(MoneyWatch) Generating reliable retirement income for the rest of your life -- no matter how long you live -- is an ambitious undertaking that takes time and skill. So it's entirely understandable that you might want to seek the advice of a professional financial advisor to help you with this task. After all, you can't afford to make mistakes, and you'll need to make every dollar count if you want your money to last throughout your retirement.
Yet not all financial advisors are qualified to help plan for retirement. Some advisors lack the necessary skills or expertise when it comes to generating retirement income, while some are more interested in making money for themselves than for you. Indeed, be aware that some advisors actually pose a danger to your retirement security.
Of course, there are also trustworthy advisors with specialized skills in this sort of financial planning. Your job is to find a trusted financial advisor who will take your goals and circumstances into account and then help you choose the best methods for you for generating a lifelong retirement income.
Let's start by distinguishing between investment advisors and retirement planners. An investment advisor might be good at helping you decide what your asset allocation should be and selecting specific securities or mutual funds. They might also help you minimize income taxes on your investments. This may have been all the advice you really needed while you were growing your retirement nest egg.
But using your retirement savings to generate retirement income is more complex, and you'll need a retirement planner who's experienced with helping people decide which retirement income generator (RIG), or combination of RIGS, will work best for you.
To this end, look for an advisor with credentials that require substantial training and experience with financial planning. Examples include Certified Financial Planners (CFP), Chartered Financial Analysts (CFA), Certified Public Accountants - Personal Financial Specialists (CPA-PFS), and Chartered Financial Consultants (ChFC). These credentials all show evidence of training on a broad variety of financial planning topics.
But be aware that these credentials focus on asset investment and accumulation, without much of an emphasis on generating lifetime retirement income. As a result, I recommend that you ask potential advisors if they have supplemented their training or expertise with specialized training on the various methods of generating retirement income. Three examples of this are the Certified Retirement Counselor (CRC) designation from the International Foundation for Retirement Education; Retirement Management Analyst (RMA) designation from the Retirement Income Industry Association; and the Retirement Income Certified Professional (RICP) designation from American College.
When you're interviewing potential retirement advisors, ask if they have one of these credentials. These designations are fairly new, so it may not be easy to find advisors with these certifications. At the very least, you'll want an advisor who's been trained on the various methods of generating a retirement paycheck and who is able to explain the pros and cons of each method in a way that is easy to understand.
In addition, I'd ask about their approach to generating retirement income. Find out if they'll work with you to decide which RIG (or combination of RIGs) will work best for you based on your needs and circumstances. Avoid planners who express any biases toward one method without first learning about your personal financial and retirement goals.
It's well worth your time to search for a skilled retirement advisor who puts your interests first. My next post will discuss another important consideration to achieve this goal: the best ways to pay your retirement advisor.