Searching for the right financial advisor can be an extremely tiring process. Unless you’ve worked directly in the industry yourself, it can be difficult differentiating the good advisors from the bad.
The reason for that is because there isn’t just one, single thing that makes an advisor good or bad. There are several factors to consider when trying to separate the two. To help jumpstart your search for the perfect financial advisor, start with these 8 questions to ask a financial advisor and pay close attention to how they answer.
Other than being asked the best and safest way to create an income stream in retirement, the second most asked question I receive is, “what happens to my money if my financial advisor dies?” It’s a very important topic of discussion, and one that should be way more prevalently discussed.
Sure, it’s not the most uplifting conversation to have, but it’s a necessary one. It isn’t brought up nearly as often as it should be between clients and their financial advisors, but the reality is… Everybody dies. Unless your financial advisor is a cat with nine lives, it’s crucial that he or she has a plan in place.
After all, it is your advisor’s job to protect your money, right? That commitment shouldn’t stop just because they are no longer physically here to see it through. That’s why I have created my own contingency plan for my clients, in the unlikely event that something unexpected happens to me.
It is no secret that investing in the stock market is a risky game to play. You are gambling with every second that your money is exposed to the volatility of the market.
That was proven on Monday when the Dow Jones saw its biggest drop since August 2011, with a 588-point decline.1
If you’ve read any of my past blogs or listened to my radio show, you know that I am NOT opposed to people investing in the stock market. I don’t feel that people should completely stay away from investing in the stock market in retirement. I just have strong opinions on how I believe people should go about it, especially when it comes to retirement (I’ll touch more on that in a minute).
It has been a while since we’ve seen this degree of chaos and panic surrounding the markets, and it started when China’s Shanghai Composite index dropped 8.5%. As of August 25, 2015, the index was down 42% from its June peak, and it seems to only be going downhill.2
These catastrophic declines aren’t only causing chaos for China’s markets.
The concept and comparison of savings vs. investments is important to understand, especially for people planning their retirement. It isn’t discussed nearly as often as I believe it should be. In my opinion, this should be one of the initial conversations financial advisors have with people heading into retirement (or anyone for that matter). I talk more about this in the link above, so I’m not going to go into too great of detail here
I just wanted to quickly mention it because it ties in directly with what I’m about to share with you today—the actual planning part. This step involves the creation of what I call your “floor and upside.
Successful implementation of this concept plays a key role in building a foolproof cash flow plan.
It’s the part where we very strategically allocate your hard-earned money in places that will allow every one of your retirement goals to be met.
You’ve probably read and/or been told to avoid investing in the stock market in retirement. While your priorities do need to shift as you plan for retirement, avoiding the stock market altogether does not necessarily need to be part of that shift unless you want it to be. There is just a slightly different way you should approach the stock market in retirement.
The first step is locking in complete protection of a portion of your income…
This is called building your floor.
According to Don Blanton (insurance industry spokesman and software creator who developed The Private Reserve Strategy™), there are three ways to make major, capital purchases like automobiles:
1) Going in debt. You may not have a choice. Millions of Americans don’t, and that is what keeps the wheels of the banking industry turning. Debtors aren’t earning any interest, so they are forced to pay interest.
2) Save up for it. Saving up for something in order to pay cash for it is an admirable discipline. Savers earn interest on their savings dollars and then pay for the purchase outright. Paying cash is better than borrowing money, but you still have to pay yourself back in some way or another. Then there’s the third way:
3) Collateralize. This method is used by individuals who could pay cash for the purchase, but they understand that second principle of compound interest: it works best if left alone to grow. These are the ones who earn compound interest on their savings and they collateralize their major purchases. This is the method most conducive to creating wealth. Collateralization simply means to pledge a portion of one’s money as security for an amortizing loan against one’s cash purchases. That way, your money is still earning interest while you are paying interest.
When you are in your career and receiving guaranteed, monthly paychecks, it’s an easier decision to gamble in the stock market. The reason I call it “gambling” is because that’s exactly what it is!
Imagine going to a casino with only $20 in hand. You place $5 into a slot machine. You have now given up complete control of that $5. What happens to that $5 from that moment forward relies on the fate of that one, single slot machine and you have absolutely zero control over what it decides to do.
So, what ends up happening? You end up losing that $5 in the blink of an eye, leaving you with $15 left of gambling money.
You decide another slot machine may give you better luck. So, you move to another slot machine and put another $5 into it. This time, you end up winning $15 from that! Great! You’re ahead now and you’re feeling confident, so you decide to go all in.
When people consider purchasing an annuity, they often question the safety of insurance companies and what happens if they fail. Though it is an extremely rare occurrence, it’s a legitimate concern. You want to know that your money is protected and will always be there.
The problem is that people don’t analyze annuities from every angle, thus resulting in a false representation of annuities and the institutions that provide them (insurance companies).
The truth is, as a retiree, insurance companies are almost always a better place to put your money than banks. Banks are more commercially represented, thus leading people to believe they are the safest and most reliable place to put your money. Because of this, banks are many people’s “go-to” option. You can read more about the difference between banks and insurance companies here.
However, many people don’t realize that this is actually a misrepresentation and banks aren’t always the safest place to put your money. This is especially true in retirement.
Imagine living in a world of “what ifs.” What if I married someone different? What if I didn’t have kids? What if I did have kids? What if I was raised in a different country? What if I went to college in a different city? You can ask yourself these questions all day. But, at the end of the day, they are just “what if” questions to which you will never truly have an answer.
There is, however, one “what if” question to which you can control the answer. This is perhaps the of the most important “what if” questions anyone who is retiring will ask themselves…
What if I don’t have the income I need in retirement
to last the rest of my family’s and my life?
This is the #1 concern retirees face: running out of money in retirement, and it’s an understandable fear. When you are used to working and getting that guaranteed paycheck, it may be difficult let go of that, regardless of how much money you’ve saved.
Well, what if you could take all of that money you’ve saved and turn it into a guaranteed paycheck? What if you could live out your retirement years never having to worry about receiving a guaranteed income stream month in and month out?
Keep reading… We’ll get there…
When it comes time to retire, there are a lot of important decisions to make. These decisions can be hard to make with so many “rules” that seem to change on a consistent basis. Unfortunately, that is the world in which we live. Things are constantly evolving and changing, and the same is true when it comes to retirement. What was once true for your parents may not be true for you.
For example, it is more likely than not that you will not be retiring with a traditional pension. The days of being able to count on income from a pension are long gone, as employers today rarely provide pensions to their employees. While there are ways today to replace the loss of a pension, the fact of the matter is you can’t count on a pension from your employer like your parents could. Therefore, the rules have changed and you have to work around it.
Here are 4 more rules you need to STOP following when planning for retirement today:
I’m not just saying that because I live in Florida and it happens to be one of my favorite states. Florida really can be one of the best states to own an annuity! It is one of the few states where annuities can help provide protection from lawsuits and creditors. Florida has certain laws that help protect your annuities and life insurance assets. Because of this, many people in Florida place their assets inside of annuities and/or life insurance, because of the asset protection they can provide.
To take asset protection in Florida even a step further, not only is there no state income tax, but also if you pay your house off in full it is better protected under Florida law. Once your house is paid off, you can choose to put your non-qualified assets into annuities and/or life insurance, thus making it so that everything is better protected!
You see, Florida provides much more than just sunshine and waves!