Factors that Influence Retirement Savings: An Adviser?

We all want to be able to have enough money for retirement.  Many people are not on track to do so, which makes it paramount to understand what actually helps us get enough money for our older days!

A recent article from Smart Money listed three factors that are drivers of retirement success. Here they are, and I’ll follow with my comments.

  1. Employing a consistent, long-term savings and investing strategy
  2. Working with a financial adviser
  3. Saving money in your workplace retirement plan

Here are my thoughts:

  1. I absolutely agree with this.  Being disciplined with our savings efforts, and doing in regularly over a long period of time, can do wonders for one’s retirement. It’s really straightforward in principle: save, do it regularly, do it early in life, get a solid rate of return, and let compounding work it’s magic.  Now, there’s more to it, such as protecting cash inflow, managing one’s career, and diversifying income streams.  In any event, regularly saving and investing consistently over a long period of time is a great practice.
  2. Hmmm. I  manage my investments on my own.  Would it help to have an adviser? Apparently, according to the article, it would.  They show that people who have an adviser have a higher probability of replacing income in retirement than do those without an adviser.  With me, it’s kind of a control factor, wanting to make the decisions on my finances individually. I’m not into sharing these decisions:) Plus, admittedly, there could be some hubris involved. Beyond that, however, I just feel safer managing my own money. Maybe this is something I should revisit, in terms of considering a financial planner.
  3. Yes, I agree with them on saving in a workplace retirement plan.  When you do so, it can often become automatic. This aligns well with #1 above. Plus, when you consider that some employers offer a 401k match, it becomes an even more attractive option. When it comes to that retirement plan, think carefully before ever taking on a 401k loan, and just don’t use that 401k for credit card debt, needless to say!

As you can see, the one area for which I’m not totally on board is the adviser factor. I’d like to learn more about the study that yielded the findings quoted in the article, just for my own curiosity so I could better interpret the data.   Who knows, I might be able to be convinced to revisit this one.

Also, their recommendation to save at least 10% is good, but I would suggest higher. To be fair, they did say “at least”.

Anyway, I’m all in on #1 and #3, and skeptical on tip #2.

My Questions for You:

What do you think about these tips? Any more that you would add?

Considering my own thoughts on advisers, I’m curious what yours are. Do you have one? Are you considering one? Feel free to convince me on your views:)

Comments

  1. says

    I think the reality is that for most people, working with an investment advisor simply brings a plan into place. If you are already doing this on your own account, than you’re likely fine.

    • Squirrelers says

      Doctor Stock – yes, I agree that having a plan in place is a big deal as is. Of course, it helps to have the right plan:)

  2. says

    We’ve never used an advisor & have done fine. We’re not millionaires, but we are able to live comfortably on our retirement, even though we retired a bit early. We always contributed to the 401K up to the employers match level. We saved more like 30% of our income. We did that as long as possible and were able to put 4 kids through their bachelor’s degrees. If we hadn’t done that we would have a lot more money now, but it was our choice. And we have not regretted it.

  3. says

    I met with a financial planner a few months ago. I wanted to make sure I was on track with my retirement planning and in meeting my (fairly simple) financial goals. It was good to get confirmation that I’m doing the right things, and I also got a few suggestions that I hadn’t considered, such as getting an umbrella insurance policy, starting a variable annuity, and getting long term care insurance. I’m tackling each of these goals bit by bit.

  4. says

    I don’t have a financial adviser either. With today’s index funds, you can be well diversified without getting someone else involved. I know financial advisers do much more in terms of planning and investment strategy, but my strategy is simple – save as much as I can and use smart investments like index funds to grow my savings.

  5. says

    Depends on how the advisor is compensated. If it is by recommending funds, I doubt if this is an unbiased report. If it is a flat-fee type of compensation, I might agree.

  6. says

    I wonder if the adviser aspect helps people with points 1 and 3; it’s like a personal trainer motivating and encouraging that person to make good financial choices. I know that I struggle with 1 and 3 – though for me my employer automatically deducts a certain amount into a pension plan and matches it. So in this case, I’m lucky or I’d be completely screwed! I’m working on making saving a habit, but it’s more challenging for me since I got a late start.

    I can’t stress enough that finance needs to be a required course in high school and college!

  7. says

    On the advisor, one of the benefits is accountability. The advisor not only provides information and recommendations but also acts as a kind of overseer, that makes you at least unconciously feel compelled to follow through. It also provides an objective source of opinions. The advisor can also make recommendations that you wouldn’t come to on your own. All of that has the potential to increase returns and your commitment substantially.

  8. Arshes says

    Having an advisor has a lot to do with overcoming the fear of investing on your own. Alot people cant trust the decisions they make when it comes to investing, so having an advisor helps overcome the fear of making the wring decision. Now getting a reasonable rate of return from the advisors advice, is a total different story.

    My parents invest with a financial advisor, they probably wouldnt have if they didnt have her advice, but thier rate of return on their investments totally suck, but their too fearfull to invest on their own!

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