The Blog

Time to Check in on Your Retirement Plan?

The New Year is often a time when people evaluate their lives to see if they’re where they want to be with their careers, with their health, and with their money. As you receive your end of the year account statements, now is the time to book an appointment with your financial advisor, revisit your investment strategy, set new goals, and check in on your retirement plan.

Are you still comfortable with the investment strategy?

This is the first question to ask yourself (and your financial advisor) when planning for retirement. Are you comfortable with the level of risk you’re taking in your retirement portfolio? The general rule of thumb is the longer your time horizon, the more investment risk you can afford to take. However, there is always an exception to every rule.

Although past performance is not an indication of potential future returns, looking at how your portfolio fluctuated over the past year can usually help determine if you’re comfortable with the level of risk being taken. I say “usually” because last year was somewhat of an anomaly in terms of the amount of risk or volatility that the U.S. stock market exhibited. Volatility will no doubt return to our markets; it’s just a matter of when.

Can you afford to increase contributions?

When it comes to saving for retirement, the more you can save, the merrier. The New Year is a perfect time to revisit your budget and determine if you can afford to increase the amount you contribute to your retirement accounts.

Increasing your contributions may allow you to retire earlier than planned. It might also allow you to spend at a higher level during retirement. Think two yearly trips to Hawaii instead of one.  Use this Vanguard retirement calculator to see how long your nest egg will last and how much your investments could grow over the years.

Are you on track for a set retirement date?

Setting a target date is a big part of checking in on your retirement plan. The question to ask your financial advisor is will your current and future savings allow you to retire on the date you hope for with the income you desire. If the answer is no, then your goals may need to be adjusted – and an advisor can help.

What are the sources of retirement income?

The second major component of creating a retirement plan (after setting a realistic target date) is determining where your retirement income will come from. The truth is, not all of your income during retirement will need to come from personal savings.

There are additional sources that will bolster your retirement income such as government assistance with Social Security as well as contributions from employer savings plans. If you’re not yet contributing to a company savings plan, talk to your employer and ask if the option is available. Very often employers match employee contributions and this helps your retirement savings grow.

If retirement planning is on your list of New Year’s resolutions, contact me today to discuss if you’re on track with your retirement goals.

Brian Littlejohn is the Founder and CEO of Sherwood Investment Management, a fee-only financial advisor firm in Sonoma County, California. Brian is a CERTIFIED FINANCIAL PLANNER(TM) professional who specializes in investment management. He holds a MBA and a Master’s Degree in Financial Analysis. He has over a decade of experience helping clients achieve their financial goals and occasionally teaches investing and financial planning courses as an adjunct professor.