A Simple Six-Step Retirement Checkup

Written By

Daniel Hunt

Senior Investment Strategist,
Morgan Stanley Wealth Management

Given the ever-changing state of the markets, checking in on your retirement plan may make a lot of sense.

Many investors suffered painful losses in their portfolio during 2022’s historic bear market. The recent volatility has made it important to check your current retirement plan to confirm that you’re on track toward meeting your investment goals. Even when the broader market continues to rebound off its 2022 lows, you’ll want to confirm that your own investments are performing in line with expectations. What’s more, if you haven’t been keeping up with your contributions or have otherwise deviated from the plan, you’ll want to see how that has impacted your status.

A Financial Advisor may be able to help you get back on track if you aren’t making the progress you expected. If you have a lot of time until you retire, small tweaks in savings or investment strategy may make a big difference. Retirement just around the corner? Sometimes a few changes to your plan now can help you cross the finish line, even if market conditions are less than fully cooperative. Are you doing even better than anticipated? Maybe now is a good time to reduce your risk exposure to lock in that progress and protect against future market volatility.

Here’s a six-step retirement plan checkup that may be helpful, including how a Financial Advisor can help you adjust your plan:

1. Determine where you stand.

Find out whether the amount you’re saving and investing is on pace with the money you’ll need to retire (with some margin for error). You can ask your Financial Advisor, if you have one, or you can find numerous calculators online to help. Some investment advisory accounts inform you automatically when you aren’t meeting your goals. If you have accumulated several different retirement accounts from past jobs, knowing where you stand may be harder than it should be. A Financial Advisor may be able to help you consolidate your retirement accounts.

2. If you’re off track, figure out why.

Are you saving as much as you planned? Are you maximizing your contributions to your employer-sponsored retirement plan or individual retirement account (IRA)? Is the amount of money you’ll need in retirement increasing? If you’re not on course because your investments aren’t performing well, your Financial Advisor may suggest that you make a change to your asset allocation strategy or to the specific investments you’ve chosen. If your investments are not performing at least in line with benchmarks, your Financial Advisor may review the latest research to ensure the original rationale for the investment still makes sense. If it does, it may be preferable to hold off on any changes, as chasing top performers may be a poor way to make decisions.

3. Decide how to get back on track.

That could include revisiting your goal, for example, by stretching out the time horizon until you retire or reducing the amount of money you plan to spend in retirement. It could mean creating a financial plan that reflects the tendency for retirees to spend less as retirement goes on, which means you might be better prepared than you think. It can also mean increasing portfolio risk, though only after careful consideration of your risk tolerance. It could be that the best option is a little of all three, which makes the significance of any one change smaller. Consulting with a Financial Advisor may be able to help you identify a clear path to reaching your goals.

4. Take advantage of ways to improve returns without magnifying the risks.

These strategies may include options to mitigate taxes, such as “income smoothing” and tax loss harvesting. Insurance can also play a role. Long-term care, life insurance and annuities may have the potential to bolster your retirement plan due to their tax treatment and risk mitigation features. These strategies can be complex, and a Financial Advisor may be able help you implement them.

5. Tally up your income sources.

If you are retiring soon, you need to get the most out of all your sources of income. That could include strategies for claiming Social Security and traditional pension fund payments, and if applicable, approaches to help you secure or maximize rental income. If your reliable sources of income are not significant enough to cover a good portion of your needs, your Financial Advisor may suggest you add more conservative income-oriented investments, such as dividend paying stocks or bonds.

6. Assess the risk level of your plan.

If you run through these steps and realize that you are on target to retire in a few years with room to spare, your Financial Advisor may suggest you consider reducing the amount of risk in your portfolio.

Checking in on your retirement plan doesn’t just entail making sure you are saving enough money. It also means helping ensure the savings you’ve worked so hard to accumulate will be there when you need it. A Financial Advisor may be able to help.


Tax Disclosures:

Tax laws are complex and subject to change. Morgan Stanley Smith Barney LLC (“Morgan Stanley”), its affiliates and Morgan Stanley Financial Advisors and Private Wealth Advisors do not provide tax or legal advice and are not “fiduciaries” (under the Investment Advisers Act of 1940, ERISA, the Internal Revenue Code or otherwise) with respect to the services or activities described herein except as otherwise provided in writing by Morgan Stanley and/or as described at Individuals are encouraged to consult their tax and legal advisors (a) before establishing a retirement plan or account, and (b) regarding any potential tax, ERISA and related consequences of any investments made under such plan or account.

When Morgan Stanley Smith Barney LLC, its affiliates and Morgan Stanley Financial Advisors and Private Wealth Advisors (collectively, “Morgan Stanley”) provide “investment advice” regarding a retirement or welfare benefit plan account, an individual retirement account or a Coverdell education savings account (“Retirement Account”), Morgan Stanley is a “fiduciary” as those terms are defined under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and/or the Internal Revenue Code of 1986 (the “Code”), as applicable. When Morgan Stanley provides investment education, takes orders on an unsolicited basis or otherwise does not provide “investment advice”, Morgan Stanley will not be considered a “fiduciary” under ERISA and/or the Code. For more information regarding Morgan Stanley’s role with respect to a Retirement Account, please visit Tax laws are complex and subject to change. Morgan Stanley does not provide tax or legal advice. Individuals are encouraged to consult their tax and legal advisors (a) before establishing a Retirement Account, and (b) regarding any potential tax, ERISA and related consequences of any investments or other transactions made with respect to a Retirement Account.

Investing Disclosures:

This material does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. The securities discussed in this material may not be appropriate for all investors. Morgan Stanley recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a Financial Advisor. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.

Asset allocation does not ensure a profit or protect against loss in declining financial markets.

Insurance products are offered in conjunction with Morgan Stanley Smith Barney LLC’s licensed insurance agency affiliates.

Equity securities may fluctuate in response to news on companies, industries, market conditions and general economic environment. Companies paying dividends can reduce or stop payouts at any time.

Fixed Income investing entails credit risks and interest rate risks. When interest rates rise, bond prices generally fall.

Past performance is not a guarantee of future results.

© 2023 Morgan Stanley Smith Barney LLC. Member SIPC.

+ Expand - Collapse
CRC 5634886 04/23