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For some retirees who are members of Generation
The typical Generation
The bottom half of Generation X earners have only a few thousand dollars saved for retirement, the research found.
Those in the bottom half typically don’t have access to a workplace retirement plan, noted Dan Doonan, executive director at NIRS. He said that encouraging financial culture may help improve those balances.
“If you have a lot of savings in retirement, how much income does that produce?” Doonan said. “I think the knowledge about this area is probably not very strong.”
For example, based on the 4% withdrawal rule, $100,000 in retirement savings means you expect about $4,000 in annual income.
“I don’t think it’s widely understood that this is a low level,” Doonan said.
Another hurdle is the way the financial industry is structured, which may result in potential retirees being reluctant to pay for advice from already low retirement balances, he noted. Meanwhile, financial professionals are usually better compensated for serving wealthier clients.
However, people with less assets or income should not necessarily be discouraged from seeking professional advice.
“Everyone should have a financial plan because it helps you map out the rest of your life,” said Daphne Jordan, a certified financial planner and board president of the National Association of Personal Financial Advisors, or NAPFA.
Some financial planners are compensated on an hourly or fixed-rate basis, and that information should be readily available on their website, noted Jordan, who is also a senior wealth advisor at Pioneer Wealth Management Group in Austin, Texas.
Jordan said it’s important to check if a professional has a certified financial planner designation, as they are trained to look at your entire financial picture, including areas like cash flow, insurance coverage and Social Security claim strategy. NAPFA’s advisors work on a fee-only basis, meaning they are not paid through commissions, nor do they sell financial products.
Search tools provided by NAPFA, the CFP Council, or the XY Planning Network may help identify potential financial professional matches. Most importantly, potential clients should also check the names of professionals with the SEC and FINRA websites to see if they have any complaints against them.
Before choosing a professional, talk to a few potential clients to see who impresses you most, advises Jordan.
“For the amount you pay for cable in a year, you can pay a financial planner, a certified professional financial planner, and then you get peace of mind when it comes to your hard-earned money,” Jordan said.
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