Revisiting your retirement plans

You may already be doing all the right things to prepare for retirement: building your nest egg, contributing to your 401(k) and sticking to a plan that you or your financial professional set up years ago. Yet as life changes, so can your needs and goals, making a regular review of your retirement plan an important step in helping ensure financial readiness for the future. 

Why regular retirement checkups matter

Even if you’ve built a well-rounded plan designed to generate the retirement income needed to cover your expenses, changes in your goals, lifestyle or even the market can affect your savings and financial focus. Regularly performing a thorough retirement review helps ensure your portfolio is still aligned with your goals, identifies any gaps and allows you to make necessary adjustments. By revisiting your retirement plan each year or following certain life events, you can help keep on the right path and feel more confident as you approach the next chapter. 

5 reasons to revisit your retirement plan

Since retirement plans are not set in stone, a periodic review can help ensure your strategy continues to support the retirement lifestyle you envision. Here are five reasons you may want to revisit your retirement plan.

1. You planned using a 7% return assumption

Many retirement plans assume an average 7% annual return, based on historical performance of a balanced portfolio. While this can be a useful benchmark, a lower percentage may be more realistic for planning purposes and helps account for market volatility, inflation and your personal allocation of stocks, bonds and other assets. 

2. Rising health care costs aren’t fully accounted for

Because health needs often increase as we age, health care can become one of the largest expenses in retirement. In fact, once you turn 55, you can expect to pay 50% or more in health care costs than you did in your younger years. During your review, check to see if what you calculated for health care costs when you first created your plan matches the current projections for health care and medical costs.

3. Your asset allocation hasn’t adjusted with age

Many financial professionals may say that your assets should become less risky as you get closer to needing income in retirement. But your savings may need to continue growing even in retirement. If it doesn’t, you may risk outliving your money, known as longevity risk. Keeping a healthy allocation to stocks in your retirement portfolio can help you stay ahead of inflation, especially health care inflation.

4. You haven't reviewed your plan in years

Instead of letting your retirement portfolio sit untouched for five or ten years, make it a habit to review your asset allocation annually. If you revisit your plan and find that your original calculations are falling short, you may still have time to put money away and get back on track. Take time to review your current spending needs and determine if more income can be directed toward savings. If you’re not already, consider maxing out your 401(k) contributions, especially if your company offers a match.

5. Your retirement vision or lifestyle has changed

When you first created your retirement plan, were you focused on travel? But now that you have grandkids, maybe your focus has changed to spending time with family. Or perhaps you’ve developed new goals altogether. Time and life experiences can change perspective — and that’s only normal. Get in tune with your future self by thinking about what you want to do in the short and long-term years of retirement. Take this quiz to discover the lifestyle you aspire to, and how to create your plan for happiness.

How often should you review your retirement plan?

Most financial professionals recommend reviewing your retirement plan once a year. An annual check-in helps ensure your income strategy and long-term goals still align with your current lifestyle and financial situation. Regular reviews also allow you to rebalance your portfolio, adjust your risk level and stay on track for a more secure retirement. 

In addition to a yearly review, certain major life events may require you to revisit and update your retirement plan. These changes can impact your financial priorities, income and goals. 

• Marriage or divorce: Changes in household income, shared expenses and beneficiary designations can often require adjustments to your plan.
• Becoming a caregiver: Caring for a parent, spouse or loved one may require you to reduce work hours, step back from your career or tap into savings. 
• Job or income change: A salary increase, loss of income, new employer benefits or starting your own business can all affect your retirement timeline.
• Inheritance or major financial windfall: Additional assets may change your retirement strategy or reveal new financial opportunities.
• Relocation: Moving to a new state or home can influence your cost of living, taxes and day-to-day expenses. 
• Market downturn impacting portfolio: Significant market volatility may shift your risk tolerance. This can be a time to explore solutions that add downside protection and help bring more financial stability to retirement. 
• Changes in health: A new diagnosis or significant changes in health may alter financial plans, your estimated health care costs or your target retirement age. 

Talking with a financial professional

Whether it’s an annual review or following a life event, working with a financial professional can help you make informed decisions about your asset allocation and ensure your retirement plan reflects your current risk tolerance and timeline. You can also recalculate your income needs and identify any gaps that could impact your long-term financial security. During your review, you may also discuss ways to diversify your portfolio and bring more guaranteed income to retirement, like adding an annuity to a retirement savings strategy. 

Along with providing guidance, partnering with a financial professional can help improve your financial literacy and give you the confidence needed to pursue a truly remarkable retirement. 

Keep your retirement plan evolving with your life

Instead of treating your retirement plan as a one-time checklist, think of it as a flexible strategy that changes as you do. By regularly revisiting your goals and adjusting for evolving priorities, you can seize opportunities to fine tune your plan and address any issues before they become larger roadblocks. Take charge of your financial future by keeping your retirement plan flexible and aligned with your dreams. 

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