Are Your Retirement Funds Wandering Aimlessly?

The purpose of your retirement fund is to help provide the income you need to live financially independent in retirement, whatever “financially independent” means to you. Without structure and planning for your funds, that goal can become more and more distant. It doesn’t just happen on its own. It takes careful planning and years, if not decades, of making prudent investment choices.

Whether you’re just getting started in saving for your retirement or have been doing so for many years, you want to be sure the hard earned money you are setting aside for your future is invested properly, or you may just find yourself with a retirement that is based more on chance than a well-crafted strategy. (For more, see: Will Your Retirement Income Be Enough?)

Put an Investing Plan in Place

Contributing to your retirement accounts is a good first step. You need to take it a step further and actually develop a long-term, strategic plan for how you’ll invest in your retirement accounts. Failing to plan is planning to fail, with failure equating to living a less desirable retirement lifestyle than the one you probably envisioned.

An investment strategy for your retirement should consider the funds you use, the allocation you keep and how much you ultimately need to have as part of your nest egg before you can use it for income. It also needs to take into account how it will change as you go from working to retired.

Totally ignoring your retirement accounts is definitely not a smart move. But it could still be better than the other mistake average investors make with their retirement accounts. Paying “too much attention” to their 401(k) and IRA investments can cause investors to make short-term decisions based on emotions rather than sticking with their long-term investment plans. Too much fiddling around can cause years of underperformance.

Link Retirement Goals With Investment Strategies

Foregoing a plan but still playing around with your investments in a 401(k) or IRA anyway is a recipe for financial disaster. There’s nothing strategic about randomly moving funds around or choosing to dabble in an asset class you don’t fully understand. (For related reading, see: Managing Income During Retirement.)

It’s great that you want to do what you can to get the best return on your retirement funds. For some people, this means deciding to partner with a fiduciary financial planner and investment advisor who can help you properly link your retirement lifestyle goals with your investment decisions. Choosing a fee-only advisor will help make sure that your conversations are less about what financial products they can offer you and more about the strategies to utilize in managing your retirement funds that will provide more purpose and meaning to the investment decisions you make.

Having a long-term investment plan properly linked to the income you want these funds to generate in retirement becomes the driving force of your investment choices. That’s a far cry from playing around with your accounts based on your feelings, news headlines or what you heard from your neighbor who works in tech about the next great stock pick.

Elements of a Smart Retirement Investment Strategy

At this point, you should know two things. First, the thing you can do right now is get started - which requires follow through in the form of properly linking your retirement lifestyle goals with your retirement investment strategies. Second, a properly linked and well thought out retirement investment strategy has to be just that - a strategy. You want to avoid randomly moving money around, churning up your asset allocation, or investing based on “hunches,” feelings or tips from the grapevine.

Having a true long-term strategy in place means making smart, rational investment decisions during your working years so you can hopefully enjoy all the things you hoped to when you finally put in that last day of work. Those smart, rational investment decisions should also be aligned with:

  • Other financial goals, beyond just funding retirement.

  • Your tolerance for risk and comfort level with varying degrees of volatility as well as your time horizon, or how many years between today and when you’ll want to use your retirement funds. The latter is what helps determine your portfolio’s ability to weather potential market volatility.

These are the fundamentals that help make up a good strategy. What each of these factors are to you will help determine what actions you need to take (and what you should avoid). Other parts of a strategy that will help you to build wealth include things like your ability to stay calm and rational in emotional moments (like when the market experiences a downturn).

You also need some source of accountability to not only help you get through challenges but also keep you on track when distractions come up. It’s not always about dodging major bullets - sometimes, boredom with a decades-long process can derail a good investment strategy faster than any market event can.

Some people are disciplined enough to do the right thing, over and over again, consistently for the amount of years it takes. Most of us, though, make the mistake of either ignoring our investments entirely or getting way too obsessed with them (to the point where our own tweaks and changes cause us to create losses).

When creating your retirement plan, focus on creating a financial plan that makes sense for you and a smart retirement fund strategy that shows you exactly what to do with your investments. Both of these things will help you reach the level of financial independence you really want. (For more from this author, see: How the Unexpected Can Drain Retirement Income.)


Disclosure: Registered Representative/Securities and Investment Advisory Services offered through Signator Investors, Inc. Member FINRA, SIPC, and Registered Investment Advisor. AspenCross Wealth Management is independent of Signator. 1400 Computer Drive Westborough, MA 01581