Should I spend $$ on a financial planner?

[Chessie]

Here is my situation. I am mid-fifties, divorced mom, working several years now for a school district, and putting my son through college. He just finished his first year. His father, so far, has contributed half of college costs, but he pays very late, and is having serious financial troubles with his company (he is remarried with 2 additional kids now). I have a small 529 plan that I have not yet tapped, as I am trying to save that for the last two years. I have a fear that my ex is not going to be able to contribute next year, and this will all be on me. Scholarships are nil (yes we apply all the time, but have received none) and we do take advantage of the Stafford loans, so that helps. Costs are about 18 - 20k a year, and the loans knock about 6K off of that. So for the first year, we each paid about 7k. That pretty much consumes most of my "discretionary" money. If I have to pay all of it next year, I will to make some severe changes.

I defer 20K a year now, into a 457b plan, so of course the financial aid is minimal as I technically DO have income to cover the costs. But I am trying to save for retirement, although at this point I just can't even see that far into the future. I thought about switching to a Roth, but the tax impact would hurt, and my AGI would be so much higher I am afraid what it would do to our current financial aid offers. So I stay with the deferred comp. I lost a great deal back in 08-09, and am just now getting back on track, like many others. I did make a change in the investment a couple of years ago (I was just freaking out with the market) - I changed it to a 100% fixed rate return - it's around 3.5% or so now.

My car payment is low (older car), and my mortgage was refi'd a couple of years ago from a 30yr 7% to a 15 year 4.25% (minimal closing costs, no increase in principal, and reduced my payment a couple of bucks or so). I have no CC debt - everything is paid off every month. I am aversive to debt, as you can probably tell - but this is because I am my only support, so I get really nervous about having debt, and I want to save every penny I can. My ex failed to pay the last 2 years of child support, but he has paid half of college cost, so far.

I have a small Fideltity IRA left over from a previous job (about 50K), and 2nd one (Schwab)from an earlier job (15K). I don't do much with them...I think I have made a couple of transfers once or twice...most of those balances sit in indexed funds. I am afraid to make a move on that stuff as the darn market is so sketchy and I don't have time to keep up with that stuff. I just stay conservative. I have very little in cash savings...maybe 15K. But some of that will go to tuition in August. I can't seem to save much cash up during the year since I just don't have much left over.

I am comfortable with my spending level and debt - I don't splurge on hardly anything. But I know my house will need a new roof in a few years, and there is other maintenance that needs to be done...it's hard to manage that sort of stuff. It's hard to explain to others as I make a good salary, so people think I have all this money ...but I don't - it either goes to college, or to retirement. I guess I just worry that I am not doing what I should be doing, with my investments and planning for retirement. But with college, retirement seems like a distant planet right now. I don't know anything about financial planners - it just seems like another expense right now that I can't afford.

Any thoughts or advice would be greatly appreciated.

[disneysteve]

I am mid-fifties, divorced mom

Costs are about 18 - 20k a year, and the loans knock about 6K off of that. So for the first year, we each paid about 7k.

Any thoughts or advice would be greatly appreciated.

How much of the college costs is your son paying for? How much is he earning from his job? Are the loans being taken out by him or by you, or both?

You need to put saving for your retirement higher on your priority list. There are lots of ways to fund college. There is no financial aid for retirement.

How much is in the 529?

[woodie96]

I'm with Steve on this one.
You and your ex are doing great paying for the son's college to this point, but I do wonder what portion your son is paying?
I have always been of the mindset that I don't mind helping people, but I refuse to sink myself trying to help someone, because we both sink then.
Steve had a great point that there isn't any financial aid for retirement.
You have far less years to plan for retirement, than your son has to plan for the remainder of his life.
You also mentioned some costly home repairs that will be needed in the future. Those need to be added to your budget so you can plan for them in advance, so you don't end up going in debt to pay for them when needed.
Personally, I would put more of the college expenses on your son and put more towards your impending retirement in a few years...but thats just my opinion.

[luckyzimmy]

Pay for planner

You can get your own financial plan for under $100

I would be happy to review it for free and make any observations that I can see. I would simply need to have you send it to me

More people should take the time to get a written plan. Things look different when you get them down on paper. It would be unthinkable to drive across the country without a map, but no thought is given to getting your financial plan together.

[jpg7n16]

FYI - I'm a planner, so I'm a bit biased

I think you should.

http://www.cfp.net/find/EnhancedSearch.aspx

You've got a number of goals you're working towards (retirement, college savings, debt elimination) and have a complex family situation (divorce w/ unpredictable support). You need someone to review your plans for the above, make sure you're on track, discuss investment options for the long term, review insurance coverages to make sure your family is protected, and review your estate situation to make sure your son is taken care of if you pass early.


It seems like your situation has been like that for a while, so I'm curious - what made you decide to seek help from a planner now?

[LivingAlmostLarge]

For free you can put it on the board and a lot of people here give good advice.

[jpg7n16]

For free you can put it on the board and a lot of people here give good advice.

For free, you can read every IRS publication, and the entire tax code online. On IRS.gov, there is enough info to cover any tax topic you have questions about. There are even tax forums where you can post and hear answers from people who prepare taxes for a living.

So why do people pay for tax professionals to do their taxes?

[disneysteve]

For free, you can read every IRS publication, and the entire tax code online. On IRS.gov, there is enough info to cover any tax topic you have questions about. There are even tax forums where you can post and hear answers from people who prepare taxes for a living.

So why do people pay for tax professionals to do their taxes?

The question of when, or why, to use a financial planner comes up regularly around here, and it is a very good question.

I'm a do-it-yourselfer, as are most of the regulars here. That's why we hang out here. I'm the type that likes to educate myself, gather data from different sources and use that, and the opinions of others, to make my decisions. I've read many financial books and magazines and websites, watched many financial TV shows, listened to many podcasts, etc. I can honestly say that there is not any single author or personal finance guru with whom I agree 100% of the time.

Financial planning is not an exact science and I wouldn't want to "hang my hat" on the opinion of one specific adviser. I can almost guarantee that if I sat down with 5 different CFPs and presented my situation, I'd walk away with 5 different financial plans. That being the case, why would I want to pay one person for their opinion? When I leave them, I'm still going to have to do the research, see if what they told me makes sense and decide if their advice is really the best way to go for my situation. I can do that just as well on my own for free.

So does that mean planners are useless? Absolutely not. Not everyone is a DIY type of person. Many, if not most, people don't have the knowledge or desire to do the research. I enjoy doing it. Most people don't. Those people would likely benefit greatly from getting professional advice and guidance. Most people are clueless about personal finance and end up either taking way too much or way too little risk, not diversifying or making various other mistakes that a CFP could correct or avoid.

So when should you use a CFP? The answer really depends on you. If you are comfortable and confident doing it yourself, do it yourself. If not, find a good planner. Interview a few and go with the one who you are most comfortable with. Don't just pick a name out of the phonebook. And if you do choose to see a planner, that doesn't mean you have to blindly follow every bit of their advice. If something doesn't sound right or feel right, ask about it. If they can't explain it satisfactorily to you, don't do it. Or get another opinion, and a board like this one is a great place to do that. Many times, someone has come here and posted advice they got from a planner and we told them why we did or didn't agree with that advice.

[green_goblin12]

You seem to have a pretty good grasp on the situation. A financial planner MIGHT give you a little direction and advice, but that sucking sound you'll hear is the fees and expenses for them doing so. Be wary, as most are just salesmen. If you're worried about the amount in your retirement funds, don't hire a planner, as there will be less in the end. You know what index funds are, so you're ahead of most investors, and planners for that matter.


I agree with others. Your child may need to pitch in. Whether it be a job or private loans, don't put your retirement on hold to fund a child's college 100%. Heck, at that price, maybe transferring to a less expensive school would be an option, albeit a last resort. Take a year off to save up some? It's a tough situation, good luck.

[jpg7n16]

You seem to have a pretty good grasp on the situation. A financial planner MIGHT give you a little direction and advice, but that sucking sound you'll hear is the fees and expenses for them doing so. Be wary, as most are just salesmen. If you're worried about the amount in your retirement funds, don't hire a planner, as there will be less in the end. You know what index funds are, so you're ahead of most investors, and planners for that matter.

I really do feel insulted by the way you talk about my profession. (not just in this thread, but in others too)

Why are you so against someone selling a more secure financial future? Is that something you feel you should never pay for?

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I don't feel OP has as strong a grasp as you think she does. Finance is more than just budgeting, spending a small amount, and saving 20%. OP does have a good grasp on those parts, but not on others.

OP said she's 100% in a fixed income at 3.5%. Inflation has averaged 3.4% long term. So she'll make .1% inflation adjusted, before tax. Given that she'll be taxed on the entire amount, she'll lose to inflation long term. I don't call that a strong grasp on your financial future.

I don't think either you or OP could answer all the following questions:
-What level of life insurance should OP have on herself? On OP's ex? How should that policy be owned?
-What type of disability policy would be best for OP's occupation?
-What estate documents need to be in place to make sure OP's child is taken care of if passing early?
-What protection is available for OP and OP's child if ex passes early and leaves everything to the new spouse?
-What is the most tax efficient way of saving for retirement? College?
-At 3.5% returns, how long will it be before you're able to retire the way you want to?
-What happens to your fixed income portfolio if interest rates go up? What can you do to protect youself against that?

A qualified planner could. Don't you think it'd be beneficial to have solid answers to those questions?? I resent the idea that you portray about the help we give others.

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And always remember, just because the index does well does not mean that you will do well - especially when you cash out in fear and switch to a 100% fixed income portfolio.

From: http://www.dalbar.com/Portals/dalbar...ease040111.pdf

As with previous years, investor returns lagged market averages. For the twenty-year period, equity investors earned 3.83% and asset allocation fund investors earned 2.56% compared to the S&P 500 return of 9.14%. For the same period, fixed income investors earned 1.01% compared to the Barclays Aggregate Bond Index return of 6.89%.

“Investors diligently seek investments that they hope will produce the best returns but lose much of that benefit when they yield to psychological factors” said Louis S. Harvey, DALBAR’s president.

Part of a planner's role is to help you stick to the plan.

By paying an advisor 1%/year who could have helped OP stay properly invested over the past few years, OP would EASILY have made more than enough to offset the fee. (The stock market is up somewhere 17-44% from "a couple years ago" - aka when OP, left to herself, got out. Figures are from beginning of 2010 and 2009, respectively) How many years of financial service would that pay for?

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I still agree with DS that you should interview a couple planners to find the one you mesh with the best. In the end, it's about finding someone you trust with your financial future.

And if you find someone you trust, who helps you get a more secure future that you wouldn't have had if left to yourself, I see no reason why they haven't earned their fee.

If you're a DIY-er, you should seriously ask yourself how much of this you really know. DS is not your average person. And not the average DIY-er either. There are many people out there who think they can do it themselves, but make really destructive financial decisions.

[green_goblin12]

I really do feel insulted by the way you talk about my profession. (not just in this thread, but in others too)

Why are you so against someone selling a more secure financial future? Is that something you feel you should never pay for?

Every profession has a few bad eggs. Financial planners, financial advisors, brokers, wealth managers, etc...whatever you're calling yourselves this week have a few good eggs. You're likely one of the good ones. Unfortunately, the past behavior of your peers speaks for itself, ranking the profession right up there with car salesmen. The lack of transparency and conflict of interest is what bothers me the most.

Anyway, your advice for the OP is good. Sticking to a plan is good. Some people need to pay someone for that guidance. Very well then. Just ask lots of questions of an advisor and never invest or buy something you don't understand.

[jIM_Ohio]

The OP prevented private messages from being sent. While many here are probably giving reasonable advice on one or two issues, the focus of financial planning is to see the forest, see the tree, and make sure every tree in the forest is accounted for.

I saw many details not listed, and many questions not asked. I would suggest the OP ask more questions before coming to any decision.

The questions include
1) Tax situation, including who is claiming child, who is eligible to claim tax credits for child
2) What is probable outcome for child on graduation? Live at home, job, etc...
3) This is very important- what is the GOAL of the financial situation? I saw a problem listed, I did not see a goal. Clearly stated goals can get good solutions in context of comprehensive situation.
4) What is the retirement plan- meaning what gaps exist? Its possible the OP is on right path, however verifying this before advising "save for retirement first" is clearly needed (advice before problem definition is short sighted thinking).

OP should contact a financial planner because initial consultations are no cost for 99% of them out there. See what they ask, see what they are suggesting...

Keep BS detector on high at all times (use the questions above to find out who really knows the whole thing).

[Chessie]

How much of the college costs is your son paying for? How much is he earning from his job? Are the loans being taken out by him or by you, or both?

You need to put saving for your retirement higher on your priority list. There are lots of ways to fund college. There is no financial aid for retirement.

How much is in the 529?

My son's job covers his spending money - clothes, gas, and that sort of thing. I provide him no additional funds for this - he covers it. He does not make enough to have anything left over for tuition.

Stafford Loans are required to be in the students name.

Approx. a year and a half of tuition in the 529 plan.

Yes, I have prioritized my retirement above college. That is why I am asking about a financial planner.

[Chessie]

I'm with Steve on this one.
You and your ex are doing great paying for the son's college to this point, but I do wonder what portion your son is paying?.

Again, my son's job does cover all of his spending money. So technically, he IS contributing.

I have always been of the mindset that I don't mind helping people, but I refuse to sink myself trying to help someone, because we both sink then. Steve had a great point that there isn't any financial aid for retirement. You have far less years to plan for retirement, than your son has to plan for the remainder of his life.
You also mentioned some costly home repairs that will be needed in the future. Those need to be added to your budget so you can plan for them in advance, so you don't end up going in debt to pay for them when needed.
Personally, I would put more of the college expenses on your son and put more towards your impending retirement in a few years...but thats just my opinion.

Well I am certainly not "sinking". I know that there is "no financial aid for retirement". That is why I am asking about financial planners. My son has taken out the max amount of Stafford Loans. I understand and respect your opinions as to my son shouldering more of the financial burden, but I would prefer to not impact his studies by long work hours. I'm managing...I am simply asking how to manage better.

[Chessie]

It seems like your situation has been like that for a while, so I'm curious - what made you decide to seek help from a planner now?

I had no concerns about my son's father's finances until just recently. I do now. Also, the market drives me crazy...the small amounts that I have in various 401k/Roth accounts just seem to be spinning...no growth.