Why 401(k) Advisors Are Critically Important in the Current Market Environment

401k, retirement, advisor, Voya Financial

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Income is the outcome. It’s cliché but incredibly true.

New research from Voya Financial finds (unsurprisingly) that people who work with a professional are significantly more prepared for a range of financial decisions in retirement compared to those who go it alone.

This is especially important when markets are strong, as many overconfident do-it-yourselfers find themselves far short when markets turn.

“Americans are all very focused on that magic number—the amount you need to save to maintain your lifestyle in retirement—but there are many important aspects of retirement planning beyond the financial,” James Nichols, senior vice president of Voya Financial’s Customer Solutions Group, said in a statement. “Advisors help clients take a broad view of their retirement and prepare for a fulfilling life when they stop working fulltime. This process includes discussions about how they will fill their days with activities and where they might want to live.”

Several key findings from Voya’s research are:

Calculating Income and Expenses

Many pre-retirees don’t realize that budgeting can begin approximately 10 years before retirement, or around age 55.

Voya’s research showed that individuals without an advisor are postponing the budgeting process, sometimes until the same year they retire. Financial advisors can provide guidance so that people are prepared for daily spending decisions, health care costs and other living expenses in advance of retirement.

Fully 94 percent of individuals surveyed who work with an advisor feel at least somewhat prepared when it comes to making decisions about estimating their monthly income in retirement.

On the other hand, 42 percent of individuals surveyed without an advisor don’t feel prepared at all to make these decisions.

Recalibrating Investments

Voya’s research identified a significant gap between those who do and do not work with a financial advisor, in relation to knowledge of investment and retirement income strategies.

Managing Lifestyle Changes

Financial advisors are preparing their clients not just for financial aspects of the transition into retirement but also for the social and emotional aspects.

Voya’s survey research suggests that individuals who are not receiving advice from a professional are not adequately preparing for the impact retirement will have on many aspects of their lifestyle.

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