Want to be Prepared for Retirement? Work With a Professional
People who use financial advisors are more than twice as likely to feel confident in their retirement preparedness than people who don't. That's the conclusion of a recent report from the LIMRA Secure Retirement Institute.
Two in five U.S. pre-retirees surveyed who work with an advisor reported that they feel well prepared for retirement. In contrast, only 21% of those who do not work with a financial advisor report feeling similarly confident.
It helps to have a plan
The survey also found that having a formal, written retirement plan is a big plus when it comes to preparing for retirement. Two thirds of those who have a written retirement plan report feeling well prepared, while just one out of three senior citizens surveyed who do not have a written retirement plan report feeling well prepared.
The study confirmed earlier research that shows that people who work with a financial advisor over time are more prepared for retirement than people who don't. "Consistently, our research has shown that those who work with an advisor are more likely to have a plan, have a better grasp of their financial situation and generally feel more confident in their retirement security," said Jafor Iqbal, assistant vice president of the LIMRA Secure Retirement Institute.
That said, many Americans have a long way to go before being fully prepared for retirement. The LIMRA study also found that only 27 percent of pre-retirees have a fully-developed plan for converting their retirement nest eggs into a stable and reliable income stream, and only 1 out of 3 have estimated how long their retirement savings are likely to last.
One pre-retiree in five has not completed any retirement planning activities at all.
In each case, though, those who work with professional financial advisors were substantially more likely to have completed these vital financial planning steps than those who do not work with an advisor.
A qualified advisor may help you and your family in the following ways:
Providing a roadmap. A good advisor, from whatever background, will help you develop a snapshot of your current financial condition, and help you develop a realistic plan to get you toward your financial goals while protecting what you already have. Many people report feeling better about their finances very quickly after the first few meetings, because they now have a clear understanding of their situation, and have a track to run on. They have a better idea of how much they should be saving and investing, and have specific advice on how to do it.
Risk management. Insurance products like life insurance, long term care insurance and annuities can take a great deal of uncertainty and risk out of your financial future. Licensed insurance professionals can help you preserve your legacy and assets while helping ensure you won't outlive your income in retirement. Few do-it-yourselfers have the detailed knowledge and expertise required to select the most suitable insurance coverage without at least some guidance from an insurance professional.
Continuity. Many times one spouse handles most of the financial affairs. But if that spouse dies or becomes disabled, the other spouse may not be comfortable with taking over the financial decision-making, and may simply not be capable of doing it as well. A financial advisor can provide needed continuity and assistance through difficulty and tragedy.
Some advisors come from an investing background, others come out of the insurance industry. Ultimately, both have the same ultimate goals - to see that your family is protected from financial catastrophe like disability or untimely death of a breadwinner, and to see you realize your financial goals, including a long and comfortable retirement.