So there you are. You have done the hard work of deciding to save money into a retirement plan, whether it is a 401k, 403b or IRA, you checked the box and now you have less money to live on but more for retirement. The only question is how will you invest your savings?
It’s not uncommon for most people to have no idea about where they are invested. In my own self study of clients I would say a vast majority don’t know what they selected and how this affects their financial plan until we review that area. But, are you doing yourself a disservice? If you could reach your retirement goals sooner by aligning your investments, would it be worth it understand how you are invested?
You have heard me say save for a purpose, but now I challenge you to invest with a purpose.
Here are 4 quick steps to make sure you have your investments aligned with your goals.
1. Consider your allocation
So if that word confuses you, don’t worry, allocation means the mix of investments you have in your account. For example do you have more stocks or more bonds? What type of investments do you have? Your allocation is the mixture of both those things in your account. The ratio of the type of investments you have, should take into consideration the risk of the investments and the amount of time you have until your goal, or retirement. If you have the wrong allocation, your goals may take longer to achieve. There are plenty of allocation tools online, a quick google search will help you get started.
2. If you don’t know your allocation, how do you know if you are on track to retire?
Ignorance is not bliss, as most investors who saw what happen to the stock market when Britain voted to leave the EU two weeks ago. However, turning a blind eye to your investments may be hurting your financial goals. Make sure you check at least once a year to make sure your allocation lines up with what you intend. Investments go up and down which means your allocation can be out of balance. Knowing your allocation will set you up to better meet your goals. You can check your 401k statements or update your allocation by talking to your HR. This will better keep you on track. Your HR can’t give you investment advice but they can help you understand the system in place.
3. Things change, so make changes
Most of us, don’t have an idea about what we are invested in yet, we continue to pour money into our retirement fund. Retirement plans are great, because we can set it and forget it, but don’t forget to review your options. As we age our allocation will change, along with our goals. For example, your allocation may change as you get closer to actual retirement. Have you considered how much risk you should be taking as you are closer to needing income to fund your retirement? Your allocation will most likely change, so make the change. Don’t forget that your money will have to last you for possibly another 30 years, so making the right changes, can put you on the path toward success.
4. Get some help
If you are still unsure or just want a second opinion, find help. Whether it’s online or through a financial advisor like yours truly, becoming aware and finding help is the first step. An advisor will have the tools and resources that aren’t as available through online searches or free platforms. Just remember, your best friend or family members will most likely not have the same goals and therefore allocation as you. Each situation is unique and should be treated that way. Think of your allocation like your mom thinks of you, special and unique!
Did you know I am a virtual financial advisor? Why not schedule some time for us to review your investment goals and allocation, with a 30 minute free consultation!