A 2024 CPP Investments survey found that Canadians believe they will require $900,000 for a comfortable retirement, marking a 29% rise compared to the previous year.
However, according to Statistics Canada from 2024 report revealed The median retirement savings of Canadians stands at $573,040. This indicates that most retirees face a significant shortfall.
If you’ve retired with a $3 million portfolio, you're certainly doing better than most. You not only possess far greater assets compared to an average Canadian retiree but also surpass the recommended $900,000 per individual needed for a comfortable retirement.
However, you might be pondering whether it’s worth hiring a financial planner to assist with managing your retirement funds. The reality is that there are both advantages and disadvantages to seeking professional financial assistance.
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Using a financial planner
If you possess $3 million in assets, own your home outright, and do not have any significant financial worries, you may think that hiring an expert isn’t necessary. However, there’s good cause for reconsidering this assumption. 25% of Canadians possess a financial advisor or planner, according to research conducted by CIBC and FP Canada.
The advantage of collaborating with a financial advisor is having someone knowledgeable who remains unemotional about your finances providing guidance on managing your resources. This can be incredibly valuable, particularly when unexpected challenges arise in life.
Your financial situation might currently be strong, but what happens if your life changes or your health deteriorates, leading to the need for prolonged medical support?
If you lack insurance coverage, the cost of hiring a home health aide might range from approximately $3,500 to $30,000 each month. The Scotia Wealth Management report discovered A financial advisor or planner can assist you not just in preparing for such expenses, but also in managing them when they come up.
Moreover, even though you've demonstrated considerable knowledge about savings and investments by accumulating $3 million before retiring, there might still be gaps in your investment strategy. Consulting with a financial advisor could assist in identifying these areas and ensuring that your portfolio is structured both to generate revenue and endure significant economic downturns or high inflation periods.
Additionally, with $3 million at your disposal, you might consider leaving an inheritance behind. However, keep in mind that the worth of $3 million now won’t remain the same as $3 million later, particularly if inflation rises sharply. Consulting with a financial advisor will help you explore various estate planning strategies, enabling you to make well-informed choices about the kind of heritage you want to pass along.
Ultimately, collaborating with a financial advisor might assist you in feeling more at ease during your later years; this shifts the responsibility from you being the expert to someone who keeps up with the latest information.
Managing your finances solo
A clear drawback of collaborating with a financial advisor is the extra expense incurred. This cost might differ based on various factors such as the specific individual you choose, your location, and the fee model utilized by your advisor. Should you handle your finances independently, you would avoid paying these professional charges altogether.
Suppose a financial advisor charges you a fee equivalent to 1% of your total assets under management. In the case of a $3 million portfolio, this amounts to an annual charge of $30,000 for assistance that might be unnecessary.
Certainly, numerous financial advisors earn compensation based on a percentage of the assets they manage. This incentivizes them to expand your investment portfolio further so their earnings increase accordingly. However, upon retirement, what might matter most isn’t necessarily growing your wealth but ensuring a consistent stream of income. If this stability is already achieved, then hiring an advisor could seem less necessary.
If you have successfully built and managed your investment portfolio over the years, you might be well-prepared to keep doing so—particularly if you are an astute investor attuned to market trends and recognize the significance of diversifying your assets.
Moreover, although a financial advisor may provide advice on estate planning, you'll generally require an attorney to draft a will or trust (or whichever instrument you choose for passing down an inheritance). Thus, even though a financial expert might help guide you towards your preferred choice, you're likely facing additional legal fees separately.
Before finalizing your choice, consider meeting with one or two advisors to get their input. However, if you've reached $3 million and are handling things effectively, hiring additional assistance might not be necessary right now. Ensure that prior to making significant financial decisions, you gather all the information available. In essence, you're acting as your own advisor.
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Sources
1. CPP Investments: Almost two out of every three Canadians express concerns about their retirement savings, according to a recent survey released on October 30, 2024.
2. Statistics Canada: Economic Family Type Assets and Debts by Age Group for Canada, Provinces, and Selected Census Metropolitan Areas, Survey of Financial Security (in millions) (October 29, 2024)
3. Cision: A vast majority of Canadians are tackling financial planning independently according to the CIBC and FP Canada™ Survey (multiplied by 1,000,000) (November 27, 2023).
4. Scotia Wealth Management: Why staying at home as we age remains out of reach for numerous Canadians—and what can be done about it (January 9, 2024)
This article At age 67, after retiring with a $3 million investment portfolio and owning a home free of mortgage, would it be worthwhile to hire a financial advisor to guarantee our savings will endure throughout retirement? originally appeared on Money.ca
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The content of this article serves solely as information and must not be interpreted as advice. No warranties of any sort are provided with this material.