I have a son who has been learning about the financial world since he was ten years old. He and his friends have been investing, first on paper and now with real money, for the past several years. Times have certainly changed, but most of us "old dogs" have not: In 2020, a Northwestern Mutual study found that 71% of adults claim that they need to learn more about financial planning and that their related knowledge is lacking. At the same time, only 29% of Americans work with a financial advisor. The reality is that those who work with a financial advisor feel more at ease about their finances and their financial future and typically end up with more spending money in retirement.

Vanguard has found that, on average, a $500,000 investment has the potential to grow to over $3.4 million with the help of an advisor; without the help of a professional, the expected value would be $1.69 million, or 50% less. In other words, a self-managed portfolio can be expected to see 5% annualized growth over a 25-year period, while a professionally managed portfolio should see 8%.

There are several mistakes that a financial advisor can help prevent you from making. For example:

• Taking Social Security too early (maximum benefit kicks in at age 70)

• Borrowing against your retirement

• Tapping into your 401(k) or IRA before RMDS (Required Minimum Distributions, which begin at age 72)

• Tapping into your Roth before exhausting other options

• Not considering your spouse's Social Security benefits

While DIY may work well for a bathroom or kitchen project (and even that can be debatable), taking your life savings in hand and trying to manage your financial options on your own is in most cases as advisable as allowing Tim (The Tool Man) Taylor to fix your sink. Retirement planning is unique to each individual and it can be complicated. Making the most informed decisions, earlier on, can help you reap huge rewards down the retirement road. A financial advisor is well-versed in financial planning and can help you determine where to invest, when to begin drawing on benefits, and how best to legally avoid tax traps. 

At the very least, take my son's advice and learn as much as you can about your financial options and responsibilities. You can begin doing this by attending our financial planning courses, several of which are headed your way at the end of January. Next week I will send out the current class schedule and related information, but if you read about the potential mistakes above and know that your financial IQ needs work, please give us a call and we will make sure you are registered..

Enjoy what looks to be shaping up as a warm and sunny weekend! It is the perfect time to sit outside and enjoy the articles I have attached with you in mind. Until next time...

Warmly,

Kimberly Wolf and Your Team at Pacific Financial Advisors