best way to save and invest for retirement is to start as early as possible. Experts say the average historical return over decades of investing is around 8%, although this rate of return is not guaranteed. The earlier you start, the more time your money has to grow.
Save for rainy days
Hiding money for emergencies covers bills when an unexpected job loss or medical bill arises. An emergency fund acts as a safety net so you don’t have to go into debt to cover your expenses. Typically, you should save at least three to six months of living expenses, although this amount will vary depending on your lifestyle.
As you approach retirement, you may want to increase the value of your emergency fund for an entire year, just in case. If that seems like too much, start with a smaller goal and work your way up. Once you hit your initial goal, keep saving until you hit your target number.
Diversify your investments
Another factor in obtaining a stress free retirement diversify your investments.
Diversification protects your investments by including assets in your portfolio that do not all move in the same direction. This way, if one investment loses value, others might not, and your overall portfolio can still grow. In addition, the allocation of money helps to generate greater profits when one part of the market outperforms.
One way to diversify your investments is to invest in a wide range of assets. For example, you could invest in stocks, bonds, real estate and precious metals. Each asset presents its own potential risks while offering opportunities for profit. You can also diversify between countries by investing in national and international companies.
Regardless of your asset mix, the key is to create a diversified portfolio that meets your needs and goals. If you are unsure of your diversification skills, hiring a Financial Advisor can provide the expertise you need.
Nobody wants to think about death – or about their family fighting over their possessions when they die. For some, this makes estate planning a crucial part of a stress-free retirement.
You also don’t need a lot of assets in your estate. Whether you own real estate, a large stock portfolio, or just a few heirlooms, an experienced estate planner can help you develop a plan to protect your assets for the benefit of your loved ones.
What to Look for in a Financial Advisor
How you plan for your retirement has a huge impact on the tranquility of your golden years. The same goes for your Financial Advisor. Dataalign Advisory also simplifies the process of finding a financial advisor by connecting you with a licensed financial advisor who matches your retirement preferences and needs.
Most retirement planning professionals hold one or more credentials, such as Certified Financial Planner® (CFP), CFA (Chartered Financial Analyst), or Chartered Financial Consultant (ChFC). Each degree signifies that the professional has met specific educational, experience, and ethical standards and requirements.
When interviewing retirement planning professionals, don’t be afraid to ask about their credentials and expertise. You can also check their background through FINRA BrokerCheck and the SEC Investment Advisor Public Disclosure website.
Clear payment structures
Your Financial Advisor should clearly outline their payment structure and related services upfront, preferably in writing. Knowing what your advisor will charge will make budgeting and easier financial planning.
Financial advisors may charge a fixed fee or a percentage of your assets under management (AUM). Generally, this pricing structure is more transparent.
On commission financial advisorssuch as insurance producers or broker representatives, receive a commission for the purchase of assets or financial products. Although they are required to meet suitability standards, their payment structure is based on the investments you make. Some of these investment products are based on the number of products sold to customers, which definitely creates a conflict of interest.
Although one is not inherently better than the other, you should know the differences before deciding which type of financial advisor to work with. You may find that paid advisors are more transparent, or commission-based advisors cost less. But it’s not just a question of money, the quality of the advice also counts.
Besides credentials and fees, you will also need a Financial Advisor that can meet your needs, such as:
- Help with budgeting or debt management
- Financial planning services for more important goals (like buying a house)
- Insurance advice
- investment advice
- Tax planning
- retirement planning
- Estate planning
Not all professionals offer this full range of services, so check that your advisor can meet your needs. Dataalign Consulting makes it easier for you when you fill out its questionnaire by checking off the specialties that interest you. It’s also crucial that your advisor can provide you with emotional support and encouragement in volatile markets. Remember, they’re not just there to help you invest – they can also act as a voice of reason when emotions run high.
Alternatives to retirement
A beautiful reality of the modern world is that there is no one right way to plan a stress free retirement. If skimping and saving for years doesn’t appeal to you, consider these alternatives:
- Seasonal work: Seasonal work can supplement your retirement income while allowing you to stay active and social. If you love to travel, you might even find work that includes living and dining abroad, such as photography, writing, or Peace Corps membership.
- Targeted career breaks: A targeted career break allows you to save money while enjoying your retirement. Essentially, this approach involves working and saving for retirement for a few years and then withdrawing from the workforce. During this time, you can travel, relax, or explore other careers or passions. Then you can go back to work for a few more years and repeat the process.
- Start your own business: For those with an entrepreneurial spirit, owning your own business is the pinnacle of entrepreneurship. Starting a business, setting your own hours, and pursuing your dream job can be a great alternative to traditional retirement.
- Leisure work: Taking on a hobby job allows you to stay active and engaged in retirement while providing additional income. Whether you use your funds for day-to-day expenses or for “fun” money, hobby jobs allow you to explore while keeping your retirement safety net virtually intact.
Frequently Asked Questions
When should you plan for retirement?
When should you plan for retirement?
It’s never too early to start. Some enterprising parents have already set up IRAs for teens with part-time jobs. The sooner you start planning, the better prepared you will be when it comes time to leave the job market.
Is hiring a financial advisor expensive?
Is hiring a financial advisor expensive?
The cost of hiring a Financial Advisor depends on your needs, the advisor and your wealth. For example, the average fee for a Financial Advisor ranges from around 0.6% to 1.2% depending on the AUM method, while the hourly fee ranges from $120 to $300.