Rebekah Barsch is executive officer and vice president of Planning and Sales at Northwestern Mutual.
If you’re saving each month for retirement, that’s great! You’re working toward building a secure financial future for yourself and your loved ones. But you can’t just sock away money for the future and forget about it. You need to revisit your financial plan regularly.
Why? Because a lot can happen in a short amount of time.
Think about it this way. Your doctor probably recommends that you get a physical every year, and there’s a good reason for it. When you identify health issues early, you’re in a better position to address them. The same is true for your retirement savings plan. If you’re checking regularly on the health of your plan, you can make minor course corrections easily. But if you’ve gone off track too far, making major corrections can be much more painful and costly.
I can say from personal experience that the sooner you’re aware of the need to correct course, the better. At one point in my career, when I went back to graduate school and was working full time, my husband and I made the decision—for our sanity and for our family—that he would stay home with our children. Overnight, we went from two retirement plans (with employer matches) down to one. But we took steps to address it early, adjusting our financial plan to avoid a problem down the road.
So, how often should you revisit your retirement savings plan? Here are six signs that it’s time to meet with your financial advisor and take a fresh look at where you stand and where you’re headed.
1. Your status has changed.
- If you get married, your financial picture may change significantly. Compared to when you were single, you’re likely to have either more debt to deal with, more financial resources available to you, or both. Either way, your vision for retirement (and the amount of money it will require) now also includes your spouse’s dreams and goals.
- If you get divorced, you may end up with only half the financial resources and retirement assets that you had when you were married. You may also be shouldering full responsibility for funding your retirement plan moving forward. So you’ll probably need a new saving strategy.
- If you have children (or adopt them), you’ll have a whole new set of financial responsibilities that will almost certainly impact your retirement savings plan.
- If there’s been a death in the family, you might receive an inheritance. If so, you’ll want to invest it in a way that complements your current retirement saving strategy.
2. You change jobs. If your new position comes with a higher salary, you may find yourself with more money to spend and a bigger lifestyle to support—both now and in retirement. Your benefits may be different in your new job, too. Does your new company offer a 401(k) match? What about disability income and life insurance? Any of these can have a significant impact on your cash flow today and your plans to save for retirement.
3. You move. Whether you move across town or across country, your life will be different in a new home, and so will your expenses. Will you have a higher mortgage payment? Lower property taxes? Because your essential expenses are likely to change after a move, your plan to save for retirement might need to be adjusted.
4. You become an empty nester. When you’re done paying for college and the kids are out of the house, will you find yourself with more discretionary income? If so, where should you put it? When major financial obligations are out of the way, it’s a great time to reassess your retirement saving strategy. Plus, by this time, your vision for retirement may also be coming into clearer focus.
5. You want to leave something behind. Do you have new grandchildren? Has one of your beneficiaries passed away? Have you gotten remarried and now have more heirs to bring into the fold? Whenever your plan to leave money to the next generation changes, you’ll want to assess the impact on your current retirement savings plan.
6. You’re closing in on retirement. When you’re about 10 years away from retirement, you’ve got to be vigilant about checking in regularly (at least every year) on your financial plan and how it reflects your circumstances and goals. Are you saving enough to support the retirement lifestyle you want? Are your assets invested appropriately given that retirement is closing in? This is the time to be fine-tuning your finances and adjusting where needed.
While these are some key times to review your retirement savings plan, the point is to be aware of the events in your life that have the potential to pull your retirement income plan off course. When you’re checking in regularly, you’ll be putting yourself in a position to correct course more easily.
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