If the number of digits on your retirement account balance surprises you, that might be a sign you need to get help with your financial decisions.
The average American household in their 50s now has $1 million in net worth, reports USA Today.
Having written the grabby headline they wanted, the story follows up with the slightly deflating truth: The median for Americans between the ages of 50 and 59 is $300,000.
Still, that’s a far higher number from the usual depressing media retirement stories. A surging stock market and rising home values are driving the middle-age wealth wave.
It’s in that middle six-digit range that people really start thinking about their money.
And they begin to worry. What if the stock market crashes? What if this or that political party wins the next election?
People often express concern over political events, disasters, and wars. Yet decades of data show that investments persevere in bad times and, oddly, can disappoint in good times.
That’s because markets deal in the future, and the future is unwritten. The short-term is bumpy, while the long-term tends to smooth things out.
Worry instead about your long-run responsibilities. Soon, you will think less about whether you will retire and more about exactly when, how long your money will last, and who might benefit from what you leave behind.
When you first start to wonder about these issues, that might be a good time to talk to a financial pro.
The worst time is later.
Think of a financial adviser the way you think of medical advisers.
Some people avoid doctors until symptoms worsen. They skip the dentist until their teeth ache.
Eventually they cave and make an appointment, only to get a serious finger-wagging. “If only you had come in six months ago!” or “Has it been that long since your last checkup?”
Cost is a major mental roadblock around money advice for many people. Some fear conversations they might be ill-equipped to navigate.
As to cost, 15 years of research by Vanguard shows that having a financial adviser, as opposed to going it alone, can add potentially up to 3% or more to your annual investment return.
Part of the gain is from lower fees, diversification, and disciplined rebalancing. But up to 2% comes from behavioral coaching, having a person in your corner when scary news headlines might lead you to sell otherwise good investments.
A 3% bump per year is nothing to sneeze at. That’s extra money compounding on your behalf, year after year. It really plumps up the end result.
That’s why it is important to get experienced help at a competitive cost. You want that 3% extra per year, but you don’t want to pay it right back out to a financial adviser.
As for the dreaded “money talk,” here is where quality guidance “moves the needle.”
Having a solid investment process is important, but so is planning that takes into account your actual life: changing jobs, dealing with 401(k)s, marriage, kids, home-buying, and so on.
Eventually, the conversation turns to second homes, downsizing, travel, and the long term. When would you prefer to have that talk? Five years after you retire? Or 10 years before?
Like with your doctor and dentist, earlier is what you want, and sustained contact with a financial adviser is the key. It is better to have a long-term relationship, not a short-term transaction…as is the case with most things in life.
Starting a serious conversation about your money is a big deal. Letting someone into the details of your financial choices is not easy, but then neither is talking about your blood pressure and flossing habits.
The quality of the financial advice you get can make a huge difference in outcomes: retiring early, traveling with ease, contributing to charity. Consider, too, the peace of mind that comes with knowing what’s next, rather than hoping and guessing.
