This question might be asked by someone who feels more than comfortable in his/her path toward early retirement. It could just as easily be asked by a worker with several part-time jobs, or a worker whose idea of financial planning is to make sure that food is on the table for the next week. This person may easily think that financial advice is for people in a high tax bracket.

The truth is that some people may not necessarily need a financial advisor. But an in-depth study published in an issue of Financial Advisor Magazine[i] gives some useful perspective on what happens when we have one (and when we don’t).

Here’s a way to think about retirement success: How much of your annual income are you on track to replace in retirement? And second, what percentage of your annual income are you going to want (or need) in retirement? At our offices we work hard to dispel the myth that you can expect to need about 70% of your income after you retire. For most, more free time means more time to spend! We regularly advise planning for at least 100%, if not more.

So according to these criteria, who is on track? The results of a longitudinal survey conducted by Putnam[ii] of 4,089 workers from 18 to 65 showed some surprising numbers. On average, people were on track to replace 61% of their yearly income. If this is you, that means if you were used to $70,000 per year, you’ll have to get used to less than $43,000.

Let’s see what adding an advisor’s council can do to those numbers. The average annual income retained without an advisor was a mere 56%. Compare this to the group that enlisted the help of an advisor, who averaged 80% of their annual income. That’s a 24% difference!graph

To add some further perspective, the survey highlighted two other factors that dramatically affect retirement success, namely consistent savings (here defined as putting away 10% or more of income) and having access to an employer sponsored plan. Let’s look at the savings plan.

Families who reported consistent savings were, according to this survey, on track to replace a solid 106% of their income! What is really meaningful about that number is it was totally unrelated to income level. A regular savings plan is going to maintain your quality of life, no matter who you are. I’ll take the opportunity to point out that you’ll be more likely to save regularly under the guidance of a professional advisor.

Are you in the group that feels financial planning is out of your reach? If you’re finding that setting aside 10% doesn’t seem possible, it may be time to visit our offices in Costa Mesa. We can work out a plan together to help raise your chances of success.


 

[i] “Working With Advisor Important To Retirement Savings, Study Says.” Financial Advisor. Financial advisor Mag., 25 Apr. 2013. Web. 15 Sept. 2015.

[ii] 2013. As cited in “Working With Advisor Important To Retirement Savings, Study Says.” Financial Advisor. Financial advisor Mag., 25 Apr. 2013. Web. 15 Sept. 2015.