Planning for retirement is a big deal—you should have money set aside so you can end your working life comfortably. It takes a lot of time and effort to ensure that you have what you need so you can still enjoy your retirement.
However, just because you have your retirement plan all set up does not mean that your work is done. Ultimately, your retirement plan may need to be revised from time to time to ensure that it will still meet your retirement goals. If what you want to do in retirement changes or your family life changes, your retirement plan might need to change as well.
Below are just a few ideas on when a refresh might be necessary and how you can make changes to account for your changing goals and lifestyle.
When Does Your Retirement Plan Need an Overhaul?
It can be hard to determine when a revision to your retirement plan is necessary. To enjoy your golden years to the fullest, you might want to take a hard look at your plan. If it has any of the following characteristics, you might want to make some changes.
1. Your plan doesn’t accurately reflect your retirement goals any longer.
Perhaps the biggest reason to make changes to your retirement plan is that your goals or lifestyle has changed. Perhaps travel isn’t as important to you as you thought it would be. Maybe you are dealing with an unexpected illness or medical expense that you hadn’t planned for when you started saving and want to re-evaluate your end of life plan.
Family life changes can result in the need to change your retirement investments as well. For example, perhaps your plan did not consider the three new grandchildren you were blessed with over the past five years. Maybe you want your plans to change so you can dote on your grandchildren a bit more in retirement.
2. Your retirement plan doesn’t include investments that are valuable to you.
Everyone’s investment strategy is different, and having investments that are important to you is vital. Having a traditional 401(k) or IRA might not really be what you want for your retirement. If you want to include alternative investments, you should make changes to your plan sooner than later.
Examples of these alternative investments could include:
- Real estate
- Hedge funds
- Private equity
- Private debts
If you have a project that you want to include in your retirement plan, you might want to adjust so you can include it. Supporting a project or investment now can have a huge effect on both your retirement and the future of a particular project you want to support.
3. Your retirement date doesn’t make sense any longer.
If your retirement date must be pushed back or moved forward, you need to make some adjustments in your investments. You might want to be a bit more aggressive if you have more time, for example. You also perhaps need to be more conservative if you want to retire sooner than later.
You should also keep in mind that Americans are living a lot longer today than they have in decades. If your plan assumes that you will only need 15 years (or less) in income, you probably need to make some changes.
4. Social Security makes up a big part of your retirement plan.
In general, you should not count on Social Security to make up a big part of your retirement plan. Even in the best scenario, Social Security will only make up about 40% of your wages. If you are an above-average wage earner, that percentage is even less.
In addition, Social Security is expected to run out of money by 2037. That means that Social Security may not be available at all by the time you are ready to retire.
5. You assume your healthcare costs will drop because of Medicare.
Healthcare costs can be a huge expense in retirement. Many people do not plan effectively for this significant expense. If your current plan assumes that your healthcare costs will drop because of qualifying for Medicare, you may need to make some changes.
Medicare can save a significant amount of money for some people, but it has its limits. For example, it does not cover dental care or eye exams. You must also still pay for premiums, deductibles, and copays, just like private insurance.
HealthView Services created a retirement planning guide in 2019 that predicted that the average 70-year-old couple in 2024 can expect to pay about $16,000 in healthcare costs each year. By age 75, those costs increase to about $21,000 annually.
6. Revising Your Retirement Plan
You may realize that your retirement plan needs some work, but you aren’t sure where to start. Below are just a few suggestions on tweaks you can make to ensure that your money is working hard for you.
Review Your Workplace Contributions
Be sure that you are taking full advantage of the matches and other benefits that your employer provides. If possible, increase your investments to get the full value from your employer. After all, not taking full advantage of an employer match means you are missing out on free money.
Utilize “Catch-up” Contributions
If you are over the age of 50, you can add more to your retirement accounts compared to the regular annual limits. That amount changes every year, but for 2022, you can add another $6,500 to your 401(k) and another $1,000 to your IRA. Those limits are per person, not per couple.
Even if you aren’t over the age of 50, you might want to move things around so you can ensure you are contributing the maximum amount that you can every year.
Review Your Plan Regularly
Reviewing your target retirement plan and ensuring that you are on track is one of the best ways to keep tabs on your plan. As a rule, take a look at your plan once or twice a year. You can make slight investment changes or moves to increase your investments sooner than later.
Consider Options for Alternative Investments and Income
Alternative investments, if used correctly, can be a great way to stockpile money for retirement and provide a source of income after you retire. Real estate, for example, can provide stable income well into retirement.
Ultimately, how you revise your plan will vary a great deal based on your investment goals. Utilize online resources and information and work with an investment professional to help you set up a plan that will work for you and your family.