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We are in our early 60s and have a $750K portfolio that is ‘sinking fast.’ But we want to pay for our daughter’s medical school. Who can help us figure this out?

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Question: We are in our early 60s and have a roughly $750,000 portfolio that is sinking fast — mostly 401(k)s from our various nonprofits. We also have a daughter entering medical school who we’d like to help avoid huge loan debt if possible. What type of financial planner would be able to help us decide if paying for our daughter’s school makes sense? I’d also like someone who can help us stretch what we have to make it last as long as possible. Is there a particular fee structure that makes the most sense for people like us?

Answer: The first thing you may want to do is look at where you are financially right now. If you’re in your 60s and your portfolio is sinking fast, you may be invested in assets with more volatility and risk than you’re comfortable with. “I would encourage you to look at the average annual return over the last 3, 5 and 10 year periods for better perspective. Then talk to a fee-only adviser who can assess your real risk tolerance, which is more than just your risk preference,” says certified financial planner Gordon Achtermann at Your Best Path Financial Planning. Risk tolerance is the amount of money you’re willing to lose in your portfolio, while risk preference is the attitude you take as an investor to measure your risk-aversion.

It’s unclear if you’re still working and if your portfolio is sinking due to recent investment returns or if you’re retired and taking distributions. “If it’s the latter, I’d say you need urgent financial triage before it’s too late. If you’re retired in your early 60s, you have many years yet to live and if you’re already panicking over depleting savings, chances are your withdrawal rate is much too high,” says certified financial planner Jim Kinney at Financial Pathway Advisors. (Looking for a new financial adviser? This tool can match you to an advisor who meets your needs.)

You also don’t mention the lifestyle you’re accustomed to, but unless you have pensions, you may need substantially more than $750,000 to sustain a long retirement without a decline in standard of living. “$750,000 will only generate $30,000 to $40,000 per year before tax,” says Achtermann. Will that be enough for you? 

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What type of financial adviser is right for you?

If you aren’t sure of the answers to these issues, a financial pro could be very helpful. And the type of pro you hire — someone who gets paid via a percentage of assets under management, hourly or per-project — will depend on the kind of relationship you want with the adviser. 

“It’s important for you to determine what level of relationship you would like to engage in with a financial planner. If you’re just looking for someone to help you with your immediate needs but no ongoing advice, an hourly fee or project-based fee financial planner may be best,” says certified financial planner and NAPFA Advisor Bureau Member Zack Hubbard of Greenspring Advisors. If you’re interested in maintaining an ongoing relationship, you may want to seek out an adviser who works under a retainer fee or assets under management (AUM). “Ultimately, what’s most important when searching for a planner is that they take into account your whole financial picture and your specific goals and that you feel comfortable that they have your best interest in mind when providing advice,” says Hubbard. (Looking for a new financial adviser? This tool can match you to an advisor who meets your needs.)

Regardless of whether you opt to pay an hourly rate or a flat-fee, you’ll want to be sure you find a planner who is a fiduciary, meaning they’re legally and ethically bound to work in your best interest. CFPs are held to the some of the highest standards, so working with a fee-only CFP means you won’t have to worry that your adviser is earning a commission from selling you products or steering you to invest in something that puts money in their pocket over assessing whether or not it’s the best course of action for your finances. To start your search for planners with varying fee structures, you can visit NAPFA’s Find an Advisor portal, Garrett Planning Network and XY Planning Network.

Saving for retirement vs. funding your child’s education

Pros say your own retirement planning is paramount if you can’t afford both. “It’s much more important that you secure your own retirement than help your daughter. You can help her later if necessary,” says Achtermann. Certified financial planner Elyse Foster at Harbor Wealth Management adds: “I would advise covering your retirement needs first, which in all likelihood will require all of your savings. Once you have answers to your questions, you can inquire as to how to best stretch your savings to last your lifetimes.”

Hopefully, your daughter will have enough income once she starts practicing to comfortably pay back her medical school loans, but if you want to make an impact, you could consider helping her with repayments should you be able to afford it when the time comes. “Don’t imperil your retirement with significant withdrawals for an expense that your daughter will be able to afford. Longer term, my guess is she would rather pay back the debt herself than to see you merely subsisting in retirement or working well into your 70s,” says certified financial planner Matt Bacon at Carmichael HIll & Associates. (Looking for a new financial adviser? This tool can match you to an advisor who meets your needs.)

The advice, recommendations or rankings expressed in this article are those of MarketWatch Picks, and have not been reviewed or endorsed by our commercial partners.


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