7 Retirement Planning Moves to Consider

  • Monitor your portfolio and asset allocation, and sell assets strategically.
  • Keep a savings reserve, plan for health expenses and discuss with your family.
  • Clean up retirement accounts and know your income sources.

Saving for retirement is simpler when you’re strategic

It’s time to think beyond the basics of tax-advantaged funds and regular contributions. Will the money in your investment accounts last through retirement? Help keep up with your accounts by considering these retirement planning steps:

1. Monitor your portfolio

During quarterly and annual investment checkups with your financial professional, start with two simple questions. Did you make what you expected? Did you encounter unplanned expenses or changes in your contributions?

2. Keep an emergency savings reserve

Understand the sources of your retirement funds and how your portfolio is going to generate money.

Unforeseen expenses, like a home repair or medical emergency, can quickly derail your retirement savings. Keep an emergency fund with enough money to cover three to six months of living expenses.

Emergency funds should be held in a liquid, but stable account so you can access them when you need them. Interest-bearing savings and money market accounts are good options.

Steer clear of being overly conservative in the size of your savings reserve.

Because a savings account probably won't match market gains, you may want to think about investing some of your other money in longer-term investments so that it has the chance to grow with time.

Your Financial Advisor can help you determine what overall strategies are most suitable for your specific financial goals, objectives and tolerance for risk.

Your emergency savings can also act as a hedge against the unexpected. You can use the emergency fund to supplement income during a down market.

3. Set an asset allocation appropriate for you

An infographic that says 7 moves for retirement. It's a good idea to think ahead.

Investments are fluid. Some are more volatile than others, but all are subject to market fluctuations. Adjust your assets to ensure they align with your current goals and tolerance for risk.

Specifically, you will likely want to reduce your risk exposure when retirement nears by choosing more conservative investments.

4. Itemize your income plan

Understand the sources of your retirement funds, such as Social Security and pensions, and how your portfolio is going to generate money. Are you going to collect interest? Get dividends? How much are you going to have to sell each year to maintain your current standard of living?

5. Clean up your accounts

Many investors hold several retirement accounts. The more they own, the more time they spend managing the accounts and trying to implement an investment strategy across those different holdings.

With money in several locations, it's hard to tell whether your overall portfolio is missing critical pieces – or doubling up in certain areas.

Look for ways you could combine accounts. That may mean rolling over an old 401(k) to an IRA or converting your Traditional IRA to a Roth IRA.

Ask your Financial Advisor for help reducing your accounts to the most essential. Combining accounts will not only result in less paperwork, but might also give you a better handle on your asset allocation and overall investment strategy.

Please keep in mind rolling over assets to an IRA is just one of multiple options for your retirement plan. Each option has advantages and disadvantages, including investment options, and fees and expenses, which should be understood and carefully considered.

  1. Roll assets to an IRA
  2. Leave assets in your former employer’s plan, if the plan allows
  3. Move assets to your new/existing employer’s plan, if the plan allows
  4. Cash out or take a lump sum distribution and pay the associated taxes

Each of these options has advantages and disadvantages and the one that is best depends on your individual circumstances.

Each of these options has advantages and disadvantages and the one that is best depends on your individual circumstances. You should consider features such as investment choices, fees, and expenses and services offered.

Your Financial Advisor can help educate you regarding your choices so you can decide which one makes the most sense for your specific situation. Before taking any action, speak with your current retirement plan administrator and tax professional.

6. Sell assets strategically

Selling any asset can have tax implications, and the proceeds could nudge you into a higher tax bracket. Naturally, you want to minimize taxes when you’re selling assets to generate income in retirement, but balance that concern with your portfolio’s allocation strategy.

As you weigh the tax implications of a sale with your long-term goals, you may find that transferring assets makes more sense for your estate plan. Your Financial Advisor can help you review your options.

7. Talk to your partner and your family

You and your significant other should be on the same page regarding your financial portfolio. Your conversations should cover key financial details, such as:

  • Current total assets
  • How much you can afford to spend per month and annually
  • The amount you have in savings
  • Where the funds are located
  • How they are distributed

You may also want to discuss spending. Identify what’s nonessential and what’s necessary. When you know where your money goes, you can easily adjust your spending in the event of financial upheaval, without sacrificing the essentials.

Ask those you are close to — maybe your children or grandchildren — to be part of the conversation. They should understand your goals and resources. Retirement planning is an ongoing process — these are not steps you should take just once.

But taking them, and repeating them as needed, can help ensure your retirement funds last as long as your retirement years.

Next steps

  • Create a savings reserve to deal with emergencies.
  • Monitor your portfolio and adjust the asset allocation to your changing needs.
  • Consider consolidating accounts to simplify your finances.
  • Talk to your family about your portfolio and your plans.

When considering rolling over assets from an employer plan to an IRA, factors that should be considered and compared between the employer plan and the IRA include fees and expenses, services offered, investment options, when penalty-free withdrawals are available, treatment of employer stock, when required minimum distributions may be required, and protection of assets from creditors and legal judgments. The costs of investing and maintaining assets in an IRA with us will generally involve higher costs than the other options available. You should consult with the plan administrator and a professional tax advisor before making any decisions regarding your retirement assets.

Investing involves risk including the possible loss of principal. Asset allocation cannot eliminate the risk of fluctuating prices and uncertain returns. Diversification does not guarantee profit or protect against loss in declining markets. Stocks offer long-term growth potential, but may fluctuate more and provide less current income than other investments. An investment in the stock market should be made with an understanding of the risks associated with common stocks, including market fluctuations. Dividends are not guaranteed and are subject to change or elimination.

Wells Fargo Advisors does not offer tax or legal advice.

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