(BPT) - The economy has changed considerably since the recession. Unemployment is at record lows and the market is flush with opportunities for workers of every level. While it is certainly good to live in the present, it is also important to plan for the future, and research shows that many people are not saving sufficiently to live life at their current standard when they retire.
A recent study finds that 52 percent of American households are at risk of not being able to carry their current lifestyle into retirement. This is an increase from an estimated 45 percent of households in a 2004 study. The estimated retirement savings shortfall amounts to roughly $6.4 trillion.
This dramatic number isn't solely the result of negligence. In fact, in many cases a lack of financial education is a major contributor. Many adults today actually know little about retirement planning because they weren’t educated on the topic during high school or college. For example, many people don’t realize that an individual retirement account, continuously funded at $3,000 per year — starting at age 20 and based on an estimated rate of return of 8 percent — will yield $1.16 million when they retire at age 65. That same account — started at age 30 instead — will only yield $517,000 at age 65.
All of this underscores the importance of being smart with your retirement planning and adjusting your strategy based on your age. A good financial planner can help you do all of that. To find the right financial planner to help you prepare for retirement, the National Association of Personal Financial Advisors (NAPFA) offers these tips.
* Look for a planner who is a fiduciary. Planners who are fiduciaries have a duty of loyalty to their clients and a duty of care. The duty of loyalty means they must always consider their clients' interests above their own, even if that interest negatively impacts their own income. The duty of care means an advisor must care for clients as though they were loved ones and provide them with prudent advice. Look for a planner who is a fiduciary and put that duty of care to work for you. You can learn more about how to find a fiduciary advisor at napfa.org/financial-planning/fiduciary-101.
* Focus on experience. Your retirement future isn’t something you want to leave to someone without the proper credentials. There are more than 100 professional designations in the financial services industry, but only a few of them truly indicate a professional’s ability to do holistic financial planning. Look for planners with the CFP(R) certification. This certification means a financial planner has met rigorous professional standards and has agreed to adhere to the principles of integrity, objectivity, fairness, confidentiality, professionalism and diligence.
* Focus on financial planning. Your financial future will be dependent on a sound financial plan, so look for a professional who focuses on true financial planning. Ask your planner if they have ever written a financial plan and what the plan might look like for you. Holistic financial planning includes tax planning, education planning, estate planning, retirement advice and more.
* Ask how your planner will minimize and disclose conflicts. Your planner is not just a professional entity, but also a person with personal interests and business dealings. This means that no matter which planner you select, there is a chance that your planner’s personal dealings could create a conflict with your financial decisions. That’s OK and normal. The key is to find a planner that will minimize conflicts and disclose any conflicts to you ahead of time. Ask potential planners how they will handle such a situation and don’t take “It won’t happen” for an answer.
* Are they compatible with you? This last quality is certainly one of the most important. How comfortable does the planner make you feel? As you speak, do you feel the planner understands your goals and is a person you could trust long-term? Over the course of your relationship you will share plenty of personal information with your planner, and entrust them with your financial future. Listen to your gut and choose a planner you feel comfortable with.
Start your planner search today
Living the life you want in retirement is possible if you start planning for it now. The right financial planner can help you realize your goals, so don't delay in finding the right planner for you. Visit NAFPA.org for more consumer resources on how to find the right planner for you today.