You. In most cases, NYC employees/retirees do not hire an investment advisor. A common statement Thomann Tax often hears when meeting with people getting ready to retire is, “I don’t need a financial advisor, NYC Deferred Comp (or Union Annuity Plan) is managing my money”. This is not accurate; the NYC Deferred Comp Plan and/or Union Annuity Plans are not financial advisors and are not managing participants retirement funds. Very simply, these entities provide the means to which participants can invest their retirement money into the different funds offered. Ultimately, the decision of how much risk to take is solely the responsibility of the individual participant. Yes, it is true that the NYC Deferred Comp plan rebalances the Pre-Arranged Portfolios (Static Allocation Fund, 2020 Fund, 2025 Fund, etc.). Simply rebalancing a fund to its target asset allocation is not investment advice.
When to consider hiring a financial advisor?
Most active NYC employees do not need a financial advisor, but rather an understanding of their risk tolerance and basic investing principles. On the other hand, retirees may have different concerns and the services of a financial advisor may be worth the cost. A retiree should consider the following:
- Do you have significant retirement assets, but do not have an investment plan/strategy?
- What are both your short- and long-term goals for your retirement funds?
- Are you overweight in equities (stock market investments)?
- Are you underweight in bonds, foreign markets, alternative assets, etc.?
- If you purchased a financial product (ex. variable annuity), do you understand the underlying investments and the ongoing fees?
- How much risk are you taking? Do you really need to take that much risk?
- Are you withdrawing funds from the retirement plan? Withdrawing funds from a retirement plan and being overly aggressive can be a disaster in a market downturn.
Note: Thomann Tax/Peter Thomann does not provide financial advice services.