Regularly evaluating your retirement savings is crucial for staying on track toward achieving your long-term goals. By monitoring your progress, adjusting your contributions, and reviewing your investments, you can ensure that your retirement strategy remains aligned with your evolving financial needs.

1. Monitor Account Statements

Keeping a close eye on your retirement account statements helps you stay informed about the growth of your savings:

Track Contributions: Ensure that your contributions are being made consistently and are in line with your savings plan. Confirm that any employer contributions (such as 401(k) matches) are being deposited correctly.
Review Investment Performance: Evaluate the performance of the investments in your retirement accounts. Compare your portfolio’s performance to relevant benchmarks to determine whether your investments are performing as expected.
Identify Discrepancies: Look for any inconsistencies or unexpected charges, such as fees or incorrect contributions. Address any issues with your account provider as soon as possible.Example:
Jane reviews her 401(k) account statement quarterly and notices that her investments have performed better than expected. She decides to maintain her current asset allocation but increases her contributions to capitalize on the strong market performance.

2. Adjust Contributions

As your financial situation evolves, it’s essential to review and adjust your contributions to ensure you’re on track to meet your retirement goals:

Increase Contributions: When your income increases, such as through a salary raise, consider increasing your retirement contributions. Contributing even 1-2% more of your income can make a significant difference over time.
Maximize Contributions: If possible, contribute the maximum allowable amount to your retirement accounts, especially if you’re approaching retirement age. In 2024, the maximum 401(k) contribution limit is $22,500, with an additional catch-up contribution of $7,500 for those 50 and older.
Catch Up Later: If you’re behind on retirement savings, take advantage of catch-up contributions, which allow individuals aged 50 and above to contribute more than the standard limit.Example:
After receiving a raise, Maria increases her 401(k) contributions from 10% to 12% of her salary, ensuring she stays on track with her retirement savings goal while maximizing her employer’s matching contribution.

3. Review Investment Choices

It’s important to periodically review the investment options in your retirement accounts to ensure they align with your goals and risk tolerance:

Align Investments with Goals: As you get closer to retirement, you may want to shift your investment strategy from high-risk, high-reward assets like stocks to more conservative investments like bonds to protect your capital.
Rebalance Your Portfolio: Over time, the value of different investments can shift, altering your portfolio’s original asset allocation. Rebalancing periodically ensures that your portfolio remains aligned with your risk tolerance and retirement goals.
Consider Fees: Review the fees associated with your retirement account investments. High fees can eat into your returns over time, so consider switching to low-cost index funds or ETFs if appropriate for your situation.Example:
David, who is 10 years away from retirement, reviews his 401(k) and decides to rebalance his portfolio to reduce exposure to stocks and increase his holdings in bonds, aligning with his more conservative approach as he nears retirement.

Action Step: Schedule Regular Reviews

To keep your retirement plan on track, establish a routine for reviewing your progress:

Set Quarterly or Annual Reviews: Mark your calendar to review your retirement savings at least quarterly or annually. This ensures you regularly check your account performance, contributions, and investment strategy.
Work with a Financial Advisor: Consider meeting with a financial advisor to assess your retirement savings progress, especially if you’re nearing retirement or facing a significant life change. A professional can help you optimize your contributions and adjust your strategy.
Make Adjustments as Needed: Be proactive in adjusting your contributions, investments, and risk tolerance based on your retirement timeline and financial situation.

Conclusion

Regularly evaluating your retirement savings is essential to ensure that you stay on course to meet your retirement goals. By monitoring your account statements, adjusting your contributions as your financial situation changes, and reviewing your investment choices, you can optimize your retirement plan for long-term success. Scheduling regular reviews and seeking professional advice when necessary will help you maintain a clear path to a secure and comfortable retirement.

Reflection Questions:

How often do you currently review your retirement account statements, and what improvements can you make to your review process?
Are you contributing enough to your retirement accounts to stay on track with your financial goals?
Is your current investment strategy aligned with your risk tolerance and timeline for retirement? Should you make any adjustments?