Iowa Fiduciary

6 Months of Data: Revisiting Your Retirement Plan

A monthly financial review meeting is a good starting point to help ensure your retirement plan is staying on track. However, checking your progress halfway through your fiscal year will present you with a bigger picture and may help you notice and resolve problems within your current portfolio. A mid-year review also allows you to take advantage of potential opportunities and help ensure that your retirement plan is where it needs to be in order to meet year-end goals.

Your retirement plan is a roadmap for your financial future. It’s a document that lays out what you need to do over the course of your working life in order to meet your goals, and it’s designed to help you get there.

But just like any map, it’s only as good as the information it contains. And sometimes, that information can become outdated or inaccurate. When this happens, it’s time for an update. Here are a couple reasons why you should revisit your retirement plan 6 months into 2022.

A lot can happen in 6 months. Half a year can provide you with a lot of information and this is perfect when you’re looking to revisit your retirement plan. Here are a few situations that can spark motivation in revisiting your retirement plan.

Inflation and Cost of Living

We’ll start with the elephant in the room. Inflation.

Ultimately, your portfolio serves your goals as they evolve. When they do evolve, you will need to review your drawdown strategy.

The market has not been the best for investors. The S&P 500 — a benchmark index commonly used to measure how the stock market overall is doing — fell into a bear market, meaning that its value dropped at least 20% from its previous high. And recent retirees or people who are planning to retire in a year or two are feeling the sting. Retiring during a bear market can be difficult on your financial wellbeing and your financial portfolio. But a bear market offers young investors the opportunity to get into the stock market at something of a discount.

By meeting with your Fiduciary advisor at the year’s midway point, you’ll be able to better identify new “on sale” investment opportunities. While financial advisors recommend not trying to time the market, it could make sense to buy when prices are low — and prices right now are certainly low. In other words, think of the bear market stock prices as your favorite store on sale. You’re essentially getting them at large discounts – which could make sense for your future investing goals. It’s also worth noting if you invest both in and across asset classes, you have a better chance of weathering challenging market environments.

Starting a New Job

Sure retirement is about leaving the workforce, but as the cost of living crisis rumbles on and the inflation rate continues to rise, what we tend to see in the world of financial planning is that people are, understandably, most concerned with how these impacts affect their current financial situation, rather than considering the long term. This leaves people’s retirement plans vulnerable. To compensate, many Iowans are taking on part-time jobs in retirement to keep their income steady. 

When taking on a new role, there’s something you need to consider as part of your new financial situation: retirement.

With a new job comes a new retirement plan, new investment options, and possibly a new 401(k) match. All of these can affect how easy it is to save for retirement. If you’re a new employee, you’ll want to make sure you’re saving enough for retirement. If you’re moving from your former employer’s 401(k), it’s important to review the plan summary and prospectus for your investments. Compare this against your old 401(k), and adjust your savings up or down as needed to hit your monthly goals.

You also have to think about your old 401(k). If you left the job before you were fully vested in the plan, you could lose some or all of your former employer’s 401(k) match, forcing you to increase your savings at your new job to stay on course. You may also want to consider rolling your old 401(k) over into your new one or into an IRA. This makes it easier to keep track of your retirement savings, and it may help you save on fees, versus leaving your money in your old 401(k).

Experiencing Major Life Events

When you’re saving for retirement, it’s important to keep in mind that life happens.

If you lose a family member, experience a major health crisis, get a divorce or buy a new home, those unexpected expenses can affect how much you need to or are able to save. You might have to divert some of those funds toward new living expenses, requiring a whole new retirement plan.

You may have to delay retirement to give yourself extra time to save if you can’t meet your monthly target. Or if you don’t want to do that, consider slashing spending on discretionary purchases, like dining out, to free up more cash for retirement.

Getting Older

Six months into your 50th year should be a big motivator in revisiting your current retirement plan.  If you’re 50 or older and have been saving for retirement for a while, it’s time to take a look at your contribution limits. 

You can now contribute up to $25,500 to a 401(k) in 2022 and $7,000 to an IRA, compared with $19,500 and $6,000, respectively, for adults under 50. And if you weren’t able to start saving as early as you’d hoped? Now’s the time to make up for it! Consider increasing your retirement contributions if you have the extra cash.

By 50, you’re probably not too far off from retirement—so that’s also a good time to make any necessary course corrections if you’re way off your retirement goals. You might plan to work longer if you’re not going to have enough saved or reduce your planned spending in retirement so you’ll have enough for basic living expenses.

What to Include in Your 6 Month Review

As we look ahead to the last 6 months of the year, it’s wise to anticipate and help prepare for the changes that every season of life brings.

Now you have a solid 6 months of data behind you, it has never been a better time to revisit your plan. Take some time to think about your long-term plans and reevaluate your decisions, especially in the following key areas:

  1. Financial Statements
  2. Investment Portfolios
  3. Budgets
  4. Forecasting
  5. Insurance Policies
  6. Estate Planning

You’re going to have a lot of questions about your retirement plan, but the most important one is: “Do I have enough?”

Ideally, you should review your retirement plan at the minimum, every 6 months. You may not need to make any changes, but if you do, it’s easier to make these small adjustments twice a year than it is to make larger adjustments as you near retirement and realize that you don’t have enough savings. 

If you’re not sure how much you need to save for retirement or how to make adjustments to your retirement plan to keep yourself on track, consider bringing in an experienced Fiduciary. They can help you identify your goals and figure out how much money you must save in order to reach them. And as a Fiduciary, they only have your best interests at heart.

Why Johnson Wealth and Income Management

Reevaluating your retirement plan during life’s moments can help you save the money you’ll need for tomorrow while meeting your financial goals today. These are just some of the many key factors that occur in our lifetime, and as such we should prepare accordingly. Ready to start planning for retirement? 

At Johnson Wealth Income Management, our goal is to help you prepare for retirement. Your retirement plan needs to be as alive and dynamic as you are—and even more so! Don’t just assume you’re on track; do the math and verify it. Review your retirement plan every 6 months when one of the above scenarios applies to you.

Our team of Fiduciary financial advisors are here to help you every step of the way. For more information about retirement planning or to set up a consultation for retirement, contact us here today.

All written content on this site is for informational purposes only. Opinions expressed herein are solely those of Johnson Wealth & Income Management and our editorial staff. Material presented is believed to be from reliable sources; however, we make no representations as to its accuracy or completeness. Investing involves risk. There is always the potential of losing money when you invest in securities. Asset allocation, diversification and rebalancing do not ensure a profit or help protect against loss in declining markets. All information and ideas should be discussed in detail with your individual advisor prior to implementation. The presence of this website, and the material contained within, shall in no way be construed or interpreted as a solicitation or recommendation for the purchase or sale of any security or investment strategy. In addition, the presence of this website should not be interpreted as a solicitation for Investment Advisory Services to any residents of states where otherwise legally permitted to conduct business. Fee-based financial planning and Investment Advisory Services are offered by Sound Income Strategies, LLC, an SEC Registered Investment Advisory firm. Johnson Wealth & Income Management and Sound Income Strategies LLC are not associated entities. Johnson Wealth & Income Management is a franchisee of the Retirement Income Store. The Retirement Income Store and Sound Income Strategies LLC are associated entities. © 2021 Sound Income Strategies.