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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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Is Social Security Running Out?

Social Security represents an important source of income for millions of Americans who paid into the system during their working years. Despite contributing thousands of dollars to the program on average, many people have concerns about the future of the Social Security Administration. Estimates from the SSA itself suggest the trust funds used for benefits payments could be depleted as early as 2033 unless changes are made to the program’s funding structure.

Key Takeaways

  • Social Security is a program that uses taxes to fund a benefits program for individuals who contributed to the program during their working years.
  • Two trust funds hold the funds raised through these taxes, but they are estimated to be depleted by around 2033.
  • The government has acted decisively in the past to make the necessary changes to keep Social Security afloat.
  • Social Security should be just one part of your overall retirement plan, alongside investments, savings and lifestyle changes.

How Does Social Security Work?

Social Security is a taxpayer-funded program designed to supplement income for retired individuals and certain other groups. A great number of American workers—184 million people, according to the Social Security Administration—pay taxes into the Social Security system which funds benefits for current Social Security recipients. When those workers retire or otherwise qualify for Social Security themselves, they will receive benefits equal to a percentage of the amount they contributed in taxes.

While many people think of Social Security as a benefit entirely for retired individuals, that’s not the only group receiving regular benefits from the SSA. Other recipients of Social Security benefits include:

  • People with qualifying disabilities
  • Spouses and children of workers who died
  • Dependent parents of workers who died
  • Spouses and children of Social Security recipients

Is Social Security Running out of Money?

To understand the current state of Social Security, it’s essential first to comprehend how your Social Security taxes are allocated to current beneficiaries.

The tax money collected for Social Security is distributed into one of two trust funds—the Old-Age and Survivors Insurance (OASI) trust fund and the Disability Insurance (DI) trust fund. The funds are then used to pay benefits to their corresponding recipients, with any leftover money invested by the government.

According to estimates released by the SSA, these trust funds are shrinking and could reasonably be expected to be depleted entirely within approximately 15 years. If these trust funds are depleted, the annual income from taxes would only be sufficient to cover 79 percent of the total benefits needed.

If nothing is done to prevent this from happening, Social Security beneficiaries may see a decrease in the percentage of their contributions returned as benefits drop. Benefits would be lower, but they would not disappear entirely. 

It’s also important to note that the trust funds have come close to depletion in the past, but the government has successfully intervened to prevent it. In 1982, Congress was forced to enact emergency legislation to prevent the collapse of the OASI fund. The crisis was averted, and better funding mechanisms were created for the fund to reduce the likelihood of a future crash.

While it is still unclear if or how the federal government might intervene on Social Security’s behalf, even in the worst-case scenario, recipients would still receive a return of some percentage of their investment into the program.

How to Financially Plan Around Social Security?

Regardless of whether or not the Social Security trust fund remains financially solvent, it’s important to have a healthy investment portfolio to prepare you for retirement. Many financial planners recommend aiming for 80 percent of your pre-retirement income from a combination of investments, savings, and Social Security benefits. For the average earner, Social Security benefits are typically between 40 and 50 percent of pre-retirement income.

Many types of investments can help you navigate your retirement more comfortably.

Set up a retirement fund

A retirement fund is a long-term investment account designed to provide certain tax benefits if the money is left untouched for a specified period. They can be created by people of any age, and are a very common tool for those wishing to invest in their retirement.

Max out 401K employer Contributions

Many companies offer matching funds for employee contributions to a 401K retirement account. These accounts function in a similar way to retirement funds, but employers will match employees’ investments up to a certain amount from each paycheck. These matching funds are paid in addition to your paycheck, and it’s a good idea to invest at least enough to reach your employer’s maximum contribution.

Open an IRA

An individual retirement account, or IRA, is another type of account set up to maximize tax benefits for long-term investments. Taxes aren’t paid on funds invested in an IRA at the time they’re placed in the account, making them an appealing target for investment.

Leverage Health Savings Accounts (HSAs)

Medical expenses can be significant at any age, and as you near retirement age, you might find yourself needing to increase your spending on healthcare. An HSA allows for tax-free contributions and growth while the funds are in your account, and those funds can be spent tax-free if they are used for qualifying healthcare products and services.

Lower Housing and Living Expenses, If Possible

Many people find themselves downsizing from much larger homes as they near retirement age. As children grow up and move out, a smaller, lower-upkeep residence becomes appealing to many people. Reducing your footprint, and thereby your costs, is a great way to supplement your savings and investments as you enter retirement. Lower overhead means the percentage of pre-retirement income necessary to sustain your lifestyle stays low as well.

Bottom Line

While there do appear to be some changes on the horizon for Social Security, there’s no need to panic about an unexpected loss of benefits for future recipients. Even without government action, the program will still be able to operate at around 80 percent capacity. With appropriate government intervention, the program can remain totally solvent and continue supporting retired workers, disabled individuals and many other people and families for years to come.

No matter what happens to the SSA, it’s smart to maintain a balanced set of investments as you plan your retirement. Social Security is a crucial component of the retirement puzzle for many individuals, but it should never be viewed as the sole source of income for retirees. 

Horizons Wealth Management can help you with your financial future, even if Social Security is a bit tumultuous. Schedule a call today and start planning for your retirement.

Social Security FAQ

H3: What happens if Social Security runs out of money?

If the Social Security trust funds run out of money, benefits will likely be reduced to match the level of funds coming into the program from taxes. The SSA estimates it could operate Social Security at around 80 percent capacity if this were to happen.

At what age do you get 100% of your Social Security?

You will receive the full amount of your Social Security benefits if you begin drawing them after you reach the full retirement age. This age has increased slightly over time, but is currently 67 years old.

 Do RMDs Affect Social Security?

Required minimum distributions don’t directly impact your Social Security benefits, but they can affect your tax liability. The amount of taxes you must pay on your benefits is determined by your income bracket, and RMDs are treated as income for tax purposes. If your RMD increases your tax bracket, you might have to pay more taxes on your SSA benefits.

How do I know if I’m ready to retire?

Retirement looks different for everyone, and the age at which you’re able to stop working is largely dependent on your pre-retirement income, your overhead, savings and investments. Many planners recommend creating a strategy to access around 80 percent of your pre-retirement income, but this number can be much lower or higher for certain individuals.

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South Carolina State House
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South Carolina Tax Guide

South Carolina State Taxes

Nestled among the lush landscapes and historic charm of South Carolina lies a complex tapestry of tax regulations residents and businesses must navigate. From the sandy shores of Myrtle Beach to the mountain town of Greenville, understanding South Carolina’s tax system is essential for anyone living in or considering moving to the Palmetto State.

This article delves into the intricacies of South Carolina taxes, shedding light on its graduated state income tax rates, unique sales tax nuances, property taxes and other fiscal obligations that define life within this vibrant southern enclave. Whether you’re a long-time resident looking to demystify your annual tax responsibilities or a newcomer trying to grasp how these laws might affect your financial landscape, our comprehensive guide serves as your roadmap through the multifaceted world of South Carolina taxation.

South Carolina state income tax 

South Carolina employs a graduated structure for its state income tax with rates spanning from 0 percent to 6.5 percent—a slight reduction from the previous top rate of seven percent. To account for inflation, the state adjusts these tax brackets each year and anticipates further rate reductions in future years.

The breakdown of these tax brackets is as follows:

  • $0—$3,200 at 0 percent
  • $3,201—$16,040 at 3 percent
  • Above $16,040 at 6.5 percent

Sales Tax in South Carolina

South Carolina has a basic 6 percent sales tax on most items, but local taxes can increase it to a maximum of 9 percent. The state does not charge this base rate on essential goods like groceries, making everyday expenses more affordable. However, prepared foods, hotel stays and certain services are taxed at the total rate of both state and local taxes.

For big-ticket items like cars, South Carolina applies its regular sales tax rates but limits the tax amount to $500 for each vehicle sold. This approach aims to keep taxes fair for larger purchases and balance the need for public funding with the need to keep living costs reasonable.

South Carolina Property Tax

South Carolina’s property tax system encompasses two main categories:

  • Real Estate Taxes: Applied to homes, land and buildings with rates varying by county. Owner-occupied residences benefit from a reduced rate of 4 percent on assessed value, compared to higher rates for non-owner occupied properties. 
  • Personal Property Taxes: Target vehicles, boats and airplanes, taxing them based on fair market value.

Additionally, the state offers exemptions aimed at lessening the burden for certain groups, including seniors over the age of 65, disabled individuals and veterans, as well as providing favorable conditions for agricultural lands actively used in farming. These efforts are designed to balance fiscal responsibility with support for South Carolina residents’ varied needs.

South Carolina Estate Tax

South Carolina does not levy an estate tax, following the federal government’s 2005 elimination of the state death tax credit. This means residents face no state-level estate taxes when transferring or inheriting property. The lack of a state estate tax simplifies inheritance matters, allowing South Carolinians to plan their estates without worrying about additional state taxes on top of federal obligations.

This policy reflects South Carolina’s commitment to creating a taxpayer-friendly environment, easing financial and legal processes for residents dealing with inheritances. By removing this layer of taxation, the state aims to promote economic stability and growth by reducing fiscal burdens during inheritance transitions.

South Carolina Retirement Tax

South Carolina offers a tax-friendly environment for retirees, highlighted by:

  • Social Security Benefits: Completely exempt from state taxes.
  • No Estate or Inheritance Tax: Enhances the state’s appeal by allowing retirees to pass on their financial legacy without additional taxes.

These policies collectively create an appealing setting for seniors looking to enjoy their retirement years with minimal taxation burdens.

To make sure you’re not overpaying on taxes, it’s smart to consult with a professional. A financial advisor can answer your tax questions and help ensure you pay only what’s necessary. At Horizons Wealth Management, we help you navigate your financial future with expertise behind you.

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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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Your Brain Does Really Weird Stuff When It Thinks About Money

Money is an emotional topic, but what’s really happening inside our brains when money comes up?  The answer, in short, is a whole lot!   A Harvard Business article explains what your brain looks like while thinking about money. Click below to read the 3 key takeaways.

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How Cars Affect your Financial Freedom

It’s not that I don’t want a really fancy car, it is just that there is something I want a bit more: financial freedom. Car payments are many times the #1 obstacle that causes the average family not to achieve financial stability. Spend some time thinking about your current car situation.  Are your car purchases making your bank richer or you?

Here is a great read about “How Your Car Affects Your Financial Freedom.”

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