When it comes to saving for retirement, taking a “set it and forget it” mindset isn’t necessarily a bad thing. In fact, putting your contributions on autopilot means you can consistently save without giving it a second thought. But that doesn’t mean you shouldn’t give your retirement accounts a little TLC on occasion. About once a year, it’s a good idea to peek at your 401(k) and/or Individual Retirement Account (IRA) to make sure everything is in solid shape and currently aligned with your goals. So, if it’s been a while, take 30 minutes to an hour to check in and tick off the items on this simple retirement checklist.
1. Review your timeline and goals.
First things first, take a moment to review any financial goals or retirement savings benchmarks you’ve mapped out. Or, if you haven’t thought through a timeline yet, you may want to try out this retirement calculator to get a ballpark idea of where your savings stand in the grand scheme of your retirement fund and think about how much you should strive to put away going forward. Then, write down your findings and any new goals for the future. That way, you’ll be able to easily reflect on your progress during your next check-in.
2. Adjust your 401(k) and IRA contributions.
The ultimate goal is to max out your tax-advantageous retirement account contributions — but don’t sweat if you aren’t there yet. Focus first on making sure you contribute enough to receive your full employer match if your 401(k) plan offers one — otherwise, you’re missing out on what’s essentially free money. Then, aim to increase your contribution by at least 1% (or more, if you can) each year. Finally, make sure to review current 401(k) and IRA contribution limits, which you can find on the IRS website. These limits increase every few years, so while you might have contributed the maximum amount in the past, you could have more room to save now.
3. Rebalance your investment portfolio.
Over time, market changes can lead to shifts in your portfolio’s asset allocation. For example, you may have started with a 75/25 stock-to-bond split, but changes in the market caused stocks to now account for 85% of your portfolio’s value. That’s why it’s important to periodically check your asset allocation to see if it aligns with your portfolio strategy and risk tolerance. Keep in mind, you may also want to rebalance to a more aggressive or conservative allocation should your tolerance for risk change due to where you are in life or how close you are to retirement.
4. Check on dividends.
Your annual check in is a great time to review any dividends you’ve earned. Your 401(k) will likely automatically reinvest your dividends; however, if you have an IRA (whether traditional, Roth, SEP or SIMPLE), you may need to be a little more hands-on. Check to see if you can enroll in a dividend reinvestment plan, or DRIP, which will ensure any dividends you earn are reinvested for additional or fractional shares of that asset.
5. Review or name your beneficiaries.
When you first signed up for your 401(k) or opened your IRA, you might’ve skipped this step — but it’s not one you want to put off any longer. (And if you named someone during enrollment, you may want to make adjustments if your familial status has changed.) Your beneficiary is who inherits your assets when you pass away, so give this some thought, and make sure your designated beneficiaries align with your will if you have one. And note that when it comes to employee-sponsored retirement plans, the law requires written consent from your spouse if you decide to name anyone besides your spouse as that account’s beneficiary.
6. Consolidate your accounts.
Say you have a 401(k) from a past job or an old IRA you no longer contribute to. Rolling over the funds from several accounts into one IRA can make your financial life more manageable, keep your savings organized and potentially reduce your account management fees. Just make sure you follow transfer or rollover rules so you don’t get hit with an unexpected tax bill.
7. Open an IRA.
If you’re currently saving exclusively with a 401(k), you might consider opening an IRA as well. Both types of retirement accounts can work well together, especially if you’re looking for ways to increase your annual savings, seek more investment flexibility or want increased control over your taxes. The best part? Opening an IRA is simple — and you can do so with Ally Invest in just three easy steps.
Save like a boss.
You don’t need to check your retirement accounts every day (or even every month). But you shouldn’t go too long without giving your 401(k) and IRA a little tune up. For most savers, an annual check-in is enough to assess where you stand and make the changes necessary to stay on track and on top of your retirement goals. Just set aside some time, settle in and get it done — oh, and don’t forget to mark your calendar for the same time next year.
Save for retirement your way with an IRA from Ally Invest.