If you spent the holidays having fun and decided to put off any financial decisions until after the first of the year, don’t feel bad—so did everybody else.
But with 2014 bringing so much excitement and so many possibilities, now is a great time to evaluate your retirement plan to make sure you are still on the right track.
Ask yourself these three questions to see if it might be time to make some changes to your retirement investing plans:
1. How much time do I have left until retirement?
Typically, you should have at least three to six months of your non-discretionary expenses liquid (available for use) in an account such as an FDIC-insured savings or FDIC-insured money market account.
However, that is the goal if you are working. If you are retired, that buffer should be increased to at least 18 months to two years. If you are just a few years away from retirement, you will need to work on increasing your liquid short-term savings. This will give your riskier assets time to recover if the market takes an extended downturn.
2. Have my objectives or goals changed?
As time goes by, your goals and objectives are likely to change. For example, while you were working, your goal was to grow your money. With retirement around the corner, your objective may be for your money to provide you with some supplemental income during retirement. If your goals and objectives change, so should the investments in your retirement accounts.
3. How have changing market values affected my asset allocations?
If your allocations have changed 5 percent or more because of market values, it might make sense to get them back in line with your time horizon, investment objectives, and risk tolerance.
An important point to remember is that asset reallocation does not ensure or guarantee better performance and cannot eliminate the risk of investment losses. It might, however, help you stay on track with your retirement plan when your emotions tell you to make risky decisions.
Don’t be like many people who fail to plan for retirement. Start the new year off on sound financial footing by taking a little time to make sure you are still on the right track with your retirement plan.
Steve Repak is a CERTIFIED FINANCIAL PLANNER™ professional, CFP® Board Ambassador, and financial literacy speaker. He is also an Army veteran and the author of Dollars & Uncommon Sense: Basic Training For Your Money. Follow him on Twitter: @SteveRepak