Morgan Stanley
  • Wealth Management
  • June 23, 2022

A Simple Six-Step Retirement Checkup

Given recent market volatility, checking in on your retirement plan may make a lot of sense.

After strong stock-market performance that benefited many investors last year, 2022 has seen one of the toughest starts to a year for a diversified investor in decades, with benchmark equities indices falling sharply and U.S. Treasuries suffering deep losses.

The recent volatility has made it important to check your current retirement plan to confirm that you’re on track toward meeting your investment goals. And even when the broader market rises higher, you’ll want to confirm that your own investments are performing in line with expectations. What’s more, if you haven’t been keeping up with your contributions or have otherwise deviated from the plan, you’ll want to see how that has impacted your status. 

A Financial Adviser may be able to help you get back on track if you aren’t making the progress you expected. If you have a lot of time until you retire, small tweaks in savings or investment strategy may make a big difference toward meeting your goal. Retirement just around the corner? Sometimes a few changes to your plan now can help you cross the finish line, even if market conditions are less than fully cooperative. Are you doing even better than anticipated? Maybe now is a good time to reduce your risk exposure to lock in that progress and protect against future market volatility.

Here’s a six-step retirement plan checkup that may be helpful, including how a Financial Adviser can help you adjust your plan as needed:

  1. Determine where you stand. Find out whether the amount you’re saving and investing is on pace with the money you’ll need to retire (with some margin for error). You can ask your Financial Adviser if you have one or you can find numerous calculators online to help. Also, some investment advisory accounts inform you automatically when you aren’t meeting your goals. If you have accumulated several different superannuation accounts from past jobs, however, knowing where you stand may be harder than it should be. A Financial Adviser may be able to help you consolidate your superannuation accounts. 

  2. If you’re off track, figure out why. Are you saving as much as you planned? Are you maximising your contributions to superannuation plan? Is the amount of money you’ll need in retirement increasing? If you’re not on course because your investments aren’t performing well, your Financial Adviser may suggest you make a change to your asset allocation strategy or to the specific investments you’ve chosen. If your investments are not performing at least in line with benchmarks, your Financial Adviser may review the latest research in the context of the original rationale for the investment. Assuming that checks out, it may be preferable to hold on through a period of volatility, as chasing top performers may be a poor way to make decisions.

  3. Decide how to get back on track. That could include revisiting your goal, for example by stretching out the time horizon until you retire or reducing the amount of money you plan to spend in retirement. It could mean creating a financial plan that reflects the propensity for retirees to spend less as retirement goes on, which means you might be better prepared than you think. It can also mean increasing portfolio risk, though only after careful consideration of your risk tolerance. It could be that the most palatable option is a little of all three, which makes the magnitude of any one change smaller. Consulting with a Financial Adviser may be able to help you identify a clear path to reaching your goals. 

  4. Take advantage of ways to improve returns without magnifying the risks. These strategies may include options to mitigate taxes. Insurance can also play a role. Long-term care, life insurance and annuities may have the potential to bolster your retirement plan due to their tax treatment and risk mitigation features. These strategies can be complex, and a Financial Adviser may be able help you implement them. 

  5. Tally up your income sources. If you are retiring soon, you need to get the most out of all your sources of income. That could include strategies for claiming Social Security and traditional pension fund payments, and where applicable, approaches to help you secure or maximise rental income. If your reliable sources of income are not significant enough to cover a good portion of your needs, your Financial Adviser may suggest you add more conservative income-oriented investments, such as dividend paying stocks or bonds. 

  6. Assess the risk level of your plan. If you run through these steps and realise that you are on target to retire in a few years with room to spare, your Financial Adviser may suggest you consider reducing the amount of risk in your portfolio. 

Checking in on your retirement plan doesn’t just entail making sure you are saving enough money. It also means helping ensure the savings you’ve worked so hard to accumulate will be there when you need it. A Financial Adviser may be able help.