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Questions to Ask a Financial Advisor

For many people, the journey to financial stability begins when they meet with a financial advisor. No matter what your assets look like, how many people are in your household or what you hope to accomplish with your finances, finding the right advisor is a crucial first step in achieving those goals.

Key Takeaways

  • Asking the right questions during a meeting with a financial advisor can reveal their ability to perform their job and achieve your specific financial goals.
  • Not all advisors are right for all clients, so it’s important to find someone who is qualified and experienced in situations similar to your own.
  • Whatever you hope to achieve through investing, you should focus on your long-term goals and let those guide your decision-making.

Determine Financial Goals

Before you can choose the right financial advisor, you need to understand what you hope to achieve. If you’re planning for retirement, for instance, you need to understand what that looks like for you—how much money do you need each month? How often will you be making large expenses? Will you continue to support other members of a household and, if so, to what extent?

All of these questions should guide your goal-setting process, and you should have a relatively clear picture of what you want before you start seeking assistance from a financial professional.

Questions for a Financial Advisor

Once you understand your financial goals, it’s time to start hunting for the right advisor. This process can be made much simpler by preparing some questions ahead of time, which will show you how qualified the advisor is and how experienced they are with individuals in similar circumstances to your own.

Are You a Fiduciary?

A fiduciary is a financial professional who is legally required to act in the best economic interests of their clients. Certain types of financial advisors, like Certified Financial Planners, must also be fiduciaries, but not all financial professionals are. Knowing your advisor is legally bound to help you make the best financial decisions is a relief for many investors.

How are You Paid?

Different advisors use different compensation plans. Typically, financial advisors receive either a commission, a set fee, or a combination of the two.

Advisors who operate on a commission basis will receive an agreed-upon percentage of the proceeds from the sale of financial products they manage for their clients. At the same time, fee-only compensation is typically either a set hourly rate or a percentage of the total value of assets managed.

For larger financial planning firms, advisors might also be paid a salary based on the company’s total funds generated.

What is Your Investment Philosophy?

No two people see the investing world exactly the same, and it’s important to find an advisor whose perspective on investing aligns with your long-term goals. 

An advisor’s investment philosophy considers factors like their tolerance for risk, preferred investing strategies, beliefs about the market, and many others. These ideas, coupled with the advisor’s professional experience, will dictate how your assets are used to accomplish your financial goals. 

What Services Do You Provide?

Many financial advisors offer a wide range of services, but often they will specialize in certain aspects of investing and financial planning. Asking about available services and specialties when seeking an advisor will ensure you find the right person for your needs.

If, for instance, you plan to send several kids to college in the future, it’s good to know your prospective advisor has experience navigating the costs and challenges of doing so economically. If you’re planning to retire soon, you want to find an advisor who knows every little tip and trick to maximize your retirement savings. Whatever your goals might be, there’s a specialist out there to help you achieve them.

How Will We Work Together?

Some people want to be involved in every little detail of their financial planning, while others prefer not to see how the sausage is made. Finding the right advisor means finding a professional who communicates in the style and frequency that suits your needs, whether that’s consistent and specific updates or more spread-out, big-picture check-ins. 

No matter what you want your working relationship with your advisor to look like, it’s critical to find someone who has clear, effective communication skills and who knows how to break down the necessary information for you to understand in a simple, efficient manner.

How Do You Track Investment Performance?

Whatever your advisor’s investment philosophy and strategy, you’ll want to receive periodic updates about your investments. Understanding how an advisor interprets the effectiveness of their investment decisions up front will allow you to see how things are going over time and can provide insight into their effectiveness as a planner. 

What Professional Experience Do You Have?

No matter how an advisor is trained or what their investing strategies look like, there’s little substitute for working experience. A seasoned veteran of the financial industry will have a better idea of how to navigate complex financial situations and, perhaps more importantly, will know what to do when things go unexpectedly wrong. In the event of an unavoidable financial issue, it’s always good to have someone on your side who’s been there before.

What Types of Clients Do You Typically Work With?

Managing finances and investments requires context. What works for one person or family might not be right for another, and it’s generally a good idea to find an advisor who has worked with clients in similar situations.

An advisor who works exclusively with ultra-high-net-worth individuals, for instance, might not be as experienced in navigating lower-stakes investing strategies or vice versa. Financial professionals who work primarily with single-income, child-free homes might not know as much about financial planning for a large family. Finding someone who’s experienced working with people like you can be a huge help when navigating tricky financial scenarios.

What to expect at a financial planning meeting

A financial planning meeting is your opportunity to get to know your financial advisor and for them to learn more about you and your goals. A typical meeting will include an overview of your long-term plans and the current state of your finances to help your advisor better understand what’s possible and what you hope to accomplish.

You will also have the opportunity to ask these important questions during the meeting. This will allow you to learn more about the advisor’s experience and mindset and determine if they are a good fit for your financial needs before committing to a working relationship with them or their firm.

Bottom Line

Starting to work with a new financial advisor is an important step toward accomplishing your goals, and finding the right person to work with is crucial to succeeding in those goals. By asking questions and arriving well-prepared to your initial meeting, you can greatly increase your chances of finding someone who will serve as a good partner for your financial future.

Horizons Wealth Management offers various services, such as wealth management, managed portfolios, and financial planning. Schedule a call today to start planning your financial future.

Financial Advisor FAQs

Is it worth it to pay 1 percent to a financial advisor?

This depends on your individual situation, but generally, a 1 percent fee is fairly typical for these types of services. For less-complex financial advising, this could be higher than necessary, but for extremely complicated tax situations, it could be relatively affordable. If possible, try to compare rates for your situation across several prospective advisors to get a sense of what’s normal for you.

What rate of return should I expect from my financial advisor?

This is also extremely dependent on your unique situation, and will likely be influenced by you and your advisor’s tolerance for risk. Safer investments will yield lower returns with a higher rate of certainty, while riskier moves could produce a higher rate of return with less certainty.

How do you know a financial advisor is good at their job? 

The simplest way to know if an advisor is skilled at their job is to check for customer testimonials and ask clear, straightforward questions during your initial meeting. An advisor with a great deal of experience and positive reviews is likely to be in touch with what their clients want and how to accomplish those goals.

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50th birthday
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How to Build Wealth in Your 50’s

Key Takeaways

  • Focus on eliminating high-interest debt to free up resources for savings and investments, setting a solid foundation for retirement.
  • Trim excess expenses to increase funds available for investing in your retirement fund, laying the groundwork for financial security.
  • Maximize “catch-up” contributions to tax-advantaged accounts, enhancing your nest egg with the help of professional financial advice.

Navigating your 50s can be a critical period for financial planning, standing at the crossroads between active employment and impending retirement. This decade is an opportune time to assess, adjust, and accelerate wealth-building strategies to ensure a secure and comfortable future. In this guide, we will explore essential tactics for enhancing financial health in your 50s—from maximizing retirement savings with strategic contributions to diversifying income streams beyond traditional means.

Reduce Debt

In your 50s, paying down debt is crucial for building wealth and securing a financially stable future. This period marks a strategic shift from accumulating to eliminating debts, recognizing that each dollar paid off not only increases net worth but also frees up more resources for investments and savings. Reducing debt not only bolsters financial health but also alleviates the stress tied to high liabilities, paving the way for a smoother transition into retirement.

A strategic approach to managing debt starts by targeting high-interest obligations first—such as credit card balances or personal loans—which can lead to substantial interest savings over time. Additionally, consolidating debts into a lower-interest option can simplify repayment and help reduce overall costs more effectively.

A targeted debt strategy focuses on eliminating high-interest debts first—like credit cards and personal loans—to minimize long-term interest payments. Consolidating multiple debts into a lower-interest loan can also simplify your finances and lower your overall repayment burden.

Expenses Review

At this stage, fine-tuning your budget becomes crucial, as identifying and trimming unnecessary spending can free up significant funds for saving and investing. It’s time to critically evaluate your lifestyle habits—consider downsizing services you no longer need, shopping smarter by seeking discounts, or even switching to more cost-effective brands or providers.

Embracing frugality isn’t about sacrificing joy but rather choosing financial health over temporary pleasures. Many people use budgeting tools to gain insight into monthly expenditures, making it easier to spot areas ripe for reduction. For example, consolidating trips to save on gas, opting for home-cooked meals over eating out frequently, and canceling underused memberships can all contribute toward enhancing your financial situation. Investing the money saved from these strategies not only bolsters your retirement fund but also brings you closer to achieving lasting financial security. In essence, conscientious spending in your 50s lays down a solid foundation for wealth that supports both current needs and future aspirations.

Maximize Retirement Contributions

Maximizing retirement contributions in your 50s is crucial for building wealth as you edge closer to retirement. As you get closer to retirement, you enter into a period that allows for “catch-up” contributions in tax-advantaged accounts, offering a chance to increase your savings and benefit from compounding interest significantly. By prioritizing these additional deposits, you can enhance the growth of your retirement fund substantially.

Adjusting your budget to boost these contributions is essential. Whether it’s through an employer-sponsored 401(k) or an individual IRA, increasing your savings now can make a profound difference in the size of your nest egg. Consulting with a financial advisor could also optimize this strategy, ensuring that you’re making the most out of every opportunity to secure a financially comfortable future.

Carefully Manage Risk

Managing risk becomes increasingly important as you navigate through your 50s. This phase requires a strategic reassessment of your investment portfolio to ensure it aligns with your current risk tolerance and retirement goals. As retirement nears, the focus should shift toward preserving capital while still achieving reasonable growth. Diversifying investments across different asset classes—such as stocks, bonds, real estate, and possibly precious metals—can mitigate risk and reduce volatility in your portfolio.

In addition to diversification, consider adjusting the allocation of assets in your investment mix. While equities offer higher growth potential over time, they come with increased volatility. Gradually increasing the proportion of fixed-income securities can provide more stability as you approach retirement age. Regularly reviewing and rebalancing your portfolio ensures that it remains consistent with your evolving risk appetite and financial objectives, which is a critical step toward safeguarding wealth during this pivotal decade.

Establish a Retirement Plan

Creating a comprehensive retirement plan in your 50s is an essential step toward securing financial stability and building wealth as you approach the golden years. This process begins with a clear assessment of your current financial situation, including savings, investments, debts, and expected income streams in retirement. Understanding these elements allows you to set realistic goals for retirement living expenses based on your desired lifestyle. It’s also crucial at this stage to account for unforeseen costs such as healthcare, which can significantly impact spending needs.
To effectively make a retirement plan:

  • Evaluate Your Financial Status: Start by listing all sources of income (pensions, savings accounts, investment portfolios) and anticipated expenses.
  • Set Clear Retirement Goals: Define your retirement age and the lifestyle you wish to maintain—traveling, hobbies, and relocation plans should be considered here.
  • Calculate Expected Retirement Income Needs: Estimate how much money will be needed annually during retirement, considering inflation rates over time.
  • Develop A Savings Strategy: Determine how much must be saved from now until retirement to meet future income needs. This may involve maximizing contributions to tax-advantaged accounts like IRAs or 401(k)s.

A critical part of creating this plan involves regularly reviewing it—preferably annually—to adjust for any changes in personal circumstances or financial markets that could affect long-term objectives. Engaging with a professional financial advisor can provide valuable insights into complex areas such as tax planning and investment management tailored specifically towards achieving your individualized goals efficiently while navigating through the complexities of preparing for a comfortable retirement life.
Horizons Wealth Management can help you navigate your financial questions, no matter your age. Get in touch today to learn more about our wealth management, financial planning, retirement planning and managed portfolio services.

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Senior woman with grandchild
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What are RMD (Required Minimum Distributions) and What You Need to Know

After a certain age, individuals with retirement accounts must withdraw a certain amount from these accounts each year as a minimum. This withdrawal is known as a required minimum distribution, or RMD, and it typically becomes mandatory at age 73.

Key Takeaways

  • Required minimum distributions are the minimum amount you must withdraw from your tax-deductible retirement accounts.
  • These withdrawals are required by law after the age of 73.
  • RMDs can be donated to reduce or eliminate the tax burden created by the additional yearly income.
  • The amount of an RMD is determined by the total value of your qualifying retirement accounts and factors like age, beneficiaries and the original owner of the retirement account.

What Does RMD Stand For and When Does it Start?

Required minimum distributions have been a part of retirement planning in the United States since the mid-1970s with the introduction of IRAs as a new type of long-term investing mechanism. These withdrawals are required by statute for all types of retirement accounts except for Roth IRAs and certain similar types of accounts.

Most people with retirement accounts must start making these withdrawals at age 73, but there are some exceptions to this rule. You aren’t technically required to make your first withdrawal from your retirement accounts until April 1 of the year following your 73rd birthday, for instance. Qualifying charitable contributions from your retirement accounts are also counted toward your RMD, meaning you can offset some or all of your required withdrawal with certain philanthropic contributions.

What If I’m Still Working?

There are also RMD exemptions for individuals who are still working at the company sponsoring their retirement plan, as long as they own less than 5 percent of the company administering the account. This allows people who continue to work past the minimum retirement age to take full advantage of the benefits offered by an IRA or similar account.

What Accounts Require RMDs?

RMDs are required for many types of employer-sponsored retirement plans. The most common types of accounts subject to RMD rules are:

  • Traditional IRAs
  • Rollover IRAs
  • SEP IRAs
  • SIMPLE IRAs
  • 401(k)s
  • 403(b)s

It’s worth noting again that Roth IRAs, Roth 401(k)s and other types of Roth accounts are not subject to the same RMD requirements as these retirement plans.

How to Determine RMD Amount?

How much you’ll need to withdraw from your accounts each year is calculated by dividing each account’s balance as of Dec. 31 by a life expectancy factor calculated using tables provided by the IRS. These life expectancy factors are determined based on a number of factors relating to you, your beneficiaries, and the original owner of the retirement account. 

How to Handle Multiple IRAs

RMDs are calculated for each individual account—if you have more than one IRA, you will need to calculate the RMD for each one based on all the factors considered by the IRS. Once you’ve determined your total RMD for the year, however, you can withdraw that amount from any one IRA or combination of accounts as long as the total withdrawal meets or exceeds your minimum requirement.

How are RMDs Taxed?

Assuming all of your retirement account contributions were tax-deductible, the income gained by withdrawing your RMD will be treated like any other income and taxed accordingly.

In some cases, an individual might make contributions to an IRA or other retirement account that are not tax-deductible but are still subject to an RMD after age 73. In these cases, you will need to work with the IRS or your tax professional to determine how much of your RMD income must be taxed and how much is exempt for the year.

How to Use RMD Assets

Funds withdrawn from your retirement accounts through an RMD can be used in a variety of ways, and some of these uses can help reduce your tax burden or make the assets more useful to your beneficiaries. 

Reinvest the funds

One common use for RMD funds is to reinvest the money elsewhere simply. This can help protect the money from inflation and continue to make it work for you even once it’s no longer in a tax-protected retirement account.

The only caveat to this approach is that the funds cannot be placed back into a typical retirement account—if they are made using RMD funds, the investments must be made into a taxable form of investment account.

Donate to Charities

Charitable donations are another common use of RMDs, and if they’re done correctly, you can avoid paying taxes on some or all of the money withdrawn for the year. Donations made to charitable organizations directly out of your RMD funds are called qualified charitable distributions, or QCDs, and up to $100,000 of these funds each year can be omitted from your taxable income.

Support Education for Your Family

If you have young family members planning to go to college, a 529 education savings plan might be a good use of your RMD funds each year. These savings plans allow your money to continue to grow tax-free and will remain tax-deductible as long as the funds are used for a qualifying educational expense in the future.

Bottom Line

While an RMD can seem confusing at first, especially if you’re recently retired or haven’t had to make withdrawals from your retirement accounts yet, the process is relatively straightforward and doesn’t have to be a financial burden if done correctly. By using your withdrawal wisely through reinvesting and charitable contributions, your RMD can become an opportunity rather than a burden each year. At Horizon Wealth Management, we can help you ensure your financial future is clear with retirement planning services and financial planning services. Schedule a discovery call today!

RMD FAQs

What is the biggest RMD mistake?

Probably the most common mistake people make with their first RMD is failing to withdraw the correct amount or missing the withdrawal deadline. These errors are sometimes accompanied by substantial fines from the IRS, but they can be easily avoided by working with a qualified investment professional to ensure the process is followed correctly and in a timely manner.

Is it better to take RMD monthly or annually?

In the long term, there is little difference if any in an individual’s finances if they choose to withdraw their RMD monthly, quarterly or annually. This decision should be made based on an individual’s needs and personal preferences, and will likely be informed by what other forms of income, if any, the person has.

Do RMDs affect Social Security or Medicare premiums?

RMDs do not directly impact social security payments but can affect Medicare premiums. If your RMDs raise your tax bracket, this can have a secondary effect on the amount of taxes paid on social security income and the Medicare surcharge premiums calculated based on your Modified Adjusted Gross Income.

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How to Think Like a Billionaire, No Matter How Much Money You Have

If you truly want to join the ranks of the super-rich, you’ll need to start thinking like you’re already one of them.

Many ultra-wealthy people seem to share a few common traits. What do you think?

Click here to read more. 

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The #1 Tip to Help Maximize Your 401(k) Investing

Investing is the most important element of our financial future.  Tony Robbins and Clark Howard recommend that people who have yet to invest in the stock market should ‘get in the game.’  Experts believe the financial market is still ‘winnable’. We agree.  Don’t wait to invest. Get started with whatever you have.

You can put off some small things in life without consequence, but when it comes to investing, sticking your head in the sand simply won’t cut it. If you don’t know how to start investing, when to start investing or why you should invest, now’s the time to learn. The sooner you get started, the more time and interest can help grow your money.

To learn more click here.

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When Is It Time to Cut Your Kids Off From Your Finances?

Deciding when to let your children stand on their own can be tough, especially when they’re contending with student loans, underpaying jobs, or sky-high rents. But easing your kid’s entry into adulthood could be undermining your own financial security.

According to a December survey from CreditCards.com, three-quarters of parents are providing financial support for their adult kids.

But at a time when the majority of Americans haven’t socked away nearly enough for retirement—the median retirement savings for all working families in the US is just $5,000, according to the Economic Policy Institute—it makes sense to do a little less for our offspring, so we can think a little more about ourselves.

So, how do you figure out when and how to cut your kids off financially?  Learn more below.

Source: https://www.thebalance.com/when-to-cut-your-kids-off-from-your-finances

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Don’t bother wondering why your friends seem to have nicer homes, cars, and vacations — there’s only one measurement that matters

Basing your spending off how your friends spend their money is a huge mistake to make.  Large spenders may also be building crippling debt.

You won’t find a real answer to how you’re doing in a Federal Reserve survey or a social media feed.  You will find it by measuring yourself against rules of thumb, refined over decades and endorsed by financial pros  that point the way toward true financial health.

Start with these:

Source: http://www.businessinsider.com/why-you-should-ignore-others-when-setting-personal-finance-goals

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How Much Money You Need To Save Each Day To Become A Millionaire By Age 65

Becoming rich is nothing more than a matter of committing and sticking to a systematic savings and investment plan.

If you want to get rich, start investing- and start as early as you possibly can.

To illustrate the simplicity of building wealth over time, Bach created a chart detailing how much money you need to set aside each day, month, or year in order to have $1 million saved by the time you’re 65.

Next time you consider running to Starbucks for a $4 latte, think about this chart and consider redirecting that coffee cash to your savings.  Check it out here.

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Tony Robbins’ 10 Tips for Living Rich

If you want to be happy, but you’re having a tough time in life due to personal or financial issues, it’s important to take whatever steps possible — even small ones — to progress and grow.

This best-selling author’s advice has been featured prominently in magazines, digital media and in national televised media. He travels all over the country every month for events to inspire people in their lives and in business.

Click HERE for some of Tony’s top pieces of advice on how to change your mindset in ways that can have a positive impact on your life and your finances.

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How to Budget Like a Millionaire

Most millionaires aren’t driving Lamborghinis and eating caviar. They’re driving reliable used cars and eating mashed potatoes and meatloaf. Millionaires aren’t wealthy because they’re lucky. They’re wealthy because they follow simple money habits year after year.

Click HERE to learn more about Dave Ramsey’s 6 Surprising Habits of Millionaires. 

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