Whether your clients are getting close to retirement or still have some years to go, they need to periodically check on how their retirement savings strategies are working and make sure they're following the best path to preparing for retirement.
Using generally accepted best practices for retirement saving, plus help from a Kiplinger report, along with questions from Morningstar, we created this list of checkpoints for clients.
With this list in hand, as well as a retirement plan and diligent saving, clients will be better equipped to stay on the straight and narrow as they save for retirement:
15. Don't choose a retirement date based solely on your age.
If you have it in your mind to retire by age 70, you might find ill health driving you out sooner. That could put you short on retirement savings—and you'll also need retirement assets for a longer period of time. Conversely, you may have wanted to retire by age 62, but find yourself needing to boost those retirement savings because of a spouse's ill health or a market downturn.
(Related: That 401(k) Tax Break Shouldn't Be Sacred)
Besides, the earlier you retire the more income you'll need to sustain you until you're old enough to draw Social Security and take cash from your retirement account funds without incurring financial penalties. Consider your age carefully, and don't make snap judgments about how long your savings will last just based on a date on the calendar.
14. Don't stick all your money in stocks.
That could be a sure way to the poorhouse, considering the volatility in the market. Diversify those retirement assets among not just stocks but bonds, cash or other assets that might not be so risky.
13. Don't dive into annuities.
If you think an annuity will help with your cash flow during retirement, don't make a snap decision about it. Do your research, seek advice from someone knowledgeable about the types, benefits and drawbacks of annuities (not your Uncle Charlie), see what sort of cash flow will be provided by annuities of various amounts and then make your decision.
12. Keep track of all your retirement accounts and potential sources of money during retirement.
If you forget about a retirement account at a former employer, or forget about having rolled one over early in your career, that money won't be there to help you when you need it. Track down all your accounts, make sure they have your current contact information and include them in your assessment of retirement assets. You might want to move or consolidate such accounts—or even do something else with the money.
11. Don't "set it and forget it."
While you should do exactly that with some things—such as automatic escalation of contributions—you really need to keep a close eye on what's going on with your retirement savings, as well as with your career and your private life. Not making allowances for changes in personal circumstances or job pay and responsibilities can result in a lower level of preparation than you need—and you'll regret that come retirement day.
10. Don't be unrealistic about rates of return.
Being overoptimistic over how much the assets in your plan will grow as you near retirement will not be helpful. Expecting more than the market can provide will land you in a hole at the worst possible time, so if you hear that the S&P 500 has averaged a 9.6 percent return since 1930, don't be fooled into expecting the particular assets in your plan to do the same. Those assets might do better—or they might not do well at all, and you need to keep on top of it to be sure your expectations are realistic.
9. Customize your asset allocation based on your personal circumstances.
When planning for retirement, one size definitely does not fit all. Just as you have to accommodate your individual situation when deciding on the level of contributions—perhaps you have a large family that precludes setting aside the maximum allowed, or, conversely, if you live alone and have few expenses, you have more leeway to save more—you have to keep your situation in mind as you choose the investments in your retirement portfolio.
For instance, if you're young with a long time horizon till retirement, conventional wisdom says you can afford to take on more risk. But if you're not comfortable with that, or if you have other obligations that make that risk level too high, you'll need to work around that rather than blindly following advice that just doesn't work for you.
