Is it worth paying a financial advisor to manage a pension?
By Seth Deal, CPA/PFS ·
No one needs to manage a Washington DRS pension for you. DRS invests the money and sends the check. What can be worth paying for is help with the handful of decisions around your pension that you can’t undo, and for most people that’s a one-time plan, not a yearly percentage of their savings.
What DRS already does
Your PERS, TRS, SERS or LEOFF pension is a formula. For PERS Plan 2 it’s 2% times your years of service times your average final compensation. DRS runs the investments behind it.
No advisor can make that check bigger by managing it. So I wouldn’t pay anyone a fee based on your pension.
Where the money is actually at stake
The decisions around the pension are a different story.
- Your survivor option. DRS says your survivor and benefit option become final once retirement begins, with only a few exceptions. If you’re married, this one choice decides what your spouse lives on after you’re gone.
- Your retirement date. Leaving before you qualify for an unreduced benefit can shrink the check for the rest of your life.
- Health insurance before 65. You have 60 days after your employer coverage ends to enroll in or defer PEBB retiree coverage. Miss that window and you lose the right to enroll, unless you later return to a benefits-eligible job.
- How it all fits together. Your pension, DCP, Social Security and taxes decide how much of your savings you need to spend each year, and in what order.
Get those right and the pension does what it’s supposed to. Get one wrong and no investment return will fix it.
When it’s worth it, and when it isn’t
Paying for advice usually makes sense if you’re within a few years of retiring, you’re married and choosing a survivor option, or you have savings beyond the pension and aren’t sure how to turn them into income.
It may not be worth it if your pension and Social Security already cover your spending, your other savings are small, and you’re comfortable working through it yourself. DRS has a free benefit estimator in your online account, plus free webinars and a half-day seminar for members within five years of retiring. Those are a good place to start either way.
What it costs with me
I’m a CPA and fee-only fiduciary, and before I was an advisor I was a public employee. I don’t charge anything based on your pension.
A One-Time Plan starts at $3,000. We work through every one of these decisions in order, you get a written plan and a video walking through it, and you have 30 days to email me questions as you put it in place. If you’d like help carrying it out, the Ongoing Plan starts at $6,500 a year, billed quarterly. Neither one requires moving your investments.
If you’d rather hand off your investments, that’s what Wealth Management is for. I build your plan, manage your savings in low-cost, tax-efficient portfolios, and keep both current as your life changes. The fee is 0.85% to 0.65% of the assets I manage, and with $500,000 or more to invest, the planning fee is waived. Your pension isn’t counted in that fee, since there’s nothing there for me to manage.
The first step is a free 45-minute Retirement Clarity Assessment on Zoom. You’ll know whether paying for a plan makes sense for you before you spend anything.