Retirement Plan Investment Allocation

Deciding how to invest your retirement plan balance can be difficult. Most retirement plans provide many different investment options to choose from, but choosing the best option for you can be challenging. There are three main areas that will help you determine the best Retirement Plan Investment Allocation: goals, risk tolerance, and existing balance.

How to Determine Your Retirement Goals

Retirement Income Needs: Your household income goal at retirement is an important factor in determining your investment allocation while you are working and actively contributing. Having clear and defined goals is important for measuring your progress over time. Participants closer to retirement need to focus on their limiting factor of time until retirement in determining their goals.

Consider the following when determining your income needs:

  • Mortgage, rent, or other home payments
  • Medical expenses, foreseen or otherwise
  • Travel or “bucket list” experiences
  • Cost of living increases

Determining Your Risk Tolerance

The risk you take should be determined by both your timeframe until retirement as well as your comfortability with market fluctuations. Individuals that have more time before retirement should invest more aggressively to allow for more long-term market growth. Investing too conservatively in your early years can prevent you from reaching your savings goals in the future. As you get closer to retirement, you should gradually shift your investments to a more conservative allocation.

By slowly shifting your investments over time, you will take advantage of market growth. You will also lower your exposure to market fluctuations. Participants who are closer to retirement need to focus on their limiting factor of time until retirement in determining their investment choices. Money that is needed within the short term should not be invested aggressively.

What To Do With Your Existing Retirement Balances

When deciding how to invest your balance, you should take your existing household retirement savings into consideration. Look at your overall household savings and the risk level of your other investments to help determine how to allocate your retirement account. An individual 10 years away from retirement with a balance of $10,000 should not necessarily be investing the same way as an individual with $1 million already saved. If you are behind on saving for retirement, this may mean you should invest more aggressively to try to grow your balance more quickly.

At Anderson ZurMuehlen, we know the process of saving and planning for retirement can feel daunting. Our team of experts is available to answer any questions you may have. We have additional helpful resources available at your request. Please reach out to us for more details!

Investment advisory services are offered through Avantax Planning PartnersSM. Insurance services offered through licensed agents of Avantax Planning Partners. 3200 Olympus Blvd., Suite 100, Dallas, TX75019. The Avantax entities are independent of and unrelated to Anderson ZurMuehlen. 


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