Mailbag: “Can a financial advisor help me stress-test my retirement savings?”

Summary

HerMoney with Jean Chatzky: Mailbag Summary – “Can a Financial Advisor Help Me Stress-Test My Retirement Savings?”

Release Date: April 4, 2025

In this insightful episode of HerMoney with Jean Chatzky, host Jean Chatzky teams up with Pam Kruger, founder and CEO of Wealth Ramp, to address listeners' pressing questions about financial advisors and retirement planning. The discussion delves deep into the nuances of choosing the right financial advisor, understanding their roles, and ensuring that retirement savings are robust enough to withstand economic uncertainties.

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1. Transitioning from Robo-Advisors to Human Advisors

Listener: Lindsay from Chicago
Timestamp: [02:00-06:55]

Issue: Lindsay has been managing her investments through a robo-advisor but is nearing retirement and questions if a DIY approach is sufficient.

Discussion Highlights:

• Value Beyond Investments: Pam Kruger emphasizes that retirement planning encompasses more than just investment management. She states:

  “It's beyond the investments. You need a tax strategy. You need to talk about long-term care. It's the big elephant in the room for women.” [02:42]

• Comprehensive Review: Transitioning to a human advisor allows for a thorough audit of all financial aspects, including insurance, debt, family needs, and long-term care.

• Cost Consideration: A deep dive with an advisor can cost between $3,000 to $8,000, depending on the portfolio size and complexity, but this investment ensures a well-rounded financial strategy.

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2. Fiduciary Duty vs. Earning Commissions

Listener: Kat from Seattle
Timestamp: [07:40-09:08]

Issue: Kat is concerned about an advisor claiming to be a fiduciary while also earning commissions, questioning the advisor’s integrity.

Discussion Highlights:

• Definition Clash: Pam Kruger clarifies that true fiduciaries, specifically registered investment advisors monitored by the SEC, operate solely on a fee-only basis.

  “There is only one type of Advisor who is 100% [a fiduciary], and that is a registered investment advisor monitored by the SEC and state, who works only for you, fee-only.” [08:00]

• Conflict of Interest: Earning commissions while claiming fiduciary status creates a conflict, as the advisor's recommendations might be influenced by third-party incentives.

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3. Accessibility for Clients with Under $100k

Listener: Melissa from Atlanta
Timestamp: [09:08-11:30]

Issue: Melissa, a 52-year-old divorced individual with nearly $100,000 in savings, feels that advisors are not interested in clients with her asset level but has essential financial questions.

Discussion Highlights:

• Industry Bias Critique: Pam Kruger criticizes the financial industry's tendency to prioritize high-net-worth clients, asserting that quality advisors are available for those with varying asset levels.

  “They’re not basing it on how much money you have. They’re basing on what they can do with you to help you accomplish what it is you really want.” [10:30]

• Reasonable Fees: Advisors willing to work with Melissa's financial standing typically charge between $1,500 to $3,000, making professional advice accessible without prohibitive costs.

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4. Comprehensive Role of Financial Advisors

Listener: Sarah from Denver
Timestamp: [15:00-17:19]

Issue: Sarah is uncertain about the scope of her advisor’s responsibilities, questioning whether they assist with budgeting, college planning, insurance, or solely focus on investments.

Discussion Highlights:

• Encouragement to Ask Questions: Jean Chatzky reassures Sarah that there are no embarrassing questions when engaging with the right advisor. She shares her personal experience of asking questions until she received clear answers.

• Defining Financial Vision: Pam Kruger advises listeners to clearly define their financial goals and ensure their advisor’s expertise aligns with these objectives.

  “I want you to want to get your money's worth and I want confidence.” [11:30]

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5. Stress-Testing Retirement Plans

Listener: Joanne from Birmingham, Alabama
Timestamp: [17:19-21:53]

Issue: Joanne fears running out of money in retirement despite diligent saving and seeks assurance through stress-testing her retirement plan.

Discussion Highlights:

• Importance of Stress-Testing: Pam Kruger underscores the necessity of having a retirement plan that can withstand market downturns, inflation, and unexpected expenses like medical treatments.

  “You’re running away from these things you're running into them and dealing with them head on.” [19:00]

• Specialized Advisors: Engaging with advisors who specialize in retirement income planning ensures that withdrawal strategies are adaptable to changing economic conditions and personal circumstances.

• Proactive Planning: Joanne is commended for her proactive approach, and Pam encourages continued diligence in creating a "watertight" retirement plan that anticipates potential challenges.

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Conclusions and Insights

Throughout the episode, Jean Chatzky and Pam Kruger highlight the multifaceted role of financial advisors in securing a stable financial future. Key takeaways include:

• Holistic Financial Planning: Beyond investment management, advisors help with tax strategies, insurance coverage, debt management, and long-term care planning.

• Selecting the Right Advisor: It’s crucial to choose advisors who align with your financial goals, operate on a fee-only basis, and are transparent about their services and fees.

• Accessibility: Quality financial advice is available for individuals across different asset levels, debunking the myth that advisors only cater to the wealthy.

• Proactive Engagement: Engaging with a financial advisor involves clear communication of your financial vision and expectations to ensure you receive value for the fees paid.

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Notable Quotes with Timestamps

• On Comprehensive Planning:

  “It's beyond the investments. You need a tax strategy. You need to talk about long-term care. It's the big elephant in the room for women.”
  — Pam Kruger [02:42]

• On Fiduciary Advisors:

  “There is only one type of Advisor who is 100% [a fiduciary], and that is a registered investment advisor monitored by the SEC and state, who works only for you, fee-only.”
  — Pam Kruger [08:00]

• On Advisor Accessibility:

  “They’re not basing it on how much money you have. They’re basing on what they can do with you to help you accomplish what it is you really want.”
  — Pam Kruger [10:30]

• On Retirement Stress-Testing:

  “You’re running away from these things you're running into them and dealing with them head on.”
  — Pam Kruger [19:00]

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Final Thoughts

This episode serves as a valuable resource for women navigating the complexities of financial planning and retirement. By addressing real listener concerns with expert advice, Jean Chatzky and Pam Kruger empower women to make informed decisions about their financial futures. The emphasis on finding the right advisor, understanding their roles, and ensuring comprehensive planning underscores the importance of proactive financial management in achieving long-term security and peace of mind.

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Transcript

[Jean Chatzky]

The economy is shaky, the markets are volatile and let's be real, we might already be in a recession and not even know it. If you are feeling unsure about your investments, you're not alone. But here's the good news. Our investing fixed portfolio is holding strong. Why? Well, I think it's because we don't just react to the headlines. We invest with a strategy, with confidence and alongside a community that is in this together. The best part, your first month is completely free. We are breaking down the markets, simplifying strategy and helping you build wealth with confidence. Join us [e-mail] that's fix with two X's. Let's grow your portfolio one smart decision at a time.

[Pam Kruger]

So dealing with a specialist, an advisor who actually specializes in retirement income planning and can sit down and again, show you. Don't just tell me, show me how I'm not going to run out of money. And yes, stress testing everything is part of that.

[Jean Chatzky]

Hey everyone, I'm Jean Chatzky. Thank you so much for joining us today on HerMoney for a special mailbag chat with Pam Kruger, founder and CEO of Wealth Ramp. Wealth Ramp is a referral service that connects consumers with vetted fee only financial advisors. I hope you all caught our earlier episode with Pam. Pam where we got real about financial advisors, what they do, what they don't do, even how to fire one you're not so happy about. We've got a lot of questions from you listeners who have doubts and issues when it comes to your own advisor journeys. We knew Pam was the perfect person to help us tackle them. So Pam, welcome back.

[Pam Kruger]

Thanks, Jean. Great to answer questions. Thanks.

[Jean Chatzky]

You ready to dive in here to help? All right. Lindsay in Chicago says hi. Jean, I have been managing my own investments through a robo advisor for years, but now that I'm a few years from retirement, I'm wondering if that's enough. How do I know when it's time to switch from a DIY approach to working with a real human? What would they do differently? For me, what I don't want is just to end up paying a bunch of fees with no real discernible difference in service. I get that. I think there are a lot of people who think, hey, I can throw my money into an index fund. I can mimic the market. Those returns have been fine. Why do I need this?

[Pam Kruger]

Well, the whole key to what she's asking is how do I know I'm actually getting my money's worth and not just throwing money down the drain? Because I've Been doing pretty darn well myself. So when you're focusing on the investments and the robo and all of the tools that are out there and you have been doing a great job on your own, but I hear in this question, what am I missing? What am I missing? Am I missing something? And that's the question that's being asked here, really. And so the way to wade into the shallow end of the pool and not just dive in and hire a financial advisor and pay thousands of dollars in fees every single year is to simply meet with an advisor that is a great fit for you, that has clients a lot like you. Because this trigger, where she is in life is a very, very typical trigger. I'm thinking now I got to think about retirement. Am I on track to sit down with an advisor and in order to go into it with the right mindset, which is how am I going to get my money's worth out of this? You want to sit down and you want to understand exactly what you want them to be able to help you accomplish. It's beyond the investments. You need a tax strategy. You need to talk about long term care. It's the big elephant in the room for women. We need to talk about all this stuff, not your investments, per se. Investments can even just stay where they are as long as they're fee efficient. The advice is going to want to audit everything, your insurance coverages, your house, your debt, your family, your kids, your aging parents, everything, and sit down and do a deep dive. Does that mean you have to pay them every single year and marry them? No, just go on one date and get out of it what you paid for that. So pay a one time fee. Unless you know you want ongoing help. And when you know you want ongoing help, then you have a situation that you're looking at a dynamic plan that you're building together that's going to drive you into the future.

[Jean Chatzky]

If you want that one time financial physical, which is basically what you're describing, where somebody looks over, are you on track for retirement? Do you have the right insurance coverages? Have you checked the boxes? When it comes to your estate plan or taxes, how much should that cost?

[Pam Kruger]

Well, it's going to depend. But I want you to understand that this is not superficial or else don't bother, okay? It's not just going to somebody who's just going to superficially look. This is why having the right advisor is how you're going to get your money's worth. You've got to take the time to screen and make sure you've got the right advisor. When you have the right advisor, then let's just say that you have a portfolio that's between 500,000 and a million dollars in total household savings. And I want your advisor to do a super deep dive. It's going to take a lot of time. I want them to look at everything. Taxes, tax returns, I want them to look at everything because that's what you're asking for. What am I missing? The only way they're going to know what you're missing is to look at everything, evaluate everything, ingest all the investment information. So that's going to cost you probably, if you're at that level, probably between three and $8,000. And if there's a lot of complexity, if you've been married three times and you've got three houses and it's going to cost you more like maybe 8 to $10,000 usually not for between half million and a million dollar portfolio. Somewhere around 5,000 and you might go, oh, sticker shock, $5,000, are you kidding? That's what you're asking for. You're asking for the advisor to look at every single detail in minutiae.

[Jean Chatzky]

I did this analysis at one point I was writing a column for AARP and trying to help somebody figure out if they should be with an advisor and how much it was going. Essentially the way it worked was that advisors are between $150 and roughly $300 an hour. And this exercise that you're asking for is a 20 hour exercise. So when you do the math on that you get to exactly the numbers that you just described.

[Pam Kruger]

I hate the hourly because it's like nobody lives their life by the hour. So I would much rather sit down with the advisor and you're the advisor and I say, Gene, here's what I'm looking to accomplish from this engagement with you. Can you describe for me all the things that you see as the deliverables at the end of this? I know it's based on time and complexity and then explain what that fee, where the money is going to instead of trying to do it in units of hours. Me, I just, it's my personal pet peeve. I hate the hourly thing. You can express it that way but then it gets very confusing because it's like, well what if I spend 50 hours? It's going to be a fee for service, a fee for the scope of work.

[Jean Chatzky]

Gotcha. Okay, that makes sense. Our next question is from Kat in Seattle. I've met with a few advisors recently and one told me they're a fiduciary, but also mentioned they earn commissions on some products. Alarm bells went off. That sounded like a walking contradiction to me. Is it possible to be both?

[Pam Kruger]

In my opinion, no, it's not. But in reality, with how advisors market their services, what advisor can you think of who does not want to be able to say they're a fiduciary? Do you know any? So given that everybody wants to say they're a fiduciary, remember there's only one type of Advisor who is 100% and that is a registered investment advisor monitored by the SEC and state, who works only for you, fee only. So in this case for Cat, the advisor, probably a really good advisor, but would not be an advisor. I would have in my network because that advisor is wearing two hats, wearing the hat of a fiduciary in the role of a fiduciary, but also makes commissions from third parties who pay them to sell something. So I can't do that. My world doesn't work that way. I have to ask myself, I have to ask the advisor and I have to ask you the consumer. Pick a lane, just pick a lane. Is it going to be fee only fiduciary or is it going to be kind of muddy in the middle?

[Jean Chatzky]

Melissa in Atlanta writes, I am 52, divorced, and finally in a stable financial place after years of rebuilding. I don't have millions, just under 100,000 right now, but I'm saving, investing and trying to plan for retirement. I, I feel like advisors aren't interested in working with people like me. But by the same token, I have very real questions that I feel like only an advisor can answer. Help. Yes, help. I love this question.

[Pam Kruger]

Shame on this industry. That is terrible to feel that way. The answer is yes. There are plenty of advisors right in our network who work with people who are either younger or maybe they're older and got a later start. And they have 50,000, they might have 100,000, they might have debt. They're not basing it on how much money you have. They're basing what they can do with you to help you accomplish what it is you really want to solve and where your aspirations really want to go and help you plan. And they will do that for a fee that is reasonable. And that's again why you have to have the right size advisor, the right type of advisor for you. So you're not going to end up in an awkward conversation meeting an advisor through us who is going to say, I'm sorry you have to have a million dollar minimum.

[Jean Chatzky]

What is a reasonable fee for somebody who has $100,000? I mean, if I've got $100,000, I don't want to spend five grand.

[Pam Kruger]

I'm just going to cut to the chase. 1500 to $3000. It might be $750, it might be 3000, but it's only going to be 3000 if there's enough complexity there that there might be some things that are really, really hairy that take a lot of extra time or you might be separated and there's just all kinds of stuff in flux. So that's reality for getting a really solid financial plan. Even through a financial coach just getting coaching, you're probably looking at budgeting between 750 and $3,000.

[Jean Chatzky]

Look, I can live, I can live with those numbers. I don't want to go, I mean, and granted I'm spending Melissa's money here, I don't want to, I don't want to go a lot higher than that. I want to see if I can bring it in so that just seeing the financial advisor doesn't derail all this good, all this good progress that I'm making.

[Pam Kruger]

And for Melissa and for everybody, it isn't just what am I paying, what am I paying, what am I paying, it's what am I getting. Right, that, that you're getting has to be worth more than the fee. The value of all that added up and that's again why it all circles back to the right advisor.

[Jean Chatzky]

Yeah, I think this is why people like our finance fix coaching. Because the program costs $400. Sometimes we discount it to closer to $300 if we're running a special. But on average, people are saving $1,500 in the program, so the value is definitely there. Before we take our last two questions, a quick word from our sponsors. I spend a lot of time in my apartment, working, recording, unwinding, cooking at the end of the day. And since I'm home so much, the quality of the air I breathe, it really matters. But here's the shocking thing. Indoor air can be up to a hundred times more polluted than outdoor air. That means the place where I spend most of my days and you spend most of yours could actually be exposing us to allergens, smoke, mold, spores and other yucks. That's why I Trust Air Doctor. This award winning air purifier removes 99.99% of harmful contaminants. And unlike standard HEPA filters, it captures ultra fine particles that most purifiers miss Right now Air Doctor is giving my listeners up to $300 off. Just go to airdoctorpro.com that's a I R D O C T-O-R-P-R-O.com promo code HERMONEY. H E R M O N E Y. You'll also get a 30 day money back guarantee and a free 3 year warranty and $84 value. Go to airdrpro.com and use promo code hermoney. When I first started out in magazines, I was making next to nothing. Like truly nothing. I was putting in the hours, staying late, taking on extra work, proving myself. At least I thought so. And yet my paycheck, it barely budged. And it wasn't until I learned how to advocate for myself, negotiate with confidence and own my worth that things finally changed. The truth is, your career is your biggest financial asset. The more you earn, the more you can save, invest and build the life that you want. But bigger paychecks, they don't just land in your lap. You have to go after them. That's where Strawberry Me career coaching comes in. They match students and professionals with certified career coaches who help you get clear on your career goals. So you're moving forward with purpose. So if you are ready to make your next career move, go to Strawberry Me Hermoney and claim your $50 credit. That's strawberry Me Hermoney. We're back. I'm talking with Pam Krueger. We are answering your questions about financial advisors. This one comes from Sarah in Denver. I recently found an advisor I like, but I still feel unsure about what exactly they're responsible for. Should they be helping me budget plan for college, review my insurance, or literally just focus on my investments? I don't want to embarrass myself with unrealistic expectations, but I also want to get my money's worth. Thank you. So, Sarah, I'm just going to jump in before Pam answers this question and focus on that word embarrass. There are no embarrassing questions with an advisor that is the right advisor for you. I know this from years of reporting on things that I did not understand. And I have asked the same question five times until I got an answer that made sense to me. And I learned a long, long time ago not to feel bad or embarrassed about that because it is their job to explain it to you in words and language that you understand. And you are paying for this. So don't be embarrassed. Ask your questions. If they're a good advisor, they will absolutely answer Them, what do you think, Pam?

[Pam Kruger]

They're working for you. Sarah, the answer to your question is already embedded in the question you asked because you said, I need them to do this and this and I want them to pay attention to all these financial planning and so forth and not just investments. And so I think the key to success and the key to paying the right fee is to define your vision of what you hope to accomplish by working with an advisor. Questions are going to come, but start out by just being able to merely explain, why am I here? Why do I think I even want an advisor? What do I expect that I want to solve for? Then you ask, is that what you do? Can you do that? Will you do that? And that's again, why having the right advisor and not wasting your time having conversations that would say, no, I don't do that. So you want to be able to know what you want to accomplish and you want to make sure. And I want to make sure, as the person who's referring you, I want to make sure that expertise that they have aligns with what it is you are really looking to accomplish. Otherwise could spend so much time interviewing advisors.

[Jean Chatzky]

Last question today comes from Joanne. She's in Birmingham, Alabama. Hi, Jean. My biggest fear is running out of money in retirement. And I know I'm in good company since it seems to be the fear we all have. Amen to that. I have saved diligently and I think I have enough. But how do I know it's enough? I know that advisors have programs where they can quote, unquote, stress test your retirement plan for things like market downturns. But what if we have a market downturn and I live to 95 and I need an expensive experimental medical treatment? I just want to make sure I'm watertight. Also, if you have a list of the kind of questions I should be asking advisors to make sure they really run the numbers, that would be great.

[Pam Kruger]

Joanne, guess what? I'm in this business since I was 24 years old and I still have that fear. It's irrational. I don't have it as much as I used to. But deep inside it's almost like an animal instinct, like you're worried about running out of food, you're running out of money. So you said it. You already know. You're already halfway there because you already know the stress testing part of it is so important. Having the right advisor, who by the way, specializes in stress testing your future withdrawal strategies from. Because remember, accumulating Money in your 401 and plowing it in over the years. That's kind of the easy part. Now we're at the complicated part where we're going to start living on taking money out of that retirement account. We have to make sure we get this right. So dealing with a specialist, an advisor who actually specializes in retirement income planning and can sit down and again, show you. Don't just tell me, show me how I'm not going to run out of money. And yes, stress testing everything is part of that. A market downturn. Like what if you're heading into retirement right at the same moment that the market drops like a hot rock? You have to have a plan that will adapt and take into consideration stock market drops, inflation being higher, all kinds of bad things that happen. You can't know your own medical future, you can't know that. And you can't know if you're going to need assisted living or long term care or memory care. But you can sit with the advisor and really plan for that so that you're not running away from these things. You're running into them and dealing with them head on and saying, okay, what would happen? Let's look. Because then I can sort of avert and I can plan in doing it now in your 40s and 50s and you know, maybe 60s. And not waiting until you're at a point in time where you need that kind of help is really key. So I think, Joanne, you already know and I love watertight. I love the fact that you want a watertight plan. Don't you dare settle for less. Don't settle.

[Jean Chatzky]

Do you have just to ask for the last thing she asked for? Do you have a list of questions that we could link to that people should or that we could post that everybody should be asking a financial advisor?

[Pam Kruger]

We'll do both. We'll make sure that we do both. We'll make sure that I give it to you and we have on our website on wealthramp.com certainly and I have a video that I've done. But I'm going to give you just the quickest answer I can is there are two questions. Once you have decided that you are at that point where you're about ready to hire the advisor you've already vetted or they've been vetted for you screen I want you to ask them to please describe who are your typical clients, who do you help the most and how. Paint me a picture of how you're helping your clients. And Jean, that forces the advisor to actually start to really explain their own value. Okay. And Then the second question right after that, please describe how your clients pay you. I know your fee only and I know that that means I'm going to pay you a fee. You're so good at what you do, I'm actually going to pay you. How do your clients pay you? What does that look like? Can you give me some idea of how you go about discussing this with me so that we're on the same page? Those two questions together start to really help you get your arms around Am I going to get my money's worth from this engagement? And that's all I care about. I want to get my money's worth and I want confidence.

[Jean Chatzky]

Pam Kruger, CEO of Wealthram. Thanks for being back with us.

[Pam Kruger]

Thank you Jean.

[Jean Chatzky]

If you are looking for an advisor now or in the future, we are partnering with Wealthram. You can go to hermoney.com findanadvisor and we'll get you going. Thanks so much for listening and we'll talk soon.

[Pam Kruger]

Soon.

[Jean Chatzky]

If you love this episode, please give us a five star review on Apple Podcasts. We always value your feedback and if you want to keep the financial conversations going, join me for a deeper dive. HerMoney has two incredible programs, finance Fix, which is designed to give you the ultimate money makeover, and Investing Fix, which is our investing club for women that meets bi weekly on Zoom. With both programs we are leveling the playing fields for women's financial confidence and power. I would love to see you there. Her Money is produced by Hayley Pascalides. Our music is provided by Video Helper and our show comes to you through Megaphone. Thanks for joining us and we'll talk soon.