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4 min read

5 Signs You Need to Refresh Your Retirement Account

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As you look ahead to your senior years, making sure your retirement account is well set up is necessary if you intend to live your golden years with financial security. Unfortunately, making missteps along the way can threaten that security and your eventual peace of mind.

Even if you do make your retirement plan early in life, which is always recommended, a retirement account is not a "set it and forget it" type of thing. If you do, you're not going to see the retirement benefits that you really want.

Whether you have a SEP IRA, a Roth 401(k), or any other type of retirement plan, it is important to check in, see what's working, and determine what needs to be adjusted. Below are a few telltale signs that you need to refresh your retirement account and re-evaluate your wealth management plan.

1. Your Income Changes Substantially

When your income grows, it is a good time to revisit your individual retirement account and consider upping your contribution. The general recommendation is to raise your retirement contribution by about 1% annually. However, if your income goes up substantially, it is a good time to consider stepping over that one-percent line and going a little higher.

Going just another percentage point higher can make a big difference. For example, increasing your contribution rate from 4% to about 6% with a $50,000 salary could mean a boost of more than $100,000 to your retirement accounts over the course of 30 years.

Readjusting the yearly percentage you’ve set can allow you to reach retirement saving benchmarks sooner. A rule of thumb is to ensure you have 10 times your annual salary or more, prior to retirement.

When you start earning more, it can seem counterintuitive to contribute more to retirement because this changes your immediate cash flow. Nevertheless, just a small hike in contributions can compound to be a profound difference in financial security when you are forced to be on a fixed income.

2. Your Retirement Account Is Only Stocks and Bonds

Is your retirement simply full of stocks? If so, you're likely missing out on new investment options that are available today. For example, there are a lot of new alternative assets that can help you meet your retirement goal more easily.

A diversified retirement portfolio with alternative assets is advantageous for quite a few reasons, such as:

  • Lower volatility because alternative investments are not so tied to broader trends in the market
  • You retain ownership of that alternative investment instead of holding less-concrete assets
  • Potential for direct tax benefits, such as with long-term capital gains breaks
  • Potential for producing stronger returns than what's possible with standard investments

You can go a lot of different routes with alternative investments. Some of the more common include things like real estate, startups, precious metals, hedge funds, and cryptocurrencies. While a healthy collection of stocks, bonds, and mutual funds are valuable as part of your retirement portfolio, alternative investments sort of sweetening the deal in the end.

The best part? Some companies like Rocket Dollar let you invest in them from your ira account.

3. Your Retirement Savings Are Not Growing

Retirement accounts can stop growing for several reasons, some of which are directly within your control. For example, if you forgo making regular contributions, this is something that directly affects retirement account growth. 

However, lack of growth with regular contributions may signify it is time for a refresh. High management fees, lack of self-direction with investments, and low-interest accumulation rates at financial institutions are all reasons why an account may grow slower than you expect.

For example, if expensive management fees from a financial advisor are being deducted month to month, your IRA account is garnering only a fractional amount of interest. This can mean the contributions you are making are not reflected as significant gains year after year. Likewise, a lack of diversity within your portfolio could potentially mean a lower growth rate.

4. You Are Getting Closer to Retirement Age

As you near retirement age, it is always best to take a look at your retirement accounts with a fresh set of eyes and a more keen perspective. For example, if you intend to retire at the age of 65, by the age of 60, you will have more of a grasp on what your finances will look like when you do retire.

You will also have a clearer idea of what your retirement goal is. Therefore, it is a good time to reassess your savings and your plans.

According to Charles Schwab, the 10-year mark before retirement is a good point to really start discerning your retirement plan. Look at your current and anticipated expenses, examine future healthcare costs, and do what you can to give accounts a boost.

Certain facts can simplify decision-making processes when it comes to deciding to contribute more when nearing retirement. So, doing a bit of research can help.

For instance, with healthcare costs as of 2022, you can assume that after age 65, you will likely spend $450 to $600 per month on medical costs, even with Medicare. This is information you can easily research on your own as you are near the retirement age to make adjustments.

5. You Experience a Major Life Change

Certain life changes should signal a refresh of your retirement savings plan. A lot of people assume the only time they really need to look at their 401(k) plan, IRAs, or otherwise is when there is a career change or early in life. However, several other life events should garner a refresh, such as:

  • Divorce or loss of your spouse
  • Added dependents in your care (e.g. gaining custody of a grandchild or having another child)
  • Major changes in health status (e.g. a diagnosis that changes your long-term medical care costs)
  • Significant changes in assets (e.g. selling your primary home or business)
  • Relocation to a new area with a changed cost of living

In general, anything that shapes what your financial support needs will look like at retirement should spur a retirement account refresh. For one, changing life circumstances change how much money is required to sustain you. 

Further, changing life circumstances affect who is affected by your personal finances. Several things may have to be adjusted, right down to contribution amounts and your listed beneficiaries. This personal information should be top of mind for you as you look at your retirement.

Beef Up Your Retirement with Alternative Investments

There are many types of alternative investments that can be a valuable part of your retirement income, giving you an added layer of financial security for the future. With Rocket Dollar, you get a straightforward way to diversify your investment portfolio and add new streams of funding to your retirement plan. Ready to add new investments to your retirement portfolio?

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