Q: I am retiring in a year or so. I want to talk with someone about financial planning, taxes and retirement before Social Security kicks in. Have you heard of a CPA/PFS? I believe there are only a few fee-based PFS professionals around Palm Beach County. My tax bracket will be 15 percent in retirement, but I am worried about taxes on Social Security in addition to how to draw down my taxable account and IRAs in my 60s. Do I need such a planner?
Q: I have lots of “pots” of money with many advisers who I feel want to sell me their products to get their commission. I live in Pembroke Pines, Fla. Do you have a suggestion or list of reputable fee-only advisers who can get me organized? I’m almost at retirement, age 62.
A. Both of these readers are getting close to retirement and believe they want a financial adviser who gets paid for giving advice as opposed to taking a sales charge related to a product sale.
Even with fairly similar circumstances — they even both live in Florida — a one-size adviser may not fit both.
Choosing an adviser is one of the trickiest financial planning tasks of all. Make even a small mistake, and you could get someone who doesn’t quite optimize the investments in your retirement accounts. Make a big mistake and, of course, the whole nest egg could be swallowed.
Checking out a potential adviser’s disciplinary record and credentials (on sites including napfa.org, adviserinfo.sec.gov and individual state securities departments) is an important step, but not necessarily your first.
Ideally, you want to narrow the field initially by looking for the type of expertise that’s truly important to you.
In the letters above, the first reader has clear tax-related concerns about Social Security and drawing down retirement accounts.
Given that, interviewing a few advisers with the CPA/PFS designation could be a good start. PFS stands for Personal Financial Specialist and is a credential that existing certified public accountants can add via an exam, 75 hours of education in financial planning and certain experience requirements.
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Officials for the American Institute of CPAs (AICPA) said about 5,000 CPAs have gone on to earn the PFS designation. There are about 330 in Florida listed on the organization’s website.
Most PFS designees are paid by client fees, though a few do work in more brokerage-related environments, said Andrea Miller, associate director of personal financial planning for AICPA.
When interviewing candidates, be sure to ask about expertise in Social Security claiming strategies and overall retirement income planning in addition to taxes. You don’t want the proverbial tax tail wagging your retirement dog.
If the adviser tends to recommend that all clients claim benefits before full retirement age because he or she expects investment performance to beat the implied rate of return on delaying benefits, that’s a big red flag, says Wade Pfau, professor of retirement income at the American College of Financial Services.
Just for comparison, it might be interesting to check out garrettplanningnetwork.com or the aforementioned napfa.org for more general financial planners who also offer tax-planning advice.
The other reader, meanwhile, is crying out for streamlining the portfolio. The reader doesn’t say it outright but gives the strong impression of a history littered with high-pressure brokerage sales tactics and failed promises.
Someone who is accustomed to an adviser bringing investment ideas, however, may find it difficult to focus on the minutiae of drawing income off a portfolio.
So this person might start by viewing retirement itself as a turning point in the type of financial professionals he or she will be working with. In addition to the other resources mentioned here, there are professionals with the RICP (Retirement Income Certified Professional from the American College of Financial Services) or the RMA (Retirement Management Analyst from the Retirement Income Industry Association). As you’re choosing, be aware of differing philosophies on, for example, the use of annuities in retirement portfolios.
Pfau also recommends the Certified Retirement Counselor designation awarded by the International Foundation for Retirement Education.
Also be aware that other credentials indicating expertise for seniors abound and that many are little more than sales come-ons, Pfau said.
A huge “tell” for this reader to watch for, he said, would be a candidate who initially claims to offer full-service planning advice, but then juices the deal with promises of outsize returns. This could play right into your sweet spot if you’ve worked with a lot of sales-oriented brokers in the past, so keep a watchful eye.
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