The Importance of Reviewing Your Retirement Goals Regularly

When was the last time you really looked at your retirement plan? For many of us, the term “retirement” evokes images of relaxation, travel, and leisure—but how often do we stop to assess if our plan aligns with the life we envision?

Reviewing your retirement goals isn’t a one-time task; it’s a continuous process that ensures you're on the right path, ready to adapt to life’s many changes. After all, as Warren Buffet wisely said, “Do not save what is left after spending, but spend what is left after saving.”

Why Reviewing Your Retirement Goals Regularly Is Essential

Reviewing your retirement goals regularly is vital to ensure your savings, investments, and overall strategy match both your current lifestyle and future aspirations. When you set retirement goals years ago, you might have had a different income, fewer financial obligations, or even a different perspective on what retirement would look like. Life moves fast, and financial markets can shift unexpectedly, so regular reviews keep you financially prepared.

Consider this: maybe your income has grown, or perhaps you've acquired more financial obligations, like a mortgage or college fund for your children. Adjusting your retirement goals to reflect these changes strengthens your financial security by ensuring that your savings rate, investment strategy, and anticipated retirement age are all up to date. In a way, reviewing your goals acts like a financial health check, making sure every element of your plan is still on course.

Example Of a Retirement Plan: The Smith Family

1. Personal Details

• Age:
  • John Smith: 45 years old.
  • Jane Smith: 43 years old.
• Retirement Age Goal:
  • Both aim to retire at 65.
• Life Expectancy:
  • Planning for longevity up to 95 years.

2. Retirement Goals

• Lifestyle:
  • Maintain current standard of living with $70,000/year in inflation-adjusted expenses.
  • Travel annually with a $10,000 budget for the first 10 years of retirement.
• Housing:
  • Pay off the mortgage by retirement and remain in the current home.
• Healthcare:
  • Allocate $10,000/year for medical expenses, increasing with inflation.

3. Current Financial Snapshot

• Savings:
  • 401(k): $200,000 (John) + $150,000 (Jane).
  • Roth IRA: $50,000 combined.
  • Emergency Fund: $20,000.
• Income:
  • Combined annual salary: $120,000.
  • Saving 15% of income into retirement accounts annually.
• Debt:
  • Mortgage: $150,000 remaining at 4% interest.

4. Estimated Retirement Income

• Social Security (starting at 67):
  • John: $30,000/year.
  • Jane: $25,000/year.
• 401(k) Withdrawals:
  • Target withdrawal rate: 4% annually.
  • Estimated balance at 65: $1,000,000 (combined).
  • Expected withdrawal: $40,000/year.
• Roth IRA:
  • Tax-free withdrawals for emergencies or travel expenses.

5. Savings Strategy

• Current Contributions:
  • John: $19,500/year (401(k)), with 5% employer match.
  • Jane: $15,000/year (401(k)), with 3% employer match.
  • Combined Roth IRA: $6,000/year.
• Adjustments:
  • Increase contributions by 1% annually to account for salary growth.

6. Investment Strategy

• Asset Allocation (currently):
  • 70% equities, 30% bonds.
• Glide Path:
  • Shift to 50% equities, 50% bonds by age 60 to reduce risk.
• Expected Return:
  • 6% annual return pre-retirement.
  • 4% annual return during retirement.

7. Healthcare and Insurance

• Pre-Retirement:
  • Maximize Health Savings Account (HSA) contributions: $7,750/year.
• Medicare:
  • Enroll at 65 and budget for supplemental insurance.
• Long-Term Care Insurance:
  • Purchase policy at 55 to cover potential nursing home or assisted living costs.

8. Estate Planning

• Drafted a will and updated beneficiary designations.
• Established a living trust to manage assets efficiently.
• Assigned power of attorney and healthcare proxy.

9. Emergency Fund

Increase emergency savings to $50,000 by retirement for unforeseen expenses.

10. Progress Monitoring

• Annual financial review to assess:
  • Savings progress.
  • Investment performance.
  • Changes in expenses or goals.

Projected Outcomes

• Savings at Retirement:
  • 401(k) + Roth IRA: ~$1,250,000 (assuming consistent savings and returns).
• Annual Income in Retirement:
  • Social Security: $55,000/year.
  • Withdrawals (401(k)): $40,000/year.
  • Total: ~$95,000/year (exceeding the $70,000/year goal).

Adapting to Life’s Shifts

Major life events can change everything. Marriage, children, job changes, or even an unexpected financial windfall can shift your priorities. Each time something significant occurs, it’s wise to ask yourself: Does this impact my retirement goals? Making small adjustments now—whether it’s increasing your contributions, changing your investments, or setting a new retirement age—can make a big difference later.

For example, let’s say you received a promotion. With a higher income, you may choose to increase your retirement contributions, making your journey to financial independence shorter. Alternatively, unexpected financial setbacks can lead you to re-evaluate your savings approach, perhaps seeking alternative income streams or more conservative investment options. Regular reviews keep your plan resilient and adaptable.

Retirement Goals Review Checklist

1. Assess Current Financial Situation

• Calculate current net worth (assets minus liabilities).
• Review income sources (salary, investments, rental income, etc.).
• Evaluate existing savings and investments dedicated to retirement.
• Check debt levels and create a plan to pay off high-interest debts before retirement.

2. Define Retirement Objectives

• Establish desired retirement age.
• Determine lifestyle goals (travel, hobbies, relocation, etc.).
• Estimate monthly living expenses during retirement (housing, healthcare, food, etc.).
• Plan for inflation-adjusted expenses over time.

3. Evaluate Income Sources for Retirement

• Review Social Security benefits and estimated payout.
• Identify and calculate income from pensions or annuities.
• Assess expected returns from retirement accounts (401(k), IRA, etc.).
• Include income from investments (dividends, interest, or rental properties).

4. Plan for Healthcare and Long-Term Care

• Estimate costs for healthcare and Medicare premiums.
• Evaluate the need for long-term care insurance.
• Set aside savings for out-of-pocket medical expenses.

5. Develop a Retirement Savings Strategy

• Set specific, measurable savings targets for retirement accounts.
• Maximize contributions to tax-advantaged accounts (401(k), IRA, HSA, etc.).
• Diversify investments to balance growth and income.
• Periodically rebalance the portfolio to align with risk tolerance and retirement timeline.

6. Assess Risk and Return Tolerance

• Determine current risk tolerance based on retirement timeline.
• Adjust investment allocation as retirement approaches (e.g., shift to more conservative assets).
• Account for market volatility and its impact on retirement assets.

7. Plan for Estate and Legacy Goals

• Draft or update a will.
• Assign power of attorney and healthcare proxy.
• Review beneficiaries for retirement accounts, insurance, and other assets.
• Consider establishing trusts or other estate planning tools.

8. Account for Taxes

• Understand tax implications of withdrawals from retirement accounts.
• Plan for required minimum distributions (RMDs) from tax-deferred accounts.
• Explore strategies to minimize taxes, such as Roth conversions or tax-efficient withdrawals.

9. Build an Emergency Fund

• Ensure an emergency fund covers 6-12 months of essential expenses.
• Keep the emergency fund in a highly liquid, low-risk account.

10. Review and Adjust Regularly

• Review retirement plan at least annually.
• Adjust savings, investments, or lifestyle goals based on changes in financial situation or market conditions.
• Reassess retirement age or lifestyle if goals become unrealistic.

Understanding Financial Market Trends

The financial world never stands still. From inflation fluctuations to shifts in the stock market, economic changes affect our money, savings potential, and overall purchasing power. If you don’t adjust your retirement strategy to account for these shifts, you might find that your savings aren’t as substantial as you’d hoped. For example, if inflation rises sharply, you’ll need to adjust your investments to help keep pace. A diverse portfolio, coupled with the foresight to adjust, will help you stay financially comfortable in retirement.

Monitoring your retirement plan allows you to capitalize on market opportunities too. Perhaps you discover a low-risk investment yielding higher returns or a tax-advantaged account that lets you save more. Each tweak you make now helps compound your savings and grows your wealth over time.

Make It Personal, Make It Real

Retirement is personal. Reviewing your goals allows you to envision your future self—where you’ll be, what you’ll be doing, and how you’ll enjoy your life. Rather than just checking off a financial to-do list, think of your retirement plan as a way of creating your future lifestyle. Picture the freedom to travel or the comfort of living debt-free. With each review, you bring that image closer to reality by ensuring every element of your plan is crafted with your dreams in mind.

Asking yourself, “Is this still what I want?” brings clarity and motivation. Even better, it can renew your commitment to saving, investing, and making wise financial choices. Each time you check in, you’re not just securing your financial health; you’re actively working towards a meaningful, fulfilling retirement.

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Making Your Future a Priority

The best retirement plans are flexible and adaptive. Taking the time to review your goals regularly allows you to respond to life’s changes and seize opportunities that will enhance your financial security.

As Benjamin Franklin said, “By failing to prepare, you are preparing to fail.” A strong retirement plan is more than just numbers on a page—it’s the framework for the life you want to lead when you’re finally able to leave the workforce behind.

So, make time for your future. Review your retirement goals often, update them as life unfolds, and keep your dream of a comfortable retirement alive and well. By taking small, consistent steps now, you can ensure that your later years are as secure and enjoyable as you envision.