Investment Strategy: What Stage of Retirement Planning Are You In?
Maintaining a successful retirement plan means keeping track of numerous factors — such as sticking to your budget, investment returns, and investment strategy. It can sometimes feel like retirement planning is a never-ending to-do list. But the important thing to keep in mind is that if you have good money habits and a solid investment strategy, you will be on your way to reaching your goal of a financially confident retirement.
To see how much you've already accomplished, answer the following questions and tally your score. You'll see which retirement planning stage you're in and what small steps you can do to keep moving your retirement plans forward, toward financial success.
1. Do you have a monthly budget planned for retirement that shows how much you'll need for living expenses?
- Yes, I have budgeted for all of my routine expenses as well as for traveling and other activities I want to pursue when I'm retired. 2 points
- I have budgeted for basics like housing and utilities, but I need to add some items and make adjustments. 1 point
- No, I haven't created a monthly budget yet. 0 points
2. Do you have any debt?
- No, I am debt-free. 2 points
- Yes, but I am making payments as scheduled and expect to pay off all of my debt before I retire. 1 point
- Yes, but I have yet to plan how I'll pay it off. 0 points
3. Do you add to your retirement savings every month?
- Yes, I always save at least 5 percent of my income. 2 points
- I usually save some money, but sometimes I skip a few months. 1 point
- No, I don't save on a monthly basis. 0 points
4. Have you estimated how much you'll need in savings and investments to retire — taking into account your budget and debt payments?
- Yes, I have calculated an investing goal. When I reach that goal, annual returns of 4 percent will fully fund my retirement budget. 2 points
- I have a general idea, but I need to go over my finances to figure out a specific number. 1 point
- No, I don't know how much I'll need to retire. 0 points
5. If you continue to save at your current rate, is your retirement savings goal and date realistic?
- Yes, I should easily reach my goal even if there's an economic downturn. 2 points
- I'll probably reach my goal if I earn consistently high returns on my investments, but I might have to delay retirement if markets fall. 1 point
- No, I'll need to significantly increase my savings or revamp my investment strategy in order to retire on time. 0 points
6. Have you gone over different financial scenarios to make sure your investment goal will cover the full length of your retirement?
- Yes, I've used calculators or simulations to test my portfolio and discussed the results with a financial advisor. 2 points
- I've started to do research or have made an appointment with a financial advisor. 1 point
- No, I haven't tested my plan against any possible eventualities. 0 points
7. Have you planned for your healthcare needs in retirement?
- Yes, my budget covers the insurance I'll need, including gap coverage and insurance for long-term care. I have a health savings account (if eligible) or other funds to cover any co-pays. 2 points
- I've budgeted for Medicare premiums, but I still need to estimate out-of-pocket expenses and look into other forms of insurance. 1 point
- No, I haven't considered how I'll pay for healthcare. 0 points
8. Do you regularly evaluate your investment strategy and balance your portfolio?
- Yes, I make sure my portfolio is diverse and that I'm happy with the mix of risk and returns. 2 points
- Some of my investments are rebalanced by an investment manager or target-date funds, but I haven't evaluated my portfolio as a whole. 1 point
- No, I still need to do this. 0 points
9. How often do you reassess your retirement plan?
- At least once every six months. 2 points
- About once every year or two. 1 point
- Rarely or never. 0 points
Now, tally up your points to see where you are in the retirement planning stages.
16 to 20 points: You have made great financial progress, have money habits, and are doing a lot to prepare for retirement. You have a solid plan in place, and you're saving up for your goals. You've already figured out most of the details of your plan, so you can focus on continuing to save and monitoring your investments.
8 to 15 points: You are approaching retirement readiness. You've taken some important steps to prepare for retirement, but you may need to flesh out your plan and build up more savings. Talking with a financial advisor can help you find the best ways to tweak your strategy and take those small steps toward financial wellness.
0 to 7 points: You are in the early planning stages. This is a great time to meet with a financial advisor and formulate a plan to build and grow your savings. It's never too late to start working toward your retirement goals. Once you have a good sense of where you are on the journey to retirement, you can decide on your next step — whether that's research, budgeting, or evaluating investments. The effort you put into planning will pay off later and allow you to retire with peace of mind.