Retirement planning is not an exercise to set and forget. Life changes quickly and it’s important to understand that your retirement plan must change just as quickly. The retirement plan you had in your 20s when you were single is not the same retirement plan you would want in your 40s and 50s when your kids are on their way to college. The volatility in the stock market or other investments can also affect your retirement savings. When things change, it’s important to regularly review your retirement plans.
When you need to reassess your retirement savings
There are different times when you might want to reassess your retirement savings. The most important times will be when you have big changes in your life or family.
- Marriage or divorce
- Birth or adoption of children
- Change of employment
- Move to another house
These types of major life events can have a significant impact how much money you need to retireSo you should rethink your plans. But not only during these big life changes does it make sense to reconsider your retirement savings. It is wise to regularly check back on where you are for retirement, just as you should Check your monthly budget regularly.
Understanding volatility in retirement planning
The only time you DO NOT want to make drastic changes to your retirement plan is during a major downturn in the stock markets. If you see these large negative amounts on your 401k or brokerage bank statements, this may be the case easy to panic and try to sell your stocks to stop the bleeding.
The fact is that the stock market is extremely volatile. The stock market may average 8% or so over the long run, but that one number masks a number of large swings in both positive and negative territory. Instead of panicking and selling when the stock market falls, be proactive and prepare for the inevitable downturn. Sometimes is the best absolutely nothing.
Familiarize yourself with the risk
In order to understand the volatility in the stock markets, it is important to become familiar with the risk. In general, the higher the return on an investment, the higher the risk. Deciding how well you will handle risk is an important part of assessing your retirement plan.
Risk is something not to be feared – after all, hiding all of your money under your mattress is a relatively low risk endeavor. But it is also unlikely to have a successful retirement. Look at yours Time horizon – how long you have until you are likely to retire – and adjust your risk accordingly. When you are younger and further away from retirement, you can afford to invest in relatively riskier assets. The closer you get to retirement, the less risk you should take.
Check your portfolio allocation
Understanding and managing risk can help you review your portfolio allocation. Because different types of investments involve different levels of risk, it is important to ensure that your portfolio is split between types of investments in a way that is reasonable for your specific situation.
In general, the younger you are and the further you are from retirement, the more sensible it is to make most of your investments in the stock market. The stock market is more volatile, but has historically achieved the highest returns. In general, as you get older and near retirement, you want to move an increasing percentage of your portfolio away from stocks and into an investment like bonds with lower yields but also lower risk.
Talk to a financial advisor
A financial advisor can be a great resource if you want to make sure you are on the right path to retirement. A trusted financial advisor can verify where you are, where you are headed, and help ask the questions you need to answer to make sure you are on the right track. If you don’t currently have one, make sure Find a financial advisor that fits the type of advice you’re looking for.
The bottom line
It is important that you check your retirement savings regularly. You should regularly review your retirement plans with your spouse, trusted friends and family, or a financial advisor. You should also review your retirement plans whenever you have a major life change, such as: B. a new child, a new job or when you move to a new home. Following these simple steps can help you ensure that you are on your way to a solid financial future.
Dan Miller (50 posts)
Dan Miller is a freelance writer and founder of PointsWithACrew.com, a website that helps families travel for free / cheap. His home base is Cincinnati, but he tries to travel the world as much as possible with his wife and 6 children.