Key Financial Considerations for Retirement Planning

Summary: Preparing for retirement is crucial for secure financial future. If you're like many you may have planned for retirement alone. But consulting a financial advisor is essential to ensure a successful retirement. In this article we discuss the importance of seeking a professional's advice.

Man contemplating future on pier symbolizing retirement planning.

Overview of Three Big Financial Conditions

You made it through your career without hiring a financial planner or financial advisor. Instead, like many people, you focused on the following three big financial conditions:

  1. You are coming into retirement with little or no mortgage debt.
  2. You have used the retirement plans offered by your employers to build up your retirement nest egg, which you hope, along with Social Security, will provide the necessary retirement income.
  3. You have bought life insurance to protect your spouse if you didn’t make it to retirement.

You are hesitant to retire without consulting a financial advisor or financial planner.

Definition of Retirement Planning

Retirement planning, in part, is about creating enough retirement income for a period that is uncertain. In addition, it involves deciding when to start taking Social Security and whom to make beneficiaries on your retirement accounts. For example, the SECURE Act makes it less beneficial to create a trust for the beneficiary or for your kids to be named beneficiaries.

Regarding when to take Social Security, Stanford University’s Center on Longevity analyzed and compared 292 scenarios. Its conclusion is a two-prong strategy. First, delay taking Social Security until age 70 by working either full- or part-time. Second, withdraw annually from your IRAs or 401(k)s based on the IRS’s minimum requirement tables.

Providing Rollover Advice

Many financial advisors, including myself, focus their practice on working with clients approaching retirement because such clients need help transitioning from growing their accounts to distributing them.

Two government entities, the U.S. Department of Labor (DOL) and the Securities and Exchange Commission (SEC), have instituted new rules for financial advisors recommending clients roll over their 401(k) to an IRA. Both entities now require the advisor to compare costs and fund options in the 401(k) to a new IRA and present their findings to the client for the latter to make an informed decision.

Two Silos of Financial Advice

There are two silos clients can use when receiving financial advice. One is advice given by a financial professional who gets paid a commission. The other is from a financial advisor paid a fee.

The commission advice was provided under a suitability requirement, while the fee advice was under fiduciary. In addition, the suitability rule allowed undisclosed conflicts of interest, but the fiduciary advice required the minimization and disclosure of any such conflicts.

The Fiduciary Rule

The regulators and politicians believed that the fee arrangement afforded better advice than the commission silo. So, the Department of Labor proposed the Fiduciary Rule, which would have required most advisors working in the retirement market to charge a level fee.

The Rule got banged around in the courts but eventually came out without the level fee requirement but with new standards for any advisor recommending a client roll over their retirement account.

Next, the politicians tasked the Securities and Exchange Commission to study whether having the two silos made any sense. After ten years of studying, the SEC decided to keep the two silos. But it required the commission silo to move toward the fee model by reducing any conflicts of interest and adding new requirements for rollovers. For example, rollovers now require most financial professionals to compare their 401(k) plan to an IRA and document that it is in the client’s best interest to roll over the account to an IRA.

Annuities, the Elephant in the Room

Regarding retirement accounts and rollover advice, much of the regulatory angst involved recommendations to roll over into an annuity—an annuity provides for tax-deferred growth and, in some cases, lifetime income. However, retirement accounts already provide for tax-deferred growth, so why pay the additional costs that annuities usually have for something they’re already getting?

Also, unlike mutual funds, annuities do not provide accumulation rights. So, for example, if clients roll over $1,000,000 from their 401(k) to American Funds, the third largest mutual fund company, they pay no commission—the bigger the deposit, the smaller the commission. But, in this case, the financial professional still gets paid 1%, and American Funds adds a 1% charge if the money leaves within 18 months.

It is the same scenario if one million dollars are rolled into an annuity. The commission earned could be as high as 6% or $60,000 instead of the $10,000 earned by using a mutual fund. Also, the annuity could impose surrender charges, requiring the customer to pay a fee if they withdraw over a certain amount. (Most annuity contacts allow for a 10% free withdrawal during the surrender period.)

Incentivizing Financial Advisors

In the past, some companies incentivized their advisors to sell annuities by tying their benefits to selling their proprietary products. For example, if they sell many annuities, the advisor might have the company pay 80% of their health insurance premiums. Conversely, if they do not sell many, they might only get paid 20%. Alternatively, the 401(k) matching contributions were based only on the income generated from selling proprietary products.

Interestingly, companies’ profits from selling annuities were less than hoped. First, as volatility in the stock market was exposed, they underpriced some income guarantees. Plus, the precipitous drop in interest rates ate into the interest rate earned on reserves they were required to put aside to pay those guarantees. Thus, the rollover into an annuity does not look so bad.

There is nothing wrong with an annuity. For some, it might make sense to roll over a 401(k) into one, especially now that annuities have added features such as income guarantees, even if the stock market crashes—giving investors some additional security in retirement. But you hope the client’s interests and not the advisor’s payout determine that recommendation.

Are There Any Conflicts with Mutual Funds?

There could be. Most mutual funds have multiple share classes. For example, the cheapest may have a .15% expense ratio. At the same time, the most expensive could be 1%. If you return 8%, the most inexpensive leaves 7.85%, while the most expensive is only 7%. (Annuities fees can be as much as 2% or 3% per year.)

Many 401(k)s, especially bigger plans, now offer institutional pricing. This means their funds have lower expense ratios. If you do a rollover, you may pay a commission to the advisor and end up in the same fund or a similar fund with a more highly priced share class.

So Is Fee-Only Fiduciary Advice the Way to Go?

Maybe. It does make the advisor product-agnostic. But if they recommend a rollover where they will be charging an annual fee, they too could bump up against having clients pay a higher cost for the same or similar funds. Fiduciary advisors, however, can be paid an hourly fee, so they can help you even if you decide that leaving your account in the 401(k) is best.

Should I Leave My Money in My 401(k)?

The government might want you to keep your 401(k) in your employer’s plan, but it is not clear whether your former employer does. If you keep it there, they are required to notify and process any IRS-required minimum distributions after age 72. They might also need to interact in the future with beneficiaries who were never employees. They also need to add investment choices that focus on income, for instance, dividend-paying funds, bond funds, or annuities, to guarantee income for a part of the money.

Also, maybe your previous employer doesn’t offer institutionally priced funds or has not focused on providing funds for distribution and, instead, is more focused on growing accounts. Remember, the new requirements allow for rollovers. However, they require due diligence before one is recommended, and the rollover must be in the client’s best interest.

Retirement Planning Near Me

I offer flexible appointment options, including in-person, virtual, phone, email, Zoom, or Skype. I am licensed to handle securities in six states and have offices in Boston and South Dartmouth, Massachusetts. I can provide investment advisory and financial planning services to clients in all 50 states.

A – Independent Retirement Planning Near Me

B – Independent Retirement Planning Near Me

C – Independent Retirement Planning Near Me

D – Independent Retirement Planning Near Me

E – Independent Retirement Planning Near Me

F – Independent Retirement Planning Near Me

G – Independent Retirement Planning Near Me

H – Independent Retirement Planning Near Me

I – Independent Retirement Planning Near Me

K – Independent Retirement Planning Near Me

L – Independent Retirement Planning Near Me

These are the opinions of Financial Advisor Tim Hayes and not necessarily those of Cambridge Investment Research. They are for informational purposes only and should not be construed or acted upon as individualized investment advice. Content provided via links to third-party sites should not be considered an endorsement of content that we cannot verify completeness or accuracy of.

Please share

Financial Advisor for Retirement Near Me

A – Boston Financial Advisor Near Me
  • Abington 
  • Acton
  • Amesbury 
  • Andover
  • Arlington 
  • Ashland 
  • Attleboro 
  • Avon 

B – Boston Financial Advisor Near Me

  • Bedford 
  • Bellingham
  • Belmont 
  • Beverly – I grew up in Beverly
  • Billerica 
  • Boston – I Live in the South End
  • Boxford 
  • Braintree
  • Brookline

C – Boston Financial Advisor Near Me

  • Cambridge
  • Canton 
  • Carlisle 
  • Carver 
  • Chelmsford 
  • Cohasset
  • Concord 

D – Boston & Dartmouth Financial Advisor Near Me

  • Danvers 
  • Dartmouth – I have a home in S Dartmouth
  • Dedham 
  • Dover
  • Duxbury

E – Boston Financial Advisor Near Me

  • Edgartown

F – Boston & Dartmouth Financial Advisor Near Me

  • Fall River 
  • Fairhaven
  • Foxborough 
  • Framingham 
  • Franklin
  • Freetown

G – Boston Financial Advisor Near Me

  • Georgetown
  • Gloucester 
  • Groton

H – Boston Financial Advisor Near Me

  • Hamilton
  • Hanover 
  • Harvard 
  • Haverhill – I lived in Haverhill for five years
  • Hingham
  • Holliston 
  • Hopkinton 
  • Hudson 

I – Boston Financial Advisor Near Me

  • Ipswich 

L – Boston Financial Advisor Near Me

  • Lexington 
  • Lincoln 
  • Lowell 
  • Lynnfield 

M – Boston and Dartmouth Investment & Financial Near Me

  • Malden 
  • Manchester by the Sea
  • Mansfield 
  • Marblehead – I worked at the Corinthian Yacht Club during college
  • Marion
  • Martha’s Vineyard
  • Marshfield
  • Mattapoisett
  • Maynard
  • Medfield
  • Melrose 
  • Merrimac
  • Methuen 
  • Middleborough 
  • Middleton
  • Milton 

N – Boston and Dartmouth Investment & Financial Near Me

  • Nantucket
  • Natick 
  • Needham
  • New Bedford
  • Newburyport 
  • Newton 
  • North Andover 
  • North Attleborough 
  • Northborough
  • North Reading 
  • Norton 
  • Norwell
  • Norwood

P – Boston Investment & Financial Near Me

  • Peabody
  • Plymouth 
  • Provincetown

R – Boston Investment & Financial Near Me

  • Randolph 
  • Reading
  • Revere 
  • Rockland
  • Rockport

S – Boston Investment & Financial Near Me

  • Salem- I lived in Salem after college
  • Sandwich
  • Saugus 
  • Scituate 
  • Sharon
  • Sherborn
  • Somerville
  • Southborough
  • Stoneham 
  • Stoughton
  • Sudbury 
  • Swampscott

T – Boston Investment & Financial Near Me

  • Tewksbury 
  • Topsfield
  • Tyngsboro 

W – Boston and Dartmouth Investment & Financial Near Me

  • Wakefield
  • Walpole
  • Waltham
  • Wareham
  • Watertown 
  • Wayland
  • Wellesley 
  • Wenham
  • Westford
  • Weston 
  • Westport 
  • Westwood
  • Weymouth 
  • Wilmington 
  • Winchester
  • Woburn

Book a Free Virtual or In-Person Consultation with Tim!

The Advantage of an Advisor: Real Stories from Real People

Cynthia Hayes


"Tim has been my financial advisor for many years. Tim is ethical, honest, thorough, detailed, thoughtful, knowledgeable, very helpful, and, last but not least, kind. He stays abreast of changing policies, laws, etc., and communicates them to me as applicable. Tim helped me to plan successfully for my retirement, and I am forever thankful to him. I highly recommend Tim if you need a financial advisor with his attributes.." Additional disclosure Cindy is Tim's stepmom.

"I have worked with Tim Hayes most of my adult life (I am a senior citizen). I trust him so much that I have recommended him to my sister. You can't go wrong with Tim."

Linda Wiegenfeld


Bryk Family


"Tim has been our financial advisor for many years. He knows our family and has aligned his expertise with our goals. He has our best interest in mind and goes above and beyond in strategizing our portfolio in this ever changing landscape. We entrust him with three generations in our family and value our relationship."

These testimonials are based upon an individual client experience and may not represent the experience of other customers, and should not be considered a guarantee or indication of future performance of success.

Scroll to Top