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3 Reasons Why You Should Review Your Retirement Plan from Time to Time

3 Reasons Why You Should Review Your Retirement Plan from Time to Time

| February 16, 2022
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Retirement planning is not the easiest thing in the world. What makes it so are the many variables one has to consider. To begin with, you can't be entirely sure when you will retire. Moreover, you never know what your financial obligation will be when you do. Equally importantly, when you retire, you finally have an option to choose whatever lifestyle you want. However, you may not be sure what that lifestyle will be right now. Perhaps you will want to move to a more tax-friendly state or enjoy warmer weather. Maybe you will decide to stay put but downsize. It may seem reasonable to create a general retirement plan at a younger age and call it a day. But that wouldn't be the best course of action. It's best to review your retirement plan from time to time and ensure you are always on the right track.

Here are three excellent reasons why reviewing your retirement plan regularly is a smart idea.

  1. Life happens, and things change

A lot can change during a lifetime. Your employment and your income may vary. More importantly, your family may grow, you might get a divorce, or you may suffer a loss. All of that significantly affects your finances and, consequently, your retirement planning. It is imperative to review how these life situations affect your plans. It will help you avoid some unpleasant surprises in the future.

There is no right or wrong way to address these changes. What's important is not to neglect your retirement plan as they happen. Consider what is happening in your life and how it impacts your financial situation and your vision of retirement.

Employment changes

Regardless of whether you are changing your career path or you have lost your job, you must review your retirement accounts. For example, you may decide that the best course of action is to roll over your accounts from your previous employer to a new broker. Alternatively, it may be best to keep all your fund where they are. 

Furthermore, in case you get a bump in your salary, you should consider using a bit of that raise to increase your retirement investment. 

Family changes

Having kids is one of the most considerable impacts on your budget. And the scope of that impact changes as the kids grow. So, it is necessary to adjust your retirement investment rate accordingly.

You may also find yourself in a caregiving position. Taking care of the kids is one form of caregiving, but it is also something you have planned to do. Placing parents into a nursing home or looking after a spouse who has fallen ill is an entirely different matter. Whether it is a short-term or a long-term situation, it will impact your finances. In addition, it will affect the way you perceive your retirement plans.

In the unfortunate event of death or divorce, it is also necessary to review your retirement plan. Losing your partner or getting a divorce significantly affects your future life and financial obligations.

Therefore, evaluate the demands you are experiencing in your family life every year and decide whether you need to implement some changes until the following year.

  1. The choice of lifestyle

The most exciting part of planning for retirement is deciding o the lifestyle you will have. As a young professional, you may dream about a life full of travel and adventure. At the age of fifty, these ideas may change to something more peaceful. You may consider investing in a second home somewhere close to a body of water, where you can spend quiet holidays with your grandkids. And when you actually get close to retirement, who knows what you will have in your mind. For these reasons, revisiting your retirement plan from time to time is more than prudent. 

But that is not all. There are a few more reasons to reconsider how you envision your retirement.

Health issues

You may now be in good health and plan for an active lifestyle in the future. A decade from now, you may experience a change in your health, which may considerably influence how you live as a retiree.

Hobbies and interests

You may want to pursue an interest later in life, or you already have a hobby you would like to spend more time on when you retire. You may have a wish to visit all the waterfalls around the US. Or you might decide to volunteer and give back to the community. If you focus on things you like, they will cost you money, and you have to include that in your retirement budget.

Moving to a new place

Perhaps you will decide to move long-distance, either to be closer to your family or to live in a warmer climate. Firstly, relocation costs are not meager, and you will have to find reputable people for the job. Secondly, moving to a new location will involve lifestyle changes and a different cost of living. It is necessary to consider how this would impact your planned expenses and adjust your retirement plan accordingly.  

  1. Deciding on beneficiaries

An important and highly sensitive aspect of your retirement planning is determining who the beneficiaries of your estate will be. You may be sure who you want it to be now. However, you may also find yourself reconsidering your decisions based on what life throws at you.

People can choose to change their beneficiaries for a variety of reasons. To make sure all documentation reflects your wishes, you must review your retirement plan from time to time. In case you decide to change who will inherit your assets, remember that you will have to make changes in several places:

  • Your will
  • Insurance policies
  • Property assets
  • Investment funds
  • Family trust

Final words

Preparing for retirement is not a one-time thing. It is an ongoing process that begins at a young age when you start your career and goes on until the time to retire. Ans is a positive thing because you have the freedom to review your retirement plan and revisit your decisions as your life circumstances change. Nothing is set in stone, and you can make changes to your plans to ensure you get the most out of your retirement when the time comes.

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