7 STEPS TO A FINANCIALLY SECURE RETIREMENT

“If you have a financial plan, then you have a goal, and you’re more likely to accomplish it.” Ray LeVitre, certified financial planner

If certified financial planner Ray LeVitre could give people one piece of advice when it comes to planning for retirement, it would be this: Get a written financial plan. Everyone needs one — no matter what your income level, savings, investments or age, says LeVitre, author of 20 Retirement Decisions You Need to Make Right Now. A financial plan is key because it drives all the other things in your retirement, he says. It should include not only your investments but any pension money you expect to receive and a plan for when you’re going to take Social Security. Yet only 14% of workers in the USA have a financial strategy for retirement that’s written down, according to a survey from the Transamerica Center for Retirement Studies. Another 44% say they have a plan but it’s not written down, and 42% do not have a plan.

So how can people go about getting a written strategy? LeVitre offers these suggestions:

1 Find a financial adviser who will create a plan for you

and update it regularly. LeVitre recommends selecting a Certified Financial Planner ( CFP). Interview several advisers. You should find one who will come up with an overall financial plan before they try to sell you something. It’s best to find one who has at least 10 years of experience. If the adviser has less experience, then he or she should be working with someone more experienced, he says.

2 Ask about how the adviser is paid.

Financial advisers are paid either by fee, commission or a combination, he says. The advice and investment products you get may depend on how your adviser is compensated.

LeVitre suggests trying to find a no- commission, fee- only adviser using the National Association of Personal Financial Advisors ( napfa. org). Fee- only advisers may charge you an hourly rate or a project fee, or a percentage of the assets they manage for you. “Even if you don’t have a lot of money to invest, you may be able to find an adviser who will work with you on an hourly rate to create a financial plan to get you started.”

Most advisers are paid by the commission they receive from products they sell to their clients, he says. “Advisers who work at brokerage firms, insurance companies and banks usually fall into that category.”

You may think you aren’t paying commissions at all, but fees that you never see are tucked into the investment to pay the adviser, he says. There is nothing wrong with working with a commissioned adviser as long as you know exactly how they are getting paid, and you are getting an equivalent amount of service, he says.

3 Beware of upfront commissions when

you purchase mutual funds, annuities and life insurance. “Your adviser could walk away with a big fat check, and you could be locked into paying penalties if you sell the investment in five to 10 years. For example, if you invest $ 100,000 and your adviser receives a one- time $ 5,000 upfront commission that you don’t see and is paid nothing thereafter, he/ she has no incentive to continue working for you. You may receive poor service in the years to come.”

It’s better to pay the fees over time so the adviser is motivated to continue offering you advice, LeVitre says.

4 Ask for no- load investments,

he says. No load equals no commission. There are thousands of no- load mutual funds, annuities and life insurance products available.

5 Expect to meet with your adviser regularly.

LeVitre meets with his clients every six months. “We update their financial plan and review their investments. I have actions for them to do, such as going to see an attorney to get their estate planning done, and I have action items for me, such as rebalancing their portfolio or doing some research on a topic.”

6 Make sure the financial plan includes a retirement section.

Do retirement projections. Am I on track? Am I saving enough to retire one day?

If you already are retired, then you need to think about whether you are managing your money so you don’t run out. “When I do a plan, I throw in a whole bunch of curve balls — higher inflation, lower returns, living a long time, what if someone goes to a nursing home — to figure out if the nest egg can handle that stuff.”

7 Make sure the plan has a smart investment strategy.

“I use what I call the bucket strategy. The first bucket is money that you plan on spending during the next one to two years. This should be liquid assets such as a checking account or money market.”

The second bucket is intermediate- term, money you’ll need from the third to ninth year of retirement. This is typically bonds or bond funds.

Bucket three is your long- term money, which won’t be spent for at least 10 years. This is stocks or stock mutual funds and is the growth portion of your portfolio. It will naturally increase and decrease with the fluctuations of the market, he says.

“If you have a financial plan, then you have a goal, and you’re more likely to accomplish it.”

Ray LeVitre