When you started saving for retirement, you chose investments based on your age and income at the time, your expected retirement date, and the amount of risk you were comfortable with. Circumstances can change, though, which is why it’s important to review your retirement plan every year, plus any time your situation changes.
You May Not Want to Assume the Same Level of Risk
If you started investing for retirement in your 20s or 30s, you may have felt comfortable putting your money in high-risk, high-reward investments. You may not feel as comfortable with that strategy if you’re getting closer to retirement age. If you lose a lot of money now, you might not have enough time to make it up before you retire. Shifting to more conservative investments can give you confidence that you’ll be able to retire comfortably.
Your Income and Family Situation May Have Changed
If your earnings have grown over time, you may be able to invest a higher percentage of your salary for retirement. Even if you’re contributing the maximum allowed to an employer-sponsored plan, you may want to consider putting money into another investment vehicle, such as an IRA.
You may also want to save for your children’s college education. If you’ve already saved a significant amount for your retirement, you may decide to shift some of the money that you’ve been putting toward retirement each month to a college savings plan.
You should, however, prioritize your own retirement over your children’s education. Your kids will be able to apply for financial aid or work to pay for college, but you’ll be responsible for supporting yourself in retirement. If your kids haven’t finished college and become financially independent, you won’t be able to count on them to take care of you.
You May Be Able to Earn More and/or Lower Your Fees
When you opened a retirement account, you most likely looked into several types of investments and compared the performance of each of them before choosing one. If you compare investments again, you may find that the one you chose several years ago isn’t performing as well now compared to others.
Focus on minimizing the amount you pay in fees. If your current retirement fund charges high fees, you may be better off switching to a different type of investment. Money that doesn’t go toward fees can instead be invested. Even modest savings can lead to substantial gains over a long period of time.
Consult a Financial Professional
People often feel confused and overwhelmed by retirement planning or worry about making mistakes, so they just decide not to touch their funds at all. That can be a costly mistake. If you need help, get in touch with a financial advisor who can explain your options and help you make informed decisions to ensure that you’ll have enough money to retire when you want and live comfortably.
Ann Nguyen - Cell: 530-545-3458 (CA BRE# 00998262)