Retirement account contributions tend to be largely “set it and forget it.” You might have automatic withdrawals made from your checking account, or your retirement contribution are withheld from your paycheck. No matter how you do it, it’s vital you determine if you’re saving enough for your ideal lifestyle.
Chances are you haven’t changed your retirement contribution amount in years.
Or maybe you’re just starting to build your investment strategy, and want to know how much you should be saving to reach your financial goals.
You might not even have checked your portfolio to see whether or not your asset allocation is still in line with your needs. If you haven’t taken a look at your retirement account recently, or are a beginner investor, now is a good time to see if your retirement savings are on track.
Here’s a simple checklist to make sure your retirement savings are propelling towards your goals.
Are You Contributing Enough?
Let’s be honest: Unless you opened an IRA as a teenager and have contributed every month since then, $200 a month just isn’t going to cut it.
When I first opened my Roth IRA at age 25, all I could manage to set aside was $100 a month. At that rate, even after 40 years, I’d only end up with about $200,000 in my retirement account.
A few hundred dollars a month is not enough!
Since then, as my income has increased, I’ve boosted my retirement contribution and my husband’s income has also been a help since he finished school.
If you want to know if your retirement savings are on the right track, you need to honestly look at the situation. How much do you have in your nest egg right now? How much do you contribute each month? When do you want to retire?
Use one of the numerous online calculators to determine whether you are really going to be able to retire when you want to, and with the amount of money to live a comfortable life.
Chances are, you need to contribute more money to your retirement account if you want to build the nest egg necessary to ensure that you enjoy your golden years in comfort. Take a look at your finances, figure out if you can cut back on some unnecessary expenses or find ways to make more money in order to have the capital to put toward retirement.
While it’s vital that you contribute enough to your retirement account, it’s also important to check your asset allocation regularly. Your asset allocation should take into account your time frame and risk tolerance.
You need enough growth-type assets to help you build wealth, but you also need some “safer” assets to protect your portfolio in times of volatility and economic difficulty.
In general, you should have more assets in growth investments earlier in your career, and as you approach retirement, you should shift some of our assets toward “safer” options, as well as income-producing assets.
Don’t forget appropriate diversification as well. If you invest in funds, the way they are managed can result in “drift” over time.
Your retirement savings can get off track as your portfolio slowly drifts away from the diversification and asset allocation you require for a better chance at long-term success. Once or twice a year, look at your portfolio, and make sure that everything is in order, then rebalance as needed.
What’s another way you can determine if you’re saving enough for retirement?