Virtually everyone has financial goals and needs, but sometimes identifying them isn’t easy. For example, folks might say their main goal is to have enough money to retire, but that can mean different things for different people. When you’re picking a retirement planning investment strategy, it’s vital to be as specific possible. If you don’t have a target, it’s exceedingly difficult to get where you want to go.
Our suggestion: Take some time to think about what you want to do in retirement and what, specifically, your savings are for.
Ask yourself some questions such as:
All these questions will help you identify the primary purposes for your money as well as the time horizon for different buckets of your liquid assets—separating short-term needs from long-term issues can help you figure out the optimal blend of stocks, bonds and other securities to meet your needs.
Note, though, this isn’t a once-and-done exercise. Never revisiting your retirement planning goals or strategy ignores that fact that circumstances change. If your goals change or an unforeseen event strikes, but you don’t account for it in your portfolio, you could find yourself in a sub-optimal predicament. We think investors should review their goals and strategy at least annually, just to be sure.
With that in mind, we conclude with this sage advice from a recent column by The New York Times’ Carl Richards, who shared his own experiences trying to navigate his changing circumstances:
Of course, we’re going to have a goal on the horizon, and we’ll head toward it. But we may wake up tomorrow and say, “I’m not sure that’s the best direction to go anymore.” We then need to ask ourselves if things have changed, or if our goal just feels too hard. Do we need to push through a tough spot or chart a different path?
Right now, I’m working really hard on both having goals and accepting the reality of uncertainty. In fact, I embrace the uncertainty and say to myself, “Given that goal, and given the uncertainty, what’s to be done next?”
I repeat this process over and over. Every once in a while, I stick my head up and say, “I still want to head to that goal. Yes, I’m uncertain I’ll get there, but for now, I think that’s where I want to go.” Then, I put my head back down, figure out what’s to be done next and go do it.