Mailbag: “Can a financial advisor help me stress-test my retirement savings?”
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Let's grow your portfolio one smart decision at a time. So dealing with a specialist, an advisor who actually specializes in retirement income planning and can sit down and again, show you, don't just tell me, show me how I'm not going to run out of money. And yes, stress testing, everything is part of that.

hey everyone i'm jean chatsky thank you so much for joining us today on her money for a special mailbag chat with pam krueger founder and ceo of wealth ramp wealth ramp is a referral service that connects consumers with vetted fee only financial advisors i hope you all caught our earlier episode with pam where we got real about financial advisors what they do what they don't do even how to fire one you're not so happy about

We've got a lot of questions from you listeners who have...

doubts and issues when it comes to your own advisor journeys. We knew Pam was the perfect person to help us tackle them. So Pam, welcome back. Thanks, Jean. Great to answer questions. Thanks. You ready to dive in? Here to help. All right. Lindsay in Chicago says, Hi, Jean. I have been managing my own investments through a robo-advisor for years, but now that I'm a few years from retirement, I'm wondering if that's enough.

How do I know when it's time to switch from a DIY approach to working with a real human? What would they do differently for me? What I don't want is just to end up paying a bunch of fees with no real discernible difference in service.

I get that. I think there are a lot of people who think, hey, I can throw my money into an index fund. I can mimic the market. Those returns have been fine. Why do I need this? Well, the whole key to what she's asking is, how do I know I'm actually getting my money's worth and not just throwing money down the drain? Because I've been doing pretty darn well myself.

So when you're focusing on the investments and the robo and all of the tools that are out there, and you have been doing a great job on your own, but I hear in this question, what am I missing?

What am I missing? Am I missing something? And that's the question that's being asked here, really. And so the way to wade into the shallow end of the pool and not just dive in and hire a financial advisor and pay thousands of dollars in fees every single year is to simply meet with an advisor that is a great fit for you, that has clients a lot like you, because this trigger is

where she is in life is a very, very typical trigger. I am thinking now I got to think about retirement. Am I on track? Just sit down with an advisor. And in order to go into it with the right mindset, which is how am I going to get my money's worth out of this? You want to sit down and you want to understand exactly what you want them to be able to help you accomplish. It's beyond the investments. You need a tax strategy.

You need to talk about long-term care. It's the big elephant in the room for women. We need to talk about all this stuff, not your investments per se. Investments can even just stay where they are as long as they're fee efficient. The advisor is going to want to audit everything, your insurance coverages, your house, your debt, your family, your kids, your aging parents, everything, and sit down,

and do a deep dive. Does that mean you have to pay them every single year and marry them? No, just go on one date and get out of it what you paid for that. So pay a one time fee unless you know you want ongoing help. And when you know you want ongoing help, then you have a situation that's you're looking at a dynamic plan that you're building together that's going to drive you into the future.

If you want that one-time financial physical, which is basically what you're describing, where somebody looks over, are you on track for retirement? Do you have the right insurance coverages? Have you checked the boxes when it comes to your estate plan or taxes? How much should that cost? Well, it's going to depend, but I want you to understand that this is not superficial or else don't bother.

Okay, it's not just going to somebody who's just going to superficially look. This is why having the right advisor is how you're going to get your money's worth. You've got to take the time to screen and make sure you've got the right advisor. When you have the right advisor, then let's just say that you have a portfolio that's between $500,000 and $1 million in total household savings. And I want your advisor to do a super deep dive. It's going to take a lot of time. I want them to look at everything. Taxes, tax returns. I want them to look at everything.

Because that's what you're asking for. What am I missing? The only way they're going to know what you're missing is to look at everything, evaluate everything, ingest all the investment information. So that's going to cost you probably, if you're at that level, probably between $3,000 and $8,000. And if there's a lot of complexity...

If you've been married three times and you've got three houses and it's going to cost you more like maybe $8,000 to $10,000, usually not for between a half million and a million dollar portfolio, somewhere around $5,000. And you might go, oh, sticker shock, $5,000. Are you kidding? That's what you're asking for. You're asking for the advisor to look at every single detail in minutiae.

I did this analysis at one point. I was writing a column for AARP and trying to help somebody figure out if they should be with an advisor and how much it was going to cost. And essentially, the way it worked was that advisors are between $150 and roughly $300 an hour. And this exercise that you're asking for

is a 20 hour exercise. So when you do the math on that, you get to exactly the numbers that you just described. I hate the hourly, because it's like nobody lives their life by the hour. So I would much rather sit down with the advisor, and you're the advisor. And I say, Jean, here's what I'm looking to accomplish from this engagement with you. Can you describe for me the

All the things that you see as the deliverables at the end of this. I know it's based on time and complexity. And then explain what that fee, where the money is going to, instead of trying to do it in units of hours. Me, I just, it's my personal pet peeve. I hate the hourly thing. You can express it that way. But then it gets very confusing because it's like, well, what if I spend 50 hours? It's going to be a fee for service, a fee for the scope of work.

Gotcha. Okay, that makes sense. Our next question is from Kat in Seattle. I've met with a few advisors recently and one told me they're a fiduciary, but also mentioned they earn commissions on some products. Alarm bells went off. That sounded like a walking contradiction to me. Is it possible to be both? In my opinion, no, it's not. But in reality, with how advisors market their services,

What advisor can you think of who does not want to be able to say they're a fiduciary? Do you know any? So given that everybody wants to say they're a fiduciary, remember, there's only one type of advisor who is 100%. And that is a registered investment advisor, monitored by the SEC and state, who works only for you, fee only. So in this case for CATT,

The advisor, probably a really good advisor, but would not be an advisor I would have in my network because that advisor is wearing two hats, wearing the hat of a fiduciary in the role of a fiduciary, but also makes commissions from third parties who pay them to sell something. So I can't do that.

My world doesn't work that way. I have to ask myself, I have to ask the advisor, and I have to ask you, the consumer, pick a lane, just pick a lane. Is it going to be fee-only fiduciary or is it going to be kind of muddy in the middle? Melissa in Atlanta writes, I am 52, divorced, and finally in a stable financial place after years of rebuilding. I don't have millions, just under 100,000 right now, but I'm saving, investing, and trying to plan for retirement.

I feel like advisors aren't interested in working with people like me, but by the same token, I have very real questions that I feel like only an advisor can answer. Help. Yes, help. I love this question.

Shame on this industry. That is terrible to feel that way. The answer is yes. There are plenty of advisors right in our network who work with people who are either younger or maybe they're older and got a later start and they have $50,000, they might have $100,000, they might have debt. They're not basing it on how much money you have.

They're basing what they can do with you to help you accomplish what it is you really want to solve and where your aspirations really want to go and help you plan. And they will do that for a fee that is reasonable. And that's, again, why you have to have the right plan.

size advisor, the right type of advisor for you. So you're not going to end up in an awkward conversation meeting an advisor through us who is going to say, I'm sorry, you have to have a million dollar minimum. What is a reasonable fee for somebody who has $100,000? I mean, if I've got $100,000, I don't want to spend five grand. I'm just going to cut to the chase.

$1,500 to $3,000, it might be $750, it might be $3,000. But it's only going to be $3,000 if there's enough complexity there that there might be some things that are really, really hairy that take a lot of extra time. Or you might be separated and there's just all kinds of stuff in flux. So that's reality for getting a really solid financial plan. Even through a financial coach, just getting coaching, you're probably looking at budgeting between

$750,000 and $3,000. Look, I can live with those numbers. I don't want to go, I mean, and granted, I'm spending Melissa's money here, but I don't want to go a lot higher than that. I want to see if I can bring it in so that just seeing the financial advisor doesn't derail all this good progress that I'm making. And for Melissa and for everybody, it isn't just, what am I paying? What am I paying? What am I paying? It's, what am I getting?

Right. That that you're getting has to be worth more than the fee, the value of all that added up.

And that's, again, why it all circles back to the right advisor. Yeah, I think this is why people like our Finance Fix Coaching, because the program costs $400. Sometimes we discount it to closer to $300 if we're running a special. But on average, people are saving $1,500 in the program. So the value is definitely there. Before we take our last two questions, a quick word from our sponsors.

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We're back. I'm talking with Pam Kruger. We are answering your questions about financial advisors. This one comes from Sarah in Denver. I recently found an advisor I like, but I still feel unsure about what exactly they're responsible for. Should they be helping me budget, plan for college, review my insurance?

or literally just focus on my investments. I don't want to embarrass myself with unrealistic expectations, but I also want to get my money's worth. Thank you. So Sarah, I'm just going to jump in before Pam answers this question and focus on that word, embarrass.

There are no embarrassing questions with an advisor that is the right advisor for you. I know this from years of reporting on things that I did not understand. And I...

Yeah.

Don't be embarrassed. Ask your questions. If they're a good advisor, they will absolutely answer them. What do you think, Pam? They're working for you, Sarah. The answer to your question is already embedded in the question you asked.

Because you said, I need them to do this and this, and I want them to pay attention to all these financial planning and so forth, and not just investments. And so I think the key to success and the key to paying the right fee is to define your vision of what you hope to accomplish by working with an advisor.

Questions are going to come, but start out by just being able to merely explain, why am I here? Why do I think I even want an advisor? What do I expect that I want to solve for? Then you ask, is that what you do? Can you do that?

Will you do that? And that's, again, why having the right advisor and not wasting your time, having conversations that would say, no, I don't do that. So you want to be able to know what you want to accomplish and you want to make sure and I want to make sure as the person who's referring you, I want to make sure that expertise that they have aligns with what it is you are really looking to accomplish. Otherwise, you're not going to be able to accomplish it.

can spend so much time interviewing advisors. Last question today comes from Joanne. She's in Birmingham, Alabama. Hi.

Hi, Jean, my biggest fear is running out of money in retirement and I know I'm in good company since it seems to be the fear we all have. Amen to that. I have saved diligently and I think I have enough, but how do I know it's enough? I know that advisors have programs where they can quote unquote stress test your retirement plan for things like market downturns,

But what if we have a market downturn and I live to 95 and I need an expensive experimental medical treatment? I just want to make sure I'm watertight. Also, if you have a list of the kind of questions I should be asking advisors to make sure they really run the numbers, that would be great. Joanne, guess what? I'm in this business since I was 24 years old and I still have that fear.

It's irrational. I don't have it as much as I used to. But deep inside, it's almost like an animal instinct. Like you're worried about running out of food. You're worried about running out of money. So you said it. You already know. You're already halfway there because you already know the stress testing part of it is so important. Having the right advisor, who, by the way, specializes in stress testing your future withdrawal strategies from... Because remember, accumulating money in your 401k and planning...

and plowing it in over the years, that's kind of the easy part.

Now, we're at the complicated part where we're going to start living on taking money out of that retirement account. We have to make sure we get this right. So dealing with a specialist, an advisor who actually specializes in retirement income planning and can sit down and again, show you. Don't just tell me, show me how I'm not going to run out of money. And yes, stress testing, everything is part of that. A market downturn,

Like, what if you're heading into retirement right at the same moment that the market drops like a hot rock? You have to have a plan that will adapt and take into consideration stock market drops,

inflation being higher, all kinds of bad things that happen. You can't know your own medical future. You can't know that. And you can't know if you're going to need assisted living or long-term care or memory care. But

you can sit with the advisor and really plan for that so that you're not running away from these things. You're running into them and dealing with them head on and saying, okay, what would happen? Let's look because then I can sort of avert and I can plan. In doing it now in your 40s and 50s and maybe 60s and not waiting until you're at a point in time where you need that kind of help is really key. So I think, Joanne, you already know, and I love watertight advice,

I love the fact that you want a watertight plan. Don't you dare settle for less.

Don't settle. Do you have, just to ask for the last thing she asked for, do you have a list of questions that we could link to that people should or that we could post that everybody should be asking a financial advisor? We'll do both. We'll make sure that we do both. We'll make sure that I give it to you and we have on our website on wealthramp.com, certainly. And I have a video that I've done. But I'm going to give you just...

the quickest answer I can is there are two questions. Once you have decided that you are at that point where you're about ready to hire the advisor, you've already vetted or they've been vetted for you screen, I want you to ask them to please describe who are your typical clients? Who do you help the most and how? Paint me a picture of how you're helping your clients. And Jean, that forces the advisor.

to actually start to really explain their own value. Okay, and then the second question right after that, please describe how your clients pay you. I know you're fee only. And I know that that means I'm going to pay you a fee. You're so good at what you do, I'm actually going to pay you. How do your clients pay you? What does that look like? Can you give me some idea?

of how you go about discussing this with me so that we're on the same page. Those two questions together start to really help you get your arms around, am I going to get my money's worth from this engagement? And that's all I care about. I want to get my money's worth and I want confidence.

Pam Kruger, CEO of WealthRam. Thanks for being back with us. Thank you, Jean. If you are looking for an advisor now or in the future, we are partnering with WealthRam. You can go to hermoney.com backslash find an advisor and we'll get you going. Thanks so much for listening and we'll talk soon.

If you loved this episode, please give us a five-star review on Apple Podcasts. We always value your feedback. And if you want to keep the financial conversations going, join me for a deeper dive.

Her Money has two incredible programs, Finance Fix, which is designed to give you the ultimate money makeover, and Investing Fix, which is our investing club for women that meets biweekly on Zoom. With both programs, we are leveling the playing fields for women's financial confidence and power. I would love to see you there.

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