Another Financial Advisor Can't Manage His Own Finances (Don't Worry, No One Else Can Either)

When I wrote Would You Take Advice from a Financial Planner Who was Doing Poorly Financially Himself? I said I wouldn't take financial advice from someone who wasn't doing well himself. Yeah, he may have some head knowledge, but if he's missing the second vital part of the equation, the ability to practically implement his own advice, I don't want him within a mile of my finances.

An illustration of this is a story I found on MoneyCentral that's about how couples these days have to be creative to make ends meet in retirement. Let me set the stage:

Having spent much of his career helping others with their finances, Don Peterson knew the importance of saving as much as possible before retiring. But when the stockbroker left the work force in 1988, he realized that retirement wasn't just about money.

Ok, here are the facts:

• The guy "spent much of his career helping others with their finances." Yeah, right. I hope they ended up better than he did.

• He "knew the importance of saving as much as possible before retiring." So he knew what to do.

• He was a stockbroker. So he's not a straight financial planner, but he's certainly a financial advisor -- telling people what to do with their money.

Here's what happened. MoneyCentral says that when they retired, Don and his wife "had less than $100,000 in their accounts and just one pension between them -- hers, which paid out only around $500 a month. Their challenge was one that millions of older Americans are faced with every day: finding a way to lead a comfortable and, yes, happy retirement with only a modest nest egg."

So the guy is dishing out financial advice and ends up scooping cat poop to make ends meet in retirement? Is this the type of person you want telling you what to do with your money?

Unfortunately, poor Don isn't alone. In fact, he's pretty average when it comes to saving for retirement (though you'd hope he would have done better given the profession he was in.) Here are some stats on how the population at large is doing when it comes to saving for retirement:

For the vast majority of today's older workers, this is the reality of retiring in America. While financial planners and retirement experts debate how many millions of dollars families should save -- and how to invest that money to make it last -- most households are retiring on meager sums. Nearly two-thirds of workers 55 and older have less than $100,000 saved for their golden years, according to a recent study by the Employee Benefit Research Institute. And 56% of those workers who are already retired have less than $50,000 to last them for the rest of their lives.

There's not a lot for me to say other than what I've already said on these issues. On financial advisors, check these out to see my thoughts:

• Why Your Planner Wants You in Debt

• Shocker: Many Brokers Give Bad Advice

• Thoughts on Financial Advisors

And some thoughts on retiring:

• Retirement Nightmare: We Aren't Saving Enough

• Don't Plan on Working Longer to Make Up for Small Retirement Savings

• Americans Deluded about Retirement Prospects

Comments

[jBR]

Given your opinion of "buyer beware" concerning finanical planners, what are your thoughts on advisor services such as Smart401K or the Mutual Fund store?

JBR --

I've never heard of them. Can you give me a few more details (or links)?

[joel ducommun]

Great post! Very interesting.
-Joel

[keith]

Actually, while not ideal, this is doable when inflation is considered. $100,000 in 1988 adjusted for inflationwould be more like $175000. Assuming they own a home free and clear, the numbers work out for a modest, middle class lifestyle. Since they both worked, social security works out to probably around $16,000 year. Take $7000 from savings, $6000 from pension, and $5000 fro part-time work. For two people with no dependants, that would be solidly middle class (around $34,000).