Retirement Planning Step 4: Monitor and Adjust

May 24, 2017

This is the fourth and final step in my retirement planning step series. Now that you’ve set your goal, opened your account and selected your investment plan, you should be checking your progress about once a year, unless you have a significant change that affects your plans like a job loss, divorce or inheritance, in which case you’ll want to update your retirement estimator then as well. Any time you’re considering making a change to your savings, the first step should be to calculate how that will affect your retirement plans.

If you need to pull back on saving to pay for college, you need to know how many more years you’ll have to work to compensate. Thinking about using your retirement savings to purchase your first home? Double check to make sure that won’t set you back too far with your savings goal.

And what if you run that calculator and find that you’re overshooting your goal? Awesome! This just means you’re on track to reach financial independence sooner, which will give you more choices with your retirement lifestyle. Unless you’re five years or less from retiring, don’t use that as an excuse to save less – better to be over-prepared in case life happens than to be playing catch-up when it does happen.

Finally, make sure you’re rebalancing your investments at least once a year. If you’re using a Target Date Fund, then you’re all set, but if you created a custom mix then you’ll want to double check that it doesn’t get too far off base as the market changes. Your 401(k) plan may offer an auto-rebalancer that will do that for you as well, so just check the box and keep saving.