No. of Recommendations: 7
To be fair, the financial advisor works at a credit union that doesn't offer any of the products (401K, IRA or ROTH IRA).

I'm going to head down a side path with semantics again. Unfortunately, with written communication, it's important to get the terminology correct to avoid a lot of confusion. So bear with me.

401k, IRA, and Roth IRA are not what most people would call products. They are types of accounts. I would be shocked if there were a credit union anywhere that did not offer an IRA or Roth IRA account. Those are very basic account types, and something that credit unions universally offer to their members. I would not be surprised, however, if a credit union did not offer a 401k account. Those are geared toward businesses rather than individuals. Credit unions tend to offer mainly accounts for individuals.

Any of these accounts can hold many different investments - stocks, bonds, mutual funds, savings accounts, CDs, annuities, and so on. Many financial advisors get a commission when they sell one of these products, whether the account is a 401k plan, an IRA, or a taxable account. And because this commission is generally tied to getting new money into the account rather than how the account performs over time, the advisors motives and your motives are very different.

So what was this credit union financial advisor suggesting you do with the money you divert from your 401k plan?

I only keep harping on these issues because if you don't know what you're investing in, it is incredibly easy for a "financial advisor" to convince you to buy something that is far better for the advisor than it is for you. The only person with your best interest at heart is you.

The next best thing is to find an advisor whose compensation is not tied to what you buy. That is generally a fee-only advisor, not a fee-based one. A fee-only advisor is paid only by you - they don't get any commission from the sale of products. A fee-based advisor gets some direct compensation from you and some from the sale of products. If you're not paying the advisor, the advice is much too often better for the advisor than it is for you.

Bottom line - keep asking questions here. The more you learn, the better protected you will be from people who are more interested in their own financial future than yours.

--Peter
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