Of course, it is never too early or too late to start planning for retirement, or rephrased, to become financially independent where work becomes optional. Pragmatically, the focus on preparing for retirement becomes more important as you age. But when should you get serious about your finances and seek expert advice?
For most people, the answer to this question is when their time becomes more valuable, or the cost of a mistake or missed opportunity becomes large. Large is a relative term. What is large to you may be a rounding error for Bill Gates. Or what is significant for you in your 20s may be immaterial to you in your 50s.
As for time, perhaps you have the aptitude for learning how to do your financial planning. Yet, would this be the highest and best use of your time? Or it would your time be better spent elsewhere whether earning more from your work or spending quality time with your friends and family.
On the other hand, if you don’t have the aptitude and desire, it would not be wise to pretend that you do and instead yield to the cost/benefit factor described above.
Life’s Progressions
For many, when you get into your late 30s or 40s, you may start thinking seriously about hiring an expert. You’re earning a lot more and have saved in your retirement plan for many years, accumulating a respectable sum. Your life is busy with your spouse, friends, career, and transporting your children all over the place for their school, sports, and other activities. You have competing objectives and need to prioritize saving, paying down debt, or spending more on your lifestyle today.
By the time you reached your 50s, you’re earning and saving even more. Your kids are more independent. Your investments have further compounded. It seems as if you blink, and now your balances have grown to be more than what you thought possible when you first started investing.
You’ve successfully climbed the ladder, but work is even more taxing. You notice the complexity of your financial life has increased. Good problem to have you jest, but you wonder – perhaps privately – whether you’re making the right decisions or what you may be missing.
The potential cost of a mistake or missed opportunity begins to weigh more heavily on your aware mind. Taxes were always there but are now a greater expense and thus a bigger concern. You acutely realize a 10% change in your investments now that the balances are large mean a heck of a lot more in dollars than previously.
Most workdays are good but some days less so. Your doctor reminds you of your elevated blood pressure and cholesterol and that you need to eat healthier and get more exercise. You begin to contemplate, “How much longer do I have to work? What would I do if I wasn’t working?”
The unknown is almost always worse than the known. As your mind wonders, you may have fear or anxiety about the unknown. You can more easily deal with the known. Financial clarity is valuable.
So When?
Over the years in my practice as a Certified Financial Planner™ Professional, I had clients in their 30s when it made sense to hire me. I’ve had others in their 50s where I told them to come back in a few years or when a specific event occurred. Alas, mom was correct. We are special, unique snowflakes.
Nevertheless, these principles apply: It is never too early or too late to start. As your time becomes more valuable, as your wealth increases, and as the cost of a mistake or missed opportunity increases, it pays to hire an expert to ensure you’re making the most out of what you have.
A trustworthy expert should clearly describe costs and potential benefits from the engagement and whether it makes sense, in their professional opinion, to invest in hiring him or her. It’s up to you to seek that opinion.
Kevin Kroskey, May 2021
