Should I hire a financial advisor?

[HGoat]

I'm a research scientist in my mid 20's, and am lucky to be well off. I have a stable job making ~75k a year, no auto/student loan debt, and am very happy with my situation. My only real expense is rent which is about $800 per month.

I have been putting the max percent that my company will match (6%) from each paycheck towards my 401k for retirement. I put another large chunk into a higher interest online savings account and at this point have close to 15k in savings, which is more than enough for an emergency fund.

What should I do with some of that extra money? Should I hire a financial advisor to help me with these decisions? Will that person just tell me to put 20k into an index fund? I'm very hesitant to do so because they seem like used car salesman, especially if their compensation is all commission based. I know that some CFP's are fiduciary and are required to have their clients best interest in mind, but I am still weary about the whole process. I have a master's degree in the hard sciences, and I know that I'm smart enough to manage my own money. I do have some interest, but I have a lot of questions. I know it will take some time to learn best practices, and I don't know if it is worth it to go through all that trouble if I can hire someone to do it for me. I don't know if a financial advisor will do that much better of a job than I could learn to do myself. Especially considering some of the people I know that are now successful financial planners for major firms. It makes me think maybe I could do a much better job on my own. What has your experience been with financial advisors?

 

[NWICY]

Smooth humble brag. Interview a few and if you like one try it. If not run your own do the low commission thing and go from there. Do a little of both if you so choose.

 

[Cyched]

Can’t speak to the financial advisor advice, but being in your 20s with your finances seemingly in order I wouldn’t think you’d need an advisor.

I would set up and start funding a Roth IRA separate from your work. Very easy to do online.

 

[Acylum]

You should be maxing out your 401k period. Not just enough to get the full match. You’re welcome, no charge.

 

[Sigmapolis]

Can’t speak to the financial advisor advice, but being in your 20s with your finances seemingly in order I wouldn’t think you’d need an advisor.

I would set up and start funding a Roth IRA separate from your work. Very easy to do online.

This. Just throw what you need beyond that to keep liquid in an index fund.

You should not need one.

 

[cyfanbr]

I am in a very similar situation to yours; max my company match, and put about 40% of my after tax income torwards retirement. During college I read a lot about investing, and also listened to some good podcasts that have helped me feel comfortable managing my own money at this point. With that being said, not everyone has the time or willingness to go through the learning. In that case, I believe the best thing to do is to monthly put your money into a low fee index fund and forget about it for years. In the meantime you can learn about investing and manage it yourself or you can hire someone else once you are getting closer to retirement and need to start diversifying your portfolio.

 

[capitalcityguy]

I depends somewhat on how interested you are in learning enough to do it yourself. Just being smart doesn't do you any good if you don't have the desire to put the time and effort. IMO, it really isn't much different than other choices you make in life to hire others to do things for your vs doing yourself.....e.g...plumber, auto mechnic, lawyer, etc. ,

If you decide to hire someone, yes, it can be difficult to find a good adviser but they are out there. You'll have to research those in your areas, talk with some, maybe get some references.

As to acting as a fiduciary, that applies to both commissions and fee based advisers....and this will likely be clarified by the end of the year when the SEC finally releases their long overdue fiduciary related regulation which should help bring some clarity to this whole complicated subject.

My only direct comment / question - why stop contributing to your 401k only up to the match amt? Does your company offer a poor 401k plan? Many larger companies have very good 401ks that offer institutionally prized investments that you and I can't get at a retail level. I would challenge you to put more in your 401k if you have the extra funds to do so.

 

[DreamyCy]

Smooth humble brag. Interview a few and if you like one try it. If not run your own do the low commission thing and go from there. Do a little of both if you so choose.

So should he just never be able to ask whether he needs a financial advisor to avoid bragging?

 

[MeanDean]

I depends somewhat on how interested you are in learning enough to do it yourself. Just being smart doesn't do you any good if you don't have the desire to put the time and effort. IMO, it really isn't much different than other choices you make in life to hire others to do things for your vs doing yourself.....e.g...plumber, auto mechnic, lawyer, etc. ,

If you decide to hire someone, yes, it can be difficult to find a good adviser but they are out there. You'll have to research those in your areas, talk with some, maybe get some references.

As to acting as a fiduciary, that applies to both commissions and fee based advisers....and this will likely be clarified by the end of the year when the SEC finally releases their long overdue fiduciary related regulation which should help bring some clarity to this whole complicated subject.

My only direct comment / question - why stop contributing to your 401k only up to the match amt? Does your company offer a poor 401k plan? Many larger companies have very good 401ks that offer institutionally prized investments that you and I can't get at a retail level. I would challenge you to put more in your 401k if you have the extra funds to do so.

This is excellent. I initially failed to do this thinking I would do the research and investing on my own. I found I was less interested in doing that than I'd thought. I found a good investment guy and have been satisfied with the growth, etc and I don't have to do the nuts and bolts myself. Yes, it costs, but in the end if you're not motivated to do the research and upkeep of the research (things change!) you are well advised to find someone who does that for a living. And does that WELL for a living.

 

[KnappShack]

This is excellent. I initially failed to do this thinking I would do the research and investing on my own. I found I was less interested in doing that than I'd thought. I found a good investment guy and have been satisfied with the growth, etc and I don't have to do the nuts and bolts myself. Yes, it costs, but in the end if you're not motivated to do the research and upkeep of the research (things change!) you are well advised to find someone who does that for a living. And does that WELL for a living.

Why not use a Robo-investment option? Betterment, Wealthfront, Fidelity Go, etc.

Gives a diversified portfolio with tax loss harvesting in some cases. A real set and forget account. Not sure if the Robo is better than an S&P ETF, but it might be an option for a younger investor that doesn't have the knowledge

Of course after maxing the 401k. Don't lose the tax benefits of that

 

[JP4CY]

Take a vacation.

 

[HGoat]

My only direct comment / question - why stop contributing to your 401k only up to the match amt? Does your company offer a poor 401k plan? Many larger companies have very good 401ks that offer institutionally prized investments that you and I can't get at a retail level. I would challenge you to put more in your 401k if you have the extra funds to do so.

We enroll annually in the 401k contribution plan annually, and when I took the job a little over eight months ago I was coming out of graduate school flat broke(but at least not in debt). When it comes back around to enroll for the following year I will probably up my contribution, but when I first enrolled I wanted to establish an emergency savings account, which I've now done.

 

[HGoat]

Take a vacation.

Cyclones gave me a reason for one in December, I'm hoping that becomes an annual event

 

[Rabbuk]

probably no need for one. Just max 401k and dump extra into an index fund.

 

[LarryISU]

I think it is hard to judge unless you give an advisor a try. I have invested on my own for over 30 years and am satisfied with my results. But I'm sure an advisor would say he/she could have done better for me. But I'm just a do-it-yourself guy. Plus I enjoyed doing the research and self-education. Right now in your 20's you have little money. Fees will be minimal. But will you still want to be paying a fee when it is based on the million dollars you have accumulated?

Oh, also I agree with others, max out your 401k. Most have a "safe" investment where you can place some money in place of that savings account.

 

[LivntheCyLife]

Personally, I think you can get almost all the financial advice you need from:
https://www.bogleheads.org/
especially if you start with their wiki.
https://www.bogleheads.org/
It can be a little overwhelming and it has it's pitfalls of any online forum, but I'd try learning a little first on your own before committing to an advisor.

 

[capitalcityguy]

We enroll annually in the 401k contribution plan annually, and when I took the job a little over eight months ago I was coming out of graduate school flat broke(but at least not in debt). When it comes back around to enroll for the following year I will probably up my contribution, but when I first enrolled I wanted to establish an emergency savings account, which I've now done.

Good for you. Emergency fund definitely should have taken precedence.

I would suggest it is highly doubtful your 401k only allows you to change your deferral amount during annual enrollment. Nowadays, most allow you to change at anytime. I would think monthly (or quarterly) at least.

 

[HGoat]

Good for you. Emergency fund definitely should have taken precedence.

I would suggest it is highly doubtful your 401k only allows you to change your deferral amount during annual enrollment. Nowadays, most allow you to change at anytime. I would think monthly (or quarterly) at least.

Thanks, I will double check that for sure!

 

[khardbored]

 

[SCNCY]

As others have said, open an IRA. You may want to figure out what your current tax rate is too determine if a Roth or Traditional is better. As for investments in the account, you could either do low cost ETF or do a target date retirement fund. The target date fund will automatically rebalance your portfolio between equities, bonds, and other investments. If you go the ETF route, you may need to do a little work to find ETFs to make a balanced portfolio (large cap, international, bond, etc.).

However, you may want to search out help in determining what your retirement goal should be.