Guidance when it comes to making a change in your retirement plan

While it’s important to have a sound retirement savings strategy in place and stick to that plan, there are times when you need to tweak your plan. Here’s why.

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Amy Chain: I’m going to throw another broad one out that maybe we can tackle at a high level and then break it down. Folks are writing in, like Julianne from California, Joseph from New Jersey, talking about when are the times to consider changes to your plan. So, you have a plan; what might trigger a reason to make a change? Christine?

Christine Benz: Well, a couple of key things. One would be changes in whatever you have going on in your life. So maybe you’re newly married or birth of a new child or maybe you are thinking about retirement within the next couple of years. So, your own life stage changes should trigger a review of your plan. It’s time to check in and see are there any changes necessary.

And then, secondarily, the contents of your portfolio may have shifted; so, we have had this fairly long-running equity market rally, and so, even if you’ve been doing nothing to your investment program, your portfolio has been getting a little bit more aggressive over the years. So, revisit your portfolio allocations as well because the contents may have shifted over time.

Amy Chain: Maria, it looks like you might have something to add to that. But I want to just add that while we were talking, I know that there’s a polling question out there that some of you have started to weigh in on. I’ll ask the rest of you to continue to weigh in while we continue our discussion.

The polling question is, “How comfortable are you with your financial plan? Are you very comfortable, do you think it might need some updates, you’re not comfortable, or you don’t have a plan?” It pays to admit it, we’re all friends here, right? We’ll talk about that too.

So, I didn’t mean to interrupt your train of thought, but did you have something to add?

Maria Bruno: No, no, I think that’s fine. I mean I do think rebalancing has been a key theme the past few years when you think about the equity markets and how generous they’ve been. So, for someone who hasn’t been checking their plan, rebalancing is probably one of the first steps that they would need to do.

And then, certainly, you need to go back and validate are you on track? Right, have your goals changed? If so, you need to modify what that plan is to achieve those goals. But if not, go back and revisit and just see if you’re on track and whether you need to kind of ratchet up the savings or if there’s been some other changes along the way that need to be accounted for. So, it’s really not once and done, it’s a continuous process.

You know, the flip side is, when we talk about rebalancing, you don’t want to do that too frequently because there’s costs involved with that as well. So, six months or once a year is usually a good benchmark.

Amy Chain: To what degree do you let what’s going on in the market drive your decision about whether or not to make changes to your portfolio?

Christine Benz: My thought would be to not get too attuned to what’s going on in the market. Do, I would say, a once-yearly, top-to-bottom checkup is plenty for most investors. In my experience, investors can do way more damage by being too hands on, being too plugged into the day-to-day market action. When the market’s good, as it has been recently, that might make you inclined to take more risk than would be prudent; and then we see the opposite. It’s easy to forget, but we had a terrible bear market just a decade ago or even less, and we saw a lot of investors take risk out of their portfolios at what turned out to be an inopportune time. So, they scaled way back on their equity exposure just as stocks were about to recover, so less is more when it comes to monitoring.

Maria Bruno: Yes, I would agree. You know, the other thing is, to keep in mind, year-end is usually, as you gear into year-end, it’s usually a good opportunity to take a look at what happened this year. Are things different in our tax picture, for instance? Is there any fine-tuning that we can do to take advantage of year-end tax planning or, maybe if you’re going through and preparing your tax return early next year, are there things that you can do differently in the year ahead or even maybe a personal anniversary or something like that, some type of target date that you would use every year as a time to go back and check on things.

Christine Benz: I would echo the year-end as being a really opportune time. Not only are there some tax opportunities but, also, with the tax-sheltered savings vehicles that you have for retirement, you have a deadline. If your goal is to max them out, your deadline is the end of the year. So, see if you’re on track. You have a couple months still that you may be able to kind of turbocharge your savings rate between now and year-end to make sure, if you possibly can, max out those contributions.

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