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Sometimes it feels like paying attention to my finances is a part-time job. I spend quality time every day updating my budget, checking on my investments, and making sure I’m on track to meet my retirement savings goals.
As we approach the end of the year, I want to make sure I’m not making any costly mistakes that could impact my finances in the future.
That’s why I’m not only taking inventory on how I managed my cash in 2021, but also trying to see if there’s anything I should do before the year ends. So, I decided to ask two financial planners to share with me what I should do with my retirement funds before 2022.
1. Rebalance your retirement funds to your targets
As I began taking inventory on my finances this year, I started to wonder if the money in my retirement accounts is split up correctly.
Financial planner Melissa Walsh recommends reviewing your retirement account’s target asset allocation and place trades to bring your account back into alignment with the target, if needed.
“For example, if your target is 80% stocks and 20% bonds and your current retirement account is at 86% stocks and 14% bonds, you should sell some of your stocks and purchase bonds to bring the account back to the target,” said Walsh.
“This is especially important in years like 2021 where stocks have increased significantly throughout the year,” she added. “Maintaining the discipline to rebalance your accounts at least annually allows you to capture some of your recent gains and helps ensure that you aren’t taking excessive risk.”
2. Revisit your investment strategy and contribution amounts
I started taking saving for retirement seriously three years ago, when I turned 30. I set a game plan for how much I wanted to contribute to my funds monthly.
Walsh recommended that I spend December revisiting that contribution amount, and my overall investment strategy.
“There’s no question that we all know, after the last two years, that life can take some unexpected turns,” said Walsh. “If your retirement plan has changed since you last reviewed your accounts, take time to consider how much you’re putting into your retirement accounts, and how that money is being invested.”
She gave the example of someone planning on retiring sooner than they originally anticipated.
“You may want to consider making your retirement accounts more conservative and/or contributing more,” in that case, according to Walsh.
“Likewise, if retirement seems further off,” said Walsh. “Consider whether your account should be more aggressively invested and ensure you’re saving enough so that you are on track for your updated retirement date.”