6 Steps for a Retirement Plan Review

How to make sure your investments will eventually meet your retirement needs.


Most people with a 401(k) have already done the hard work of setting up a retirement plan. Now all that's left to do is the most ignored part of the whole retirement planning process: periodic review. You need to make sure the plan still meets your expectations and needs.

Updating your plan is a bit like double checking your answers on a math test. We know it helps, but most of us don't do it. Here is how to find out if your retirement investments are on track.

[See 5 Misunderstood Retirement Rules of Thumb.]

1. Review your current strategy. Look over your current investment strategy and make sure that you still remember why you made the choices that you did. Part of your original plan probably involved an assessment of your risk tolerance and time horizon. Use this periodic review to compare your portfolio to your personality and see if that level of risk still makes sense.

2. Check your assets. Make sure your current investments are in line with your risk tolerance. Risky assets that cause you to lose sleep at night or make frequent emotional buy and sell decisions may need to be altered. But also check to see if you have too much cash and are losing out on long term gains.

[See The Six Biggest 401(k) Mistakes.]

3. Track your progress. Part of the difficulty of retirement planning is that no one can accurately predict future performance. By tracking your progress you are giving yourself another set of data points to base your future investment direction on.

4. Identify and address any changes in your life. Did you get married or divorced or have a baby or death in your family? Major events in your life demand a second look to make sure your retirement plan is still in good shape. Details like listing new plan beneficiaries and consolidating retirement accounts are important actions that shouldn't be ignored.

[See 12 Ways to Make the Most of Your 401(k).]

5. Update your plan. Once you collect all the facts, it's time to update your plan. Shift your investments to reflect your new reality.

6. Setup a time for the next review. Even if no changes are currently necessary, set up an appointment with yourself for the next review. It probably takes a full one minute to think of a time and put it on your calendar as a reminder. You owe it to yourself to spend that 60 seconds.

David Ning runs MoneyNing, a personal finance site aimed at helping others change their habits for a better financial future. He suggests that everyone to sign up for an online savings account to get more out of our hard earned money.