Staying the Course with Your Retirement Plan

Staying the Course with Your Retirement Plan

Planning for retirement early comes with numerous benefits, most importantly being that you know you’ll be prepared and financially secure when your retirement comes. While that may not be for 20, 30 or even 40 more years, it’s important to remember that retirement planning is all about the long game. And the long game applies to more than how early you start saving. You should also take a long-term approach when it comes to the funds your retirement plan is invested in. Let’s take a closer look.

Your retirement plan likely gives you the ability to invest in one or multiple funds so you may diversify your retirement account investments over several asset classes. Another popular option in many company sponsored retirement plans allows participants to select a target date fund. A target date fund allows you to select a single investment option based on your target retirement date, typically age 65. The portfolio of a target date fund is diversified within several asset categories. The general concept is the longer the time horizon to retirement, the more risk in the fund. As you age, the fund automatically and gradually becomes more conservative.

Here are a few things to keep in mind as you consider how best to approach your retirement portfolio with the long-term goal in mind:

  • Understand your risk tolerance, and invest appropriately. Everybody’s risk tolerance is different depending on your point in life, how many years you have left until you retire, your personal comfort level with investing. There’s no right or wrong risk tolerance. Understanding where you stand will help you decide where your retirement funds are invested, ultimately allowing you to feel more at ease with your decisions.
  • Make contributions regularly, and increase the amounts when you get raises and bonuses. Regardless of your risk tolerance, you can help your retirement account grow by setting aside a certain percentage of each paycheck, and increasing that percentage every year or each time you get a raise. A commonly recommended goal is to direct 10-15% of each paycheck to your retirement account. If your employer offers a matching contribution, make sure you’re taking full advantage of it by contributing at least the same percentage that is matched. Contribute as much as you are able.
  • Don’t be too quick to change your allocations. Some people try to play the market, moving money around when certain funds go up or down. Unless you’re an avid follower of the stock market or a trained investment analyst (and even if you are), this is a tricky approach that usually results in you losing more money than you’ll gain. Funds rarely, if ever, go up in a straight line, so you’re better off leaving your money in one place for long periods and letting the market play out over time.

Are you saving enough?

See illustrative example in the table below, assuming Employee Z is trying to decide how much to defer. She has an annual compensation of $45,000 and is 40 years old.

illustrative example of employee retirement plan

Staying the course with your retirement plan goes beyond frequently moving your money around. For example, taking out loans against your retirement account can also put a dent in – or significantly diminish – your retirement savings. If you’re in need of equity for a loan, be sure to consult with your tax advisor and banker beforehand to learn about the benefits and drawbacks.

No matter which route you choose, remember that saving for retirement takes time, but patience and consistency pays off when you’re finally ready to retire.

Next steps:

  1. While we’ve only skimmed the surface today, I encourage you to follow along with our Retirement and Investing articles.
  2. Contact me to learn more about your retirement investment options.
  3. Subscribe to the Education Center to receive email updates.
Jenny Carter

Jenny Carter

Vice President, Associate Managing Director, Retirement Plan Services (515) 245-5245 Email Jenny

Jenny Carter is vice president, associate managing director of Retirement Plan Services in the Wealth Management Division at Bankers Trust, where she provides oversight for qualified and nonqualified retirement plan administration. She joined the Bank in 2010 and served in Supervisor and Manager roles before being promoted to her current position in 2015. Jenny holds a Retirement Plan Associate (RPA) designation through Certified Employee Benefits Specialist (CEBS), and Fellow, Life Management Institute (FLMI). Her background includes: implementation, administration, and technical compliance of defined contribution plans. Prior to joining Bankers Trust, Jenny worked in positions at Diversified Investment Advisors, Marsh Advantage America and Principal Financial Group. She earned her Bachelor’s degree in business from William Penn University before starting in retirement services. Jenny is also a contributor of the Retirement and Investing category of the Education Center. Within her category, she shares her expertise on retirement planning. Simplifying complex topics for readers has provided her a unique outlook to what she does at the bank Jenny is active in the community as a volunteer at her children’s school and with Meals from the Heartland, and she previously served as a Girl Scouts troop leader. In her free time, she enjoys being involved in her kids’ activities and reading.

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