Annual Retirement Plan Review


Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on July 05, 2023

Are You Retirement Ready?

What Is an Annual Retirement Plan Review?

An annual retirement plan review is a process of evaluating and adjusting retirement plans to ensure they align with financial goals and risk tolerance. It is essential for ensuring that your financial plan remains aligned with your long-term goals and risk tolerance.

It allows you to adapt your retirement strategy to life changes and market conditions, helping to optimize your financial success in retirement.

Reviewing Retirement Goals and Objectives

Assessing Progress Towards Retirement Goals

Begin your annual retirement plan review by assessing your progress towards your retirement goals. This includes evaluating your current retirement savings and investments and comparing them to your projected retirement needs.

Determine whether you are on track to meet your retirement objectives or if adjustments are necessary.

Reevaluating Retirement Income Needs

As your life circumstances and financial priorities evolve, your retirement income needs may change as well. Reevaluate your projected retirement expenses, taking into account factors such as healthcare costs, housing expenses, and lifestyle choices.

Update your retirement income goals as needed to ensure they remain aligned with your financial priorities.

Adjusting Retirement Timeline if Necessary

If your progress towards your retirement goals is not on track or if your retirement income needs have changed significantly, you may need to adjust your retirement timeline.

Consider whether delaying retirement, working part-time during retirement, or making other adjustments to your retirement plan can help you achieve your financial goals.

Analyzing Investment Performance

Evaluating Portfolio Returns

Review your investment portfolio's performance over the past year, paying attention to the returns generated by each asset class and individual investment.

Compare your portfolio's performance to relevant benchmarks, such as market indices or target-date funds, to assess whether your investments are performing as expected.

Comparing Performance to Relevant Benchmarks

Using relevant benchmarks helps you determine if your portfolio's performance is in line with your expectations and risk tolerance. If your investments consistently underperform their benchmarks, it may be time to reevaluate your investment strategy or consider seeking professional guidance.

Assessing the Effectiveness of Investment Strategies

Evaluate the effectiveness of your investment strategies, such as asset allocation, diversification, and rebalancing.

Consider whether your strategies have been successful in managing risk and generating returns, or if adjustments are needed to better align your portfolio with your retirement goals.

Assessing Portfolio Diversification and Asset Allocation

Reviewing Current Asset Allocation

Examine your current asset allocation, including the mix of stocks, bonds, cash, and alternative investments in your portfolio. Assess whether your current allocation aligns with your risk tolerance, investment time horizon, and financial goals.

Comparing Allocation to Target Allocation

Compare your current asset allocation to your target allocation, which should reflect your ideal mix of investments based on your risk tolerance and investment objectives. Determine if your current allocation has drifted significantly from your target and if adjustments are needed.

Evaluating Diversification Across Asset Classes and Sectors

Ensure that your portfolio is adequately diversified across various asset classes, sectors, and geographical regions. Diversification helps to reduce risk and increase the potential for higher returns over time.

If your portfolio is too heavily concentrated in certain areas, consider rebalancing to achieve a more diversified mix of investments.

Rebalancing the Retirement Portfolio

Identifying Assets That Require Rebalancing

Identify any assets in your portfolio that have deviated significantly from your target allocation due to market fluctuations or other factors. These assets may require rebalancing to realign your portfolio with your target allocation and risk tolerance.

Implementing Rebalancing Strategies

Implement rebalancing strategies to adjust your portfolio's asset allocation, such as selling over-allocated assets and using the proceeds to purchase under-allocated assets. Alternatively, you may choose to adjust your future investment contributions to favor under-allocated assets.

Considering Tax Implications and Transaction Costs

When rebalancing your portfolio, be mindful of the tax implications and transaction costs

associated with buying and selling investments.

Consider using tax-advantaged accounts, such as IRAs or 401(k)s, to help minimize tax consequences and be aware of any trading fees that may impact your overall investment returns.

Reviewing Risk Tolerance and Investment Time Horizon

Reevaluating Risk Tolerance Levels

As part of your annual retirement plan review, reassess your risk tolerance levels to ensure that they still accurately reflect your comfort with investment risk.

Changes in personal circumstances, such as job stability or major life events, may affect your willingness to take on risk in your investment portfolio.

Assessing the Impact of Life Changes on Risk Tolerance

Life changes, such as marriage, divorce, or the birth of a child, can have a significant impact on your financial priorities and risk tolerance. Assess how these changes may affect your retirement planning and adjust your investment strategy accordingly.

Adjusting Investment Strategies Based on Revised Risk Tolerance and Time Horizon

If your risk tolerance or investment time horizon has changed, adjust your investment strategies to better align with your revised financial goals and risk preferences. This may involve reallocating assets or modifying your investment approach to better suit your current financial situation.

Evaluating Savings and Contribution Rates

Assessing Current Savings Rate

Review your current savings rate to determine if it is sufficient to meet your retirement goals. Evaluate whether you are consistently contributing enough to your retirement accounts and consider increasing your savings rate if necessary.

Reviewing Employer-Sponsored Retirement Plan Contributions and Matching

Ensure that you are taking full advantage of any employer-sponsored retirement plan contributions and matching programs. If you are not maximizing your employer's match, consider increasing your contributions to receive the full benefit.

Adjusting Contribution Rates to Align With Retirement Goals

If your retirement plan review reveals that you need to save more to achieve your financial goals, adjust your contribution rates accordingly. Increasing your retirement savings can help ensure that you are on track to meet your retirement objectives.

Reviewing Withdrawal Strategies and Required Minimum Distributions (RMDs)

Evaluating Current Withdrawal Strategies

As you approach retirement, review your current withdrawal strategies to ensure that they align with your retirement income needs and portfolio longevity. Consider factors such as tax efficiency, investment returns, and inflation when evaluating your withdrawal plan.

Planning for RMDs From Tax-Advantaged Accounts

If you are nearing the age at which you must begin taking required minimum distributions (RMDs) from your tax-advantaged retirement accounts, such as IRAs or 401(k)s, include this in your annual retirement plan review.

Ensure that you are prepared to take these distributions in a timely manner to avoid potential tax penalties.

Adjusting Withdrawal Strategies to Maximize Tax Efficiency and Portfolio Longevity

If necessary, adjust your withdrawal strategies to maximize tax efficiency and prolong the longevity of your investment portfolio. This may involve modifying your withdrawal order, utilizing Roth conversions, or implementing tax-efficient investing strategies.

Assessing the Impact of Life Changes on Retirement Planning

Marriage, Divorce, or the Death of a Spouse

Major life events, such as marriage, divorce, or the death of a spouse, can have a significant impact on your retirement planning. Assess how these events may affect your financial goals and adjust your retirement plan accordingly.

Job Changes and Income Fluctuations

Changes in your employment situation or income level can also influence your retirement planning. Review your retirement plan in light of any job changes or income fluctuations to ensure that it remains aligned with your financial goals.

Health Issues or Disability

Health issues or disability can significantly impact your retirement planning, particularly in terms of healthcare costs and income needs. Adjust your retirement plan to account for any health-related changes in your financial circumstances.

Updating Estate Planning and Beneficiary Designations

Reviewing Wills, Trusts, and Other Estate Planning Documents

As part of your annual retirement plan review, ensure that your estate planning documents, such as wills, trusts, and powers of attorney, are up-to-date and accurately reflect your current wishes. Make any necessary updates to ensure that your estate plan aligns with your financial and personal goals.

Ensuring Beneficiary Designations Are Up-To-Date

Review the beneficiary designations on your retirement accounts, life insurance policies, and other financial assets to ensure that they are accurate and up-to-date. Keep in mind that beneficiary designations typically supersede any instructions in your will, so it is essential to keep them current.

Coordinating Retirement Plan Assets With Overall Estate Plan

Coordinate your retirement plan assets with your overall estate plan to ensure that your financial goals and legacy wishes are achieved. This may involve adjusting your investment strategies, withdrawal plans, or beneficiary designations to align with your broader estate planning objectives.

Steps in an Annual Retirement Plan Review


Importance of Regular Retirement Plan Reviews

Regular retirement plan reviews are crucial for ensuring that your financial plan remains aligned with your long-term goals and risk tolerance. By adapting your retirement strategy to life changes and market conditions, you can optimize your financial success in retirement.

Ensuring Alignment With Financial Goals and Adapting to Changes

Through an annual retirement plan review, you can ensure that your retirement strategy remains aligned with your financial goals while adapting to changes in your personal circumstances and the investment landscape.

Achieving Long-Term Retirement Success Through Proactive Planning

Proactive planning and regular retirement plan reviews can help you achieve long-term retirement success. By regularly assessing your progress, adjusting your investment strategies, and updating your retirement goals, you can work towards a secure and fulfilling retirement.

Annual Retirement Plan Review FAQs


About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.

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