How Often Should Your Review Your Retirement Plan?

Planning for retirement is one of the most critical financial tasks you’ll undertake in your lifetime.

At Advance Capital Management, we believe that your retirement plan should be a living document, evolving as your life circumstances and the economic landscape change. That’s why we say you should plan for wherever you want retirement to take you.

This helps ensure that your strategy remains aligned with your goals while being adaptable to unforeseen events.

But how often should you review your retirement plan?

While we continuously interact with our clients, we recommend an annual financial check-up to make sure all their needs are met or if changes are necessary. And we recommend the same for anyone nearing or in retirement.

Here are five compelling reasons why reviewing your retirement plan annually is essential.

1. Life Changes Impact Your Financial Goals

Life is full of surprises, both joyous and challenging. Whether it’s a promotion, a new addition to the family, a marriage, or even a divorce, these significant life events can drastically alter your financial situation and retirement goals.

By reviewing your retirement plan every year, you can make the necessary adjustments to reflect these changes.

For example, a higher income from a promotion might allow you to increase your retirement contributions, boosting your savings. On the flip side, being laid off unexpectedly and having to consider an early retirement might require you to reassess your retirement savings target. This blog post provides tips on how to make the best of a forced retirement.

Regular reviews help you stay on track, ensuring that your plan is always relevant to your current situation.

2. Market Conditions Fluctuate

The financial markets are notoriously unpredictable. Economic conditions, interest rates and market performance can all influence the value of your retirement savings. Annual reviews of your retirement plan allow you to respond to these fluctuations appropriately.

Let’s say you’re retired. If the market has been performing well, you might be able to withdraw a little more from your retirement savings and enjoy the extra funds. Conversely, during market downturns, it might be wise to scale back your withdrawal rate to preserve your savings. Learn more about setting a safe withdrawal rate here.

Keeping an eye on market trends and adjusting your spending strategy accordingly can help you maintain financial stability throughout retirement.

3. Tax Laws and Regulations Change

Tax laws and regulations are subject to change. Specifically, changes in tax rates, contribution limits and distribution rules can significantly impact your retirement plan.

For instance, recent changes in the SECURE Act have altered the age for required minimum distributions (RMDs) and expanded opportunities for certain types of contributions.

By reviewing your retirement plan annually, you can ensure compliance with current laws and take advantage of any new benefits or opportunities.

4. Health Care Needs Evolve

As you age, your health care needs are likely to change. It’s important to account for these evolving expenses in your retirement plan since they will likely be one of your biggest retirement costs.

Medicare, long-term care insurance and other health-related expenses can have a significant impact on your retirement budget. Regularly updating your plan to reflect these costs helps you avoid any unpleasant financial surprises and ensures that you’re adequately prepared for future health care needs.

5. Retirement Goals Can Shift

Last but not least, your vision of retirement might change over time. Perhaps you initially planned to travel extensively, but now you’re more interested in spending time with family or pursuing a new hobby.

Your financial goals should reflect your current desires and aspirations.

By revisiting your retirement plan annually, you can reassess your goals and make any necessary adjustments. This keeps your savings and investment strategies aligned with what you truly want out of retirement.

It’s also an opportunity to celebrate your progress and stay motivated to achieve your dreams.

Bottom line

Your retirement plan should be as dynamic as your life, continuously adapting to new circumstances and opportunities. By reviewing it yearly, you ensure that it remains a true reflection of your financial situation and retirement aspirations.

At Advance Capital Management, we understand that a one-size-fits-all approach doesn’t work for retirement planning. Let us help you keep your retirement plan a living document, tailored to your evolving needs and goals, by scheduling a free consultation today.