We Asked Some Financial Advisers Everything You Want to Know About Money

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Honest Abe

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Some of the links in this post are from our sponsors. We’re letting you know because it’s what Honest Abe would do. After all, he is on our favorite coin.

We could all use a little financial advice now and then.

That’s why more than 300,000 financial advisers are on the job in the U.S., with tens of thousands more in Canada.

We got to wondering: What would you ask a financial adviser if you had a chance?

So, we posed the question to our Facebook community group, promising to get some answers.

We also asked a bunch of certified financial planners: What question do you get asked most often?

Here’s what we found out:

Reader Question 1: How to Save for Retirement?

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Community group member Fonda McGensy asks, “What is the best way for a 25-year-old to save for retirement?”

Here are some of the best answers we got:

Answer No. 1: “If your employer offers a qualified employer-sponsored plan, make sure you’re taking advantage of this benefit by automatically adding money from each paycheck. If your employer matches the contribution, add the full percentage that can be matched. By not doing so, you are literally leaving money on the table.

Younger investors may also consider opening a Roth IRA. Contributions to a Roth IRA are after-tax, meaning any money you add to the account grows tax-free.” — Maggie Johndrow, Farmington River Financial Group, Hartford, Connecticut

Answer No. 2: “I strongly believe in investing in low-cost, passive, exchange-traded funds like the ones Wealthfront, Betterment or Wise Banyan are offering.” — Jeremy Cohen, founder of Simplewealth, Zurich, Switzerland

Answer No. 3: “Once a regular paycheck starts arriving, it’s easy to decide that some things that had to be put off before — buying the latest phone or barista-prepared drinks — are now affordable. That may be true, but developing a budget that allows for savings directed toward their needs later in life is a better way to begin. If they ‘pay themselves first,’ then spend some of what’s left on small luxuries, they can accomplish both goals at once — eventual retirement and some enjoyment now.” — Warren A. Ward, WWA Planning & Investments, Columbus, Indiana

Answer No. 4: “Start with that 401(k) plan. Every time you get a raise, half of that raise should go directly to increasing your contribution. But don’t forget to get an emergency fund going.” — Joshua Scheinker, executive vice president of Scheinker Investment Partners, Baltimore, Maryland

Penny Hoarder tip: Consider creating that emergency fund with a high-yield bank account. Online bank Aspiration’s Summit Checking account offers up to a 1% interest rate, almost 100 times higher than the average interest rate at most banks.

Reader Question 2: Where Should I Invest My Money?

Community group member Ciera Rogers asks, “What is the best way to invest money? If I have a couple thousand saved and I want this money to work for me, where should I put it?

Great question, Ciera. Here are some answers:

Answer No. 1: “Lots of people suggest buying an S&P 500 Index fund, Motley Fool would say you can do better with their advice, all brokers promise even more. A Nobel Prize was won in the early ‘90s for saying that most people would be best served by a mixture of 60% stocks and 40% bonds. Vanguard has such a fund: VWELX. It has a $3,000 minimum initial investment, then additions can be made with as little as $1.” — Warren A. Ward, WWA Planning & Investments, Columbus, Indiana

Answer No. 2: “Once we know how long that money will be invested, for what purpose, and your comfort level and experience with risk, we can provide an appropriate solution. Generally speaking, a low-cost, broadly diversified, passive investment strategy is a good place to start.” — James M. Matthews, managing director of Blueprint, a financial planning firm in Charlotte, N.C.

Answer No. 3: “Pay yourself first. Start by saving $50, $100 or $250 per check. Save 3, 4, 5, 10% each year into your 401(k) plan. Increase that by 1% per year. You won’t regret it when you retire.” — Brett Anderson, president, St. Croix Advisors in Hudson, Wisconsin

Answer No. 4: Kerri Moriarty, head of company development for Cinch Financial in Boston, suggests following these steps if you have an extra $100:

  • Do you have at least 1 month of expenses set aside? If not, put the $100 into savings.
  • Do you have high-interest credit card debt? If so, throw the $100 toward your credit card bill.
  • Are you contributing the max to your 401(k) to get the employer match? If not, direct $100 from your next paycheck into your 401(k).
  • Got kiddos gearing up for college? Are you saving for their college expenses? This could be a good spot for the $100.
  • Consider alternative vehicles for your $100: student loan debt, your mortgage, your IRA, your HSA or FSA, and others.  

Penny Hoarder tip: An app like Stash will invest your money in a set of portfolios reflecting your beliefs, interests and goals. It’ll pull a specific amount from your bank account at regular intervals, so you can grow those investments over time.

Stash lets you start investing with as little as $5, and it’ll give you an extra $5 to invest when you sign up through this link.

Reader Question 3: How to Qualify for a Home Loan?

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Community group member Amber Salazar asks, “Is it better to pay off credit card debt in its entirety or to keep that money in the bank (and pay the debt later) when qualifying for the best rate on a home loan?”

Answer No. 1: “In the context of home buying, the bank will look at the payment on credit card debt and include it in the DTI (debt-to-income) ratio when calculating how much mortgage for which you can qualify… Lower (debt) is generally better and can improve your credit score, which may help you get a lower rate on the mortgage. Having some cash set aside is usually a requirement to qualify for a mortgage as well, though. So if you’re not sure where to start, a conversation with a financial adviser may be a good place.” — James M. Matthews

Answer No. 2: “When we pre-qualify potential borrowers for a home loan, two of the key factors that determine if they are going to be approved are their debt-to-income ratio and their down payment ability. Paying down credit card debt will only help an applicant’s debt-to-income ratio. However, the applicant should not deplete their liquid assets so much that they can’t afford the required down payment.” — Brandon Severino, HomeDirect Mortgage, Overland Park, Kansas

Penny Hoarder tip: To qualify for a good rate on a home loan, you’ll need a good credit score. To improve that score, sign up with a free service like Credit Sesame. It shows your balance on any unpaid bills, credit cards or loans. It also offers tips on reducing your debt and raising your credit score.

Now it’s the financial advisers’ turn.

We asked them what question they get asked most often, and here are their replies:

The Big Question

Every financial adviser get asked some version of this: Can I afford to retire? When can I retire? Will I have enough saved to retire the way I want?

Answer No. 1: “I typically answer that question with another question and that’s, ‘What does retirement look like for you?’ It’s different for everybody. If you want to relax, read books, spend time with family and not spend too much money, then you’re looking at a pretty affordable retirement and it might not be much of an issue for you. However, some people want to travel and buy second homes, etc. The first thing we need to do is drill down and define what type of retirement a client is looking for. From there we would determine through cash flow analysis and other avenues if that’s achievable or not.” — Chuck Mattiucci, senior vice president, Fort Pitt Capital Group, Pittsburgh, Pa.

Answer No. 2: “It depends on how much you’ve saved up, current debt load and the lifestyle you desire in your retirement years. So let’s run the math and see when you can.” — Brett Anderson

Answer No. 3: “Many advisers will run comprehensive plans which show the probability of successfully funding your retirement both in bull and bear markets. For those that fall short, we assist with budgeting, starting small by initially ensuring that clients are putting at least 10% into retirement savings.” — Maggie Johndrow

Answer No. 4: “The amount of income you’ll need at retirement has a direct impact on how much you need to have saved. If a person has $3 million saved but requires an income of $200K a year, they are worse off than a person who has $1 million and only needs an income of $40K a year.” — Karen Lee, president, Karen Lee & Associates, Atlanta, Georgia

Other Burning Questions

Financial advisers get asked a lot of other questions too. Here are some highlights:

How much should I be saving for retirement? How much do I need to accumulate before I can retire comfortably?

Answer No. 1: “15% of income, invested over your working years, should provide for a secure retirement.” — Ben Westerman, senior vice president, HM Capital Management, St. Louis, Missouri

Answer No. 2: “Take what it costs you to live today — both spending and taxes — and multiply this amount by 25. This would equate to a planned withdrawal rate of 4% over your lifetime. To this sum, you can add Social Security income which may allow for a lower withdrawal rate or can be a supplement to what you withdraw from your investments. — Kevin Gahagan, chief investment officer, Mosaic Financial Partners, San Francisco.

What do you think will happen if (insert whatever apocalyptic event the financial media is currently focusing on) happens?

It doesn’t matter because it’s out of our control and we don’t waste time focusing on things we can’t control. Short-term events rarely have a material impact on a long-term financial plan. Time heals everything for the patient investor, so as long as you stay the course and don’t panic, there’s nothing to worry about.” — Andy Yadro, financial planner with Googins Advisors in Madison, Wisconsin

How can I help my child pay for college?

“This question often comes too late and the answer usually is student debt.” — Michael P. Griffin, accounting and finance lecturer, University of Massachusetts, Dartmouth.

How much of a down payment should I make on my first home?

“The 20%-down rule is largely outdated, as wages have largely stagnated over the last three decades while general inflation and real estate appreciation have continued upward … Waiting to buy a home until you have a 20% down payment is impractical for many people. If you can save for a 20% down payment within a 5-year period, do it. If not, shoot for 10%, or at least do 5% down.” Justin Chidester, owner of Wealth Mode Financial Planning in Logan, Utah.

In what order should I do the things I know I should be doing?

“Organization and prioritization are the biggest questions on people’s minds and serve as an obstacle to people getting help because it feels too big and overwhelming, so they do nothing. By focusing on a process-based planning approach that helps a client get organized first and focus on accomplishing things in the right order, we are able to bring a sense of financial balance to the client’s situation as we help them pursue their goals.” — James M. Matthews.

Disclaimer: This article contains general information and explains options you may have, but it is not intended to be investment advice or a personal recommendation. We can’t personalize articles for our readers, so your situation may vary from the one discussed here. Please seek a licensed professional for tax advice, legal advice, financial planning advice or investment advice.

Mike Brassfield (mike@thepennyhoarder.com) is a senior writer at The Penny Hoarder. He could definitely use some advice.

Did this article help put money in your pocket?

Honest Abe

Disclosure:

Some of the links in this post are from our sponsors. We’re letting you know because it’s what Honest Abe would do. After all, he is on our favorite coin.