What misconceptions keep individuals from engaging a professional financial advisor?
Baby boomers and generations to come face unique retirement planning challenges, from the diminished value of 401(k)s to uncertainty over the solvency of Social Security. But the basic questions about retirement remain pretty much the same: Do I save enough money? When should I start planning/saving? Will I outlive my money?
A recent study of middle income Americans ages 55-75 with between $25,000 and $75,000 and do not receive Medicaid benefits reveals that 63 percent are unsure if they have saved enough to live comfortably in retirement. Of this group, 39 percent are only somewhat confident that their savings will not run out, while one-fourth are not too or not at all confident.
This Middle-Income Retirement Preparedness Study from the Center for a Secure Retirement also reveals that 54 percent of middle-income retirees and pre-retirees do not receive professional retirement guidance, and more than 80 percent of that group does not believe they need it. Forty-seven percent said they could do it themselves, 37 percent said they did not have enough assets to warrant professional guidance, and nearly a quarter said that financial planners are too expensive.
These misconceptions may prevent individuals from getting the type of professional planning guidance they may need, the report concludes. “I can do it all on my own” was the most common reason for not seeking professional guidance. However, two out of three of those surveyed who do not use a professional advisor spend less than an hour per month on retirement planning, with more than one-third spending no time at all.
Of those who do not think they are wealthy enough to warrant paying for an advisor, 37 percent think they need $100,000 or more, while 64 percent believe they cannot afford or don’t know if they could afford professional assistance.
These concerns and beliefs are not unique to middle-income individuals. According to research by the Spectrem Group of investors with a net worth of $100,000 and $1 million (not including primary residence), 67 percent are worried about having enough money for retirement, while nearly a third are concerned that because of the economic downturn they will have to delay their retirement.
Of baby boomers who do use a professional advisor, about three-quarters prefer that their planner handle all facets of their wealth. This again correlates to the CSR study which found that 68 percent of those who work with a professional advisor feel extremely or very confident that they will be better prepared for retirement.
Whether or not one chooses to use a financial planner, they avoid or delay retirement planning at their own risk.