September 10, 2024
Retirement planning requires regular reviews and adjustments to align with your financial goals, life events, economic shifts, and changing priorities which all impact your strategy.
Although there’s no set timeline for when to revisit your retirement plan, life alterations and financial developments often require prompt attention.
A solid retirement plan should adapt to your situation and be updated accordingly. Staying informed and making necessary changes can enhance your chances of maintaining financial security in retirement.
This article will explore how frequently you should revisit your plan to help ensure its longevity.
53% of Americans surveyed feel they are behind on retirement planning and savings
A CNBC and Survey Monkey poll found that 53% of Americans feel they are behind on retirement planning and savings.
Read: Why Your Credit Score Still Matters When You are Retired
Read: Retirement in 2024: Strategies for Financial Stability Amid Economic Uncertainty
Life is full of changes. And some of the major significant moments can have a direct impact on your financial future. It’s really important to regularly review and update your retirement plan to help ensure it aligns with your evolving circumstances.
Certain life events, such as changes in family dynamics, health, or financial responsibilities, can dramatically alter your retirement outlook.
By reassessing your retirement strategy during these key milestones, you help ensure that your financial goals remain realistic and achievable.
Below are some of the major life events that may require a closer look at your retirement plan:
Marriage and divorce can bring significant changes to your financial situation, which might require revisiting your retirement plan.
When you get married, there may be a need to combine assets, adjust savings goals, and decide how you and your partner will plan for retirement together.
You may also want to update beneficiary designations on retirement accounts or insurance policies to reflect your new marital status.
On the other hand, divorce often leads to a division of assets, which can directly impact the amount of money you have saved for retirement.
Additionally, divorce may change your income, tax situation, and future financial obligations like alimony or child support.
In both cases, reviewing your retirement strategy will help ensure you stay on track with your long-term financial goals and helps ensure that all legal and financial documents reflect your current status.
When you have or adopt a child, your financial priorities shift. The cost of raising a child is significant, from basic needs like food and clothing to long-term expenses like education.
These added financial responsibilities can reduce the amount of money available to contribute to retirement savings.
To manage these new expenses, you may need to adjust your retirement contributions, reevaluate your budget, and potentially alter your risk tolerance or investment strategy.
It’s also a good time to update beneficiaries on retirement accounts and life insurance policies to include your child and consider setting up a college savings plan, which could further impact how you save for retirement.
Taking on caregiving responsibilities, whether for an aging parent or another family member, can have a substantial financial impact.
You may need to reduce your working hours or stop working altogether, which can significantly lower your income and retirement savings potential.
At the same time, caregiving can introduce new expenses, such as medical costs or home care services, which further strain your financial resources.
Given these changes, reviewing your retirement plan is essential. You may need to adjust your savings goals, look for additional income sources, or alter your investment strategy to make up for lost time and money.
Additionally, it’s important to assess how caregiving might affect your own future plans, as it could delay your retirement or change your long-term financial needs.
Transitioning into retirement or deciding to downsize your home can significantly alter both your income and your expenses, which makes reviewing your retirement plan a critical step.
When you retire, you stop earning a regular paycheck, and your income shifts to sources such as Social Security, pensions, or retirement account withdrawals.
The way you manage these income streams is essential to ensuring your savings last throughout retirement.
Downsizing, such as selling your home and moving into a smaller one, could free up some capital and reduce expenses like mortgage payments, property taxes, and utilities. However, you might also incur costs associated with moving or purchasing a new home.
Both retiring and downsizing require a fresh look at your retirement portfolio to determine if your asset allocation is appropriate for the income you will need and the lifestyle you plan to maintain.
You may also want to adjust your withdrawal strategy or rebalance your investments to suit your new financial situation.
Facing a major health issue or disability can bring unexpected expenses and may affect your ability to continue working, which can disrupt your retirement plans.
Health-related costs, such as medical treatments, long-term care, or accessibility modifications to your home, can be considerable and may not always be covered by insurance.
As a result, your savings might need to be redirected, which can reduce the amount available for retirement.
If you’re forced to retire earlier than planned due to a health condition, it could mean fewer years to contribute to your retirement accounts and fewer years for your investments to grow.
In such cases, reviewing your retirement plan helps ensure it reflects your new circumstances. This might involve adjusting your savings goals, finding new sources of income, or considering long-term care insurance or other financial protections.
Planning for health-related financial risks is essential to preserving your retirement security.
The passing of a loved one can bring significant changes to your financial situation, especially if you are a beneficiary or inherit assets.
Inheriting money, property, or other assets might increase your financial resources, but it can also introduce tax considerations and require decisions about how to best use or invest those funds to support your long-term goals.
Additionally, you’ll need to review and possibly update beneficiary designations on your retirement accounts, insurance policies, and estate planning documents.
If your spouse passes away, there may be further implications for your income, particularly if you relied on their pension or Social Security benefits.
In these situations, reassessing your retirement plan can help ensure that you remain on track to meet your financial goals while properly managing any new assets or changes in income.
Financial shifts, whether positive or negative, can have a significant impact on your retirement strategy.
It’s important to adjust your retirement plan to reflect changes in your income, benefits, or overall financial situation.
These adjustments help ensure that you stay on course to meet your retirement goals, despite changes in your financial landscape.
Here are some common financial changes that may require you to reassess your retirement plan:
A new job or career shift often brings changes in salary, benefits, and retirement savings options, which makes it important to reevaluate your retirement plan.
If your new employer offers a different retirement plan, such as a 401(k) with different contribution limits or matching options, you’ll need to adjust how much you contribute and possibly reallocate your investments.
Changes in health insurance or other benefits might also influence your financial priorities, potentially freeing up or reducing disposable income that could be directed toward retirement.
Additionally, if you receive a pay increase or decrease as part of your job change, it will likely affect how much you can comfortably set aside for retirement.
Conversely, if you leave a job with a pension or employer-provided retirement plan, it’s crucial to consider how you will continue saving or roll over funds to avoid penalties or unnecessary taxes.
Whether it’s a promotion, a raise, or the unfortunate experience of losing a job, major income changes can greatly influence your retirement savings goals.
A raise or bonus provides an excellent opportunity to boost your retirement contributions and accelerate your savings progress.
Increasing your contributions when your income rises helps ensure that you’re capitalizing on your earning power, which is particularly beneficial for long-term growth.
On the other hand, a reduction in income or job loss may require cutting back on contributions to cover immediate expenses.
In these cases, it’s essential to revisit your retirement plan and potentially adjust your savings strategy to account for the change.
This might involve recalibrating your budget, seeking additional income sources, or exploring temporary cost-saving measures to keep your retirement goals in sight during tough financial times.
Large purchases, such as buying a home, starting a business, or making significant investments, can have long-lasting effects on your financial position and retirement plan.
For example, buying a house might tie up a large portion of your savings or introduce new long-term debt, both of which could impact how much you’re able to set aside for retirement.
Starting a business or investing in other ventures may involve risk and require substantial capital, which could reduce your available retirement savings if not carefully managed.
If you’re planning to make major financial decisions, it’s important to evaluate how these moves will affect your long-term retirement goals.
You may need to adjust your savings contributions, take on less risk in other areas of your portfolio, or reconsider your retirement timeline based on how these financial commitments impact your overall wealth.
The stock market and other investment markets are inherently volatile, with periods of growth followed by potential downturns.
Large market swings can significantly affect your retirement portfolio, especially if you’re invested in stocks, bonds, or mutual funds.
A prolonged market decline, for instance, can reduce the value of your investments, while a market rally may significantly boost your portfolio.
When the market experiences significant changes, it’s important to reassess your investment strategy. You may need to rebalance your portfolio to maintain the right mix of assets based on your risk tolerance, age, and retirement timeline.
For example, if you’re nearing retirement and the market takes a downturn, it might be wise to shift to more conservative investments to protect your savings.
Conversely, during periods of market growth, you may want to consider increasing your exposure to high-growth assets while maintaining a balanced approach. Regularly reviewing your portfolio helps ensure that it aligns with both current market conditions and your long-term retirement objectives.
Interest rates influence both the growth of your savings and the cost of borrowing. When interest rates rise, borrowing becomes more expensive, which can affect mortgages, personal loans, and other debts.
This may lead to an increase in monthly payments, impacting your available cash flow for retirement savings.
Higher interest rates, however, may benefit those with savings in fixed-income products, such as bonds or CDs, by offering better returns.
On the flip side, when interest rates fall, borrowing becomes cheaper, potentially allowing you to refinance existing debt or take on new loans at lower costs.
However, lower interest rates can reduce the returns on conservative investments like bonds or savings accounts, which could impact retirees relying on fixed-income streams.
Whether rates are rising or falling, reviewing your retirement plan is important to assess how these changes will affect your debt obligations, investment growth, and overall financial strategy.
Adjusting your portfolio to respond to interest rate changes can help you maintain steady progress toward your retirement goals.
Tax laws can change over time, impacting how you save for and withdraw from your retirement accounts.
Updates to tax policies can influence contribution limits to retirement accounts like IRAs and 401(k)s, change the tax treatment of withdrawals, or introduce new benefits or penalties related to retirement savings.
For example, changes in tax rates could affect the value of tax-deferred accounts or Roth accounts, which are taxed differently. If capital gains taxes, estate taxes, or the rules governing required minimum distributions (RMDs) shift, it could influence how and when you access your retirement savings.
Staying informed about tax law changes and reviewing your strategy with a financial professional can help you make timely adjustments, such as maximizing tax advantages or avoiding potential penalties.
Broader economic trends, like inflation, recession, or changes in the job market, can significantly impact your retirement planning.
Inflation, for example, erodes purchasing power over time, meaning that the same amount of money may cover fewer expenses in the future.
If inflation is high, you might need to adjust your retirement savings targets or consider investments that outpace inflation.
A recession, on the other hand, can lead to job loss or reduced income, which could slow down your savings or affect your retirement date.
Economic downturns may also reduce the value of investments, especially if they coincide with a stock market decline.
Conversely, periods of economic growth may provide opportunities for enhanced investment returns or job security, which could boost your retirement savings.
Monitoring the economy and adjusting your savings, spending, and investment strategies accordingly can help you stay prepared for both good and challenging times.
Over time, your personal goals and values may evolve, which can influence how you approach retirement planning.
As you grow older, your vision of retirement may shift. Perhaps you initially planned for an early retirement but later decided you enjoy working and want to extend your career.
Or maybe you’ve developed a desire to travel more, start a business, or leave a larger legacy for your family or charity.
These changes in personal goals might require you to reassess your savings needs, adjust your withdrawal strategy, or even alter your retirement timeline.
It’s important to regularly reflect on what you want out of retirement and how those desires align with your financial situation.
Updating your retirement plan as your goals shift helps ensure that you can enjoy the retirement lifestyle that best fits your evolving values.
While there’s no definitive timeline, it’s generally recommended to review your retirement plan:
It’s generally recommended to perform a comprehensive review of your retirement plan at least once a year, particularly if you’ve experienced significant life events or financial changes.
These events can have an immediate and direct impact on your savings needs, investment strategy, and overall retirement timeline.
For example, life events like marriage, divorce, or the birth or adoption of a child often bring changes to your household income, expenses, and financial responsibilities.
In these cases, you may need to update beneficiaries, adjust your savings contributions, or revisit your overall retirement goals.
Similarly, major financial changes—such as a job change, significant raise, or large purchase—may affect how much you can contribute to your retirement accounts or shift your long-term financial outlook.
By scheduling an annual review, you can also evaluate how well your current investment strategy is performing, make sure your contributions are aligned with your retirement goals, and adjust for any recent tax law changes.
An annual check-in helps ensure that your plan remains up-to-date with your evolving personal and financial circumstances.
For less significant changes, such as minor income adjustments or small updates to your retirement goals, a review every two to three years may be sufficient.
Even when there aren’t major life events or financial disruptions, it’s important to regularly reassess your progress and make sure that you’re on track to meet your retirement savings targets.
Income fluctuations, such as modest raises or smaller bonuses, may not require immediate changes to your retirement contributions, but periodic adjustments help ensure that you’re optimizing your savings potential over time.
Additionally, your retirement goals may evolve subtly as you approach different life stages. For example, you may decide to retire a year or two later or shift your focus from travel to other post-retirement activities.
Checking in on your plan every few years helps ensure that your savings strategy still aligns with your evolving priorities.
During these reviews, you can also update your investment portfolio if needed, rebalance your asset allocation, or fine-tune your withdrawal strategy as you get closer to retirement.
This frequency helps you stay on top of gradual changes without being overly reactive to smaller financial shifts.
During times of significant market fluctuations, it’s helpful to monitor your retirement portfolio more frequently—on a quarterly or semi-annual basis.
Economic conditions, such as stock market volatility or major shifts in interest rates, can have a direct impact on your investments and savings.
Monitoring your portfolio more closely allows you to make necessary adjustments to mitigate risk or take advantage of market opportunities.
For example, during periods of high market volatility, your asset allocation might become unbalanced as some investments gain or lose value.
A more frequent review helps ensure that you can rebalance your portfolio and realign it with your risk tolerance and long-term goals.
Additionally, if you’re nearing retirement, you may want to shift to more conservative investments to protect your savings during turbulent market conditions.
While you don’t need to make drastic changes with every market fluctuation, quarterly or semi-annual reviews during uncertain times help ensure that your retirement portfolio remains resilient and positioned for long-term growth.
Regularly reviewing your retirement plan is essential for helping ensure that it remains in sync with your evolving financial situation, personal goals, and the broader economic environment.
As your life circumstances change, whether through career shifts, family events, or market conditions, it’s important to reassess your strategy and make any necessary adjustments to stay on track for a secure and comfortable retirement.
By staying proactive and reviewing your plan periodically, you not only respond to immediate changes but also maintain a long-term perspective that helps you navigate uncertainties and optimize opportunities.
Keeping your retirement strategy aligned with your current needs and goals helps you maximize your savings potential and protect your future financial stability.
Whether it’s through major life events, changes in financial conditions, or simply shifts in personal goals, regular reviews help ensure that your retirement plan remains a living, adaptable document that can grow and evolve with you. Let us know if you’d like to explore any specific aspects of your retirement planning further!
Landsberg Bennett is a group comprised of investment professionals registered with Hightower Advisors, LLC, an SEC registered investment adviser. Some investment professionals may also be registered with Hightower Securities, LLC, member FINRA and SIPC. Advisory services are offered through Hightower Advisors, LLC. Securities are offered through Hightower Securities, LLC. All information referenced herein is from sources believed to be reliable. Landsberg Bennett and Hightower Advisors, LLC have not independently verified the accuracy or completeness of the information contained in this document. Landsberg Bennett and Hightower Advisors, LLC or any of its affiliates make no representations or warranties, express or implied, as to the accuracy or completeness of the information or for statements or errors or omissions, or results obtained from the use of this information. Landsberg Bennett and Hightower Advisors, LLC or any of its affiliates assume no liability for any action made or taken in reliance on or relating in any way to the information. This document and the materials contained herein were created for informational purposes only; the opinions expressed are solely those of the author(s), and do not represent those of Hightower Advisors, LLC or any of its affiliates. Landsberg Bennett and Hightower Advisors, LLC or any of its affiliates do not provide tax or legal advice. This material was not intended or written to be used or presented to any entity as tax or legal advice. Clients are urged to consult their tax and/or legal advisor for related questions.