Retirement planning is an ongoing process. No matter how great of a strategy you think you created for your golden years, it’s worth reexamining from time to time to make sure it’s up-to-date. You never know–a few simple tweaks to your portfolio could end up equaling a lot more assets for you or your loved ones in the end.
Following are some questions to ask yourself when reevaluating your retirement strategies:
1. Will deflation have a major effect on your retirement fund?
Recent studies have negated the assumption that retirees will increase household spending over time in light of inflation. Those studies found that spending actually decreases in inflation-adjusted terms between ages 65-90. This assumption will become valid once again, however, if inflation sees a sudden increase. It’s wise to examine your portfolio accordingly with several different inflation scenarios to find out what kind of savings cushion you’re comfortable with, come what may.
2. Do you plan on retiring to another state?
If the answer to this question is “yes,” then it’s important to research your new home state’s income taxes to see if your retirement tax burden will increase or decrease when you move. Some states may have little or no income taxes but may increase property taxes as a result. If a move will increase your taxes significantly, then maybe it’s time to come up with some different retirement strategies to boost your income. Talk with a financial professional for ideas.
3. Are major changes on the horizon for you or your spouse?
Perhaps you and your partner are thinking about financially supporting a grandchild, sibling or aging parent. Chances are, those extra expenses weren’t written into your original retirement plan. Or maybe you’re experiencing a chronic health issue into which you weren’t expecting to pour your finances. Come up with a new game plan for how you may tackle these expenses so you don’t come up short in your retirement account.
4. Do you have new hobbies or goals for your golden years?
Maybe you and your spouse have recently discussed how you want to take a cruise around the world, or join a pricey golf club so you can have unlimited access to your favorite hobby. Make sure you haven’t underestimated the toll these kinds of expenses will take on your retirement account.
5. Does a down market make you nervous about your investments?
It’s normal to feel some anxiety about the market as you near retirement. You may check your investments more frequently and worry about how a poor quarter might affect your nest egg. It’s true: you have a lot more at stake than the younger generation of investors since you have a shorter timeline to regain losses. Talk with a financial professional about the amount of risk that’s currently in your portfolio to make sure it’s appropriate for your retirement goals.
Note: It’s also wise to talk to a financial professional before making any rash decisions about your portfolio due to a sudden change in the market. You may think moving your money is the best option, but riding out an economic downturn may be the better choice.
6. Does your portfolio have enough diversity?
Again, don’t be afraid to ask a professional about this matter. In general, your portfolio should contain a variety of different sectors and funds. If it’s heavily weighted in equities, for instance, you may want to consider changing things up. Believe it or not, there’s also such a thing as having too much diversification. Click here to read some of my past blogs on this subject.
The bottom line
Don’t wait to do a thorough reexamination of your retirement portfolio. It’s normal for your priorities to change and different needs to arise throughout the years, which is why it’s important to make sure your nest egg reflects those amendments. Regularly reviewing your approach to investing with a financial professional is the best way to ensure your strategies match your goals for the present and future.
