There are some things in life where “Set it and Forget it” works well, but managing your retirement plans isn’t one of them.

Most people give a lot of thought to their initial investment set-up, but then rarely look at it in the years ahead. The problem with this is that things change, both with you and with the investments themselves. Reviewing your choices, at least annually, can make a big difference over time.

Most retirement plans offer a selection of funds – usually index funds, target date funds and actively managed funds.

Important things to consider are:

  • Contribution Amount – decide how much you are going to add to your retirement plan annually (make sure to take advantage of any Employer match). A percentage of annual compensation vs. a specific dollar contribution will keep pace with periodic salary increases, enabling you to “Save More Tomorrow.”
  • Tax-Deferred or Taxable Contribution? –  Contributing on a tax-deferred basis today means that all distributions will be income taxable when funds are withdrawn. Paying income tax on contributions now as they are made via a Roth Account makes all future withdrawals plus investment earnings income tax free under current law.
  • Asset allocation – determine how you divide your savings between different asset categories (in this case, usually stocks and bonds). This is based on your personal circumstances – specifically, your goals, time frame and risk tolerance.
  • Investment Selection – understand the available investment options and select which funds to use within each asset class.

It’s important to look at the risk ratings, performance and fees of different funds, either on the Plan providers website or Morningstar.com.

Once you have set your contribution amount, asset allocation and fund selection, you should check this annually for several reasons:

  • Your goals and risk tolerance can change over time, and you may want to adjust to a more conservative or aggressive approach as you get closer to retirement.
  • Rebalancing – some plans give you the option to rebalance automatically but if not, you may need to rebalance to stick to your asset allocation.
  • Investments perform differently over time, and you may want to make changes to your fund choices.

As part of the ongoing maintenance of comprehensive financial plans, Eagle Ridge professionals work with clients to ensure their Retirement Plan investment choices are aligned with their overall investment strategy to meet their goals in retirement.