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The Simple Six-Step Retirement Checkup

Dan Hunt, Senior Investment Strategist
Given market volatility in 2018, checking in on your retirement plan may be one of the wisest New Year’s resolutions you can make.

The turbulent market in 2018 has complicated many people’s retirement planning. It has also made it more important than ever to check your current plan to see if you’re on track towards meeting your investment goals.

If you have a lot of time until you retire, small tweaks in savings or investment strategy can make a big difference. Retirement just around the corner? Sometimes a few changes to your plan now can help you cross the finish line, even if market conditions are less than fully cooperative.

Here’s a simple six-step retirement plan checkup:

  1. Determine where you stand. See whether the amount you’re saving and investing is on pace with the money you’ll need to retire (with some margin for error). You can find numerous calculators online to help. Also, some investment advisory accounts can inform you automatically when you aren’t meeting your goals. If you have accumulated several different retirement accounts from past jobs, however, knowing where you stand may be harder than it should be. Consider working with a Financial Advisor with access to sophisticated tools, or consolidating your retirement accounts.
  2. If you’re off track, figure out why. Are you saving as much as you planned? Are you maximizing your contributions to your employer-sponsored retirement plan or individual retirement account (IRA)? Is the amount of money you’ll need in retirement increasing? If you’re not on course because your investments aren’t performing well, see if you should make a change to your asset allocation strategy, or to the specific investments you’ve chosen. If your investments are not performing at least in line with benchmarks, it may be best to review the latest research in the context of the original rationale for the product. Assuming that checks out, it may be wise to hold on through a period of volatility, as chasing top performers may be a poor way to make decisions.
  3. Decide how to get back on track. That could include revisiting your goal, for example by stretching out the time horizon until you retire or reducing the amount of money you plan to spend in retirement. It can also mean increasing portfolio risk, though only after careful consideration of your risk tolerance. It could be that the most palatable option is a little of all three, which makes the magnitude of any one change smaller. If you don’t see a clear path to reaching your goals, consider consulting with a Financial Advisor who can help steer you in the right direction.
  4. Take advantage of ways to improve returns without magnifying the risks. These strategies can include options to minimize taxes, such as “income smoothing” and tax loss harvestingInsurance can also play a role. If used correctly, long-term care, life insurance and annuities have the potential to bolster your retirement plan due to their tax treatment and risk mitigation features.
  5. Tally up your income sources. If you are retiring soon, you need to get the most out of all your sources of income. That could include strategies for claiming Social Security and traditional pension fund payments, and where applicable, approaches to help you secure or maximize rental income. If your reliable sources of income are not significant as a portion of your needs, you may want to add more conservative income-oriented investments, such as dividend paying stocks or bonds.
  6. Assess the risk level of your plan. If you run through these steps and realize that you are on target to retire in a few years with room to spare, consider reducing the amount of risk in your portfolio. The current business cycle is in late innings. The stock market was rocky in 2018 and, while in our opinion, it doesn’t appear that recession is imminent, a downturn may materialize in the next few years.

Checking in on your retirement plan doesn’t just entail making sure you are saving enough money. It also means helping ensure the savings you’ve worked so hard to accumulate will be there when you need it.

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